Filtered by Topic: Monetary Policy Use setting Monetary Policy
This Update was originally sent to clients as a Rapid Response immediately after the Fed’s policy statement on 23 rd March. The Fed’s expansion of its open-ended QE, together with new measures to lend directly to firms shows the Fed is moving beyond …
24th March 2020
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
While the ECB’s extra €750bn in bond purchases has reduced financial market stress, governments also need to deliver a large fiscal response without triggering a fresh sovereign debt crisis. In our view, a good way to do so would be to adapt the ESM to …
20th March 2020
With the growth outlook deteriorating rapidly, the Bank of Thailand today became the sixth central bank in the region to cut interest rates this week. The 25bp emergency rate cut takes the policy rate to a new all-time low of just 0.75%. The decision to …
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
The big package of measures announced by the Bank of England today in its second emergency meeting in just over a week is designed to ease the stress in the financial markets and to support the recovery once the full economic hit from the coronavirus has …
19th March 2020
The Fed’s revival of financial crisis-era programs and a huge ramp-up in the pace of its open-ended Treasury purchases in recent days could help to stem some of the bleeding in financial markets. But with broader financial conditions still tightening, …
South African policymakers appear to have decided that the current grave economic situation requires a bold response, and have moved away from their traditional hawkishness. We expect that they will follow today’s 100bp cut with another 75bp of loosening …
Bank Indonesia cut interest rates today, but the slump in the rupiah in recent days means policymakers in the country will need to act more cautiously than other central banks in the region over the coming weeks and months. Today’s 25bp rate cut takes the …
In response to the rapidly worsening outlook for the economy, Taiwan’s central bank (CBC) today cut its key policy rate today by 25bps to 1.125% and announced other measures to support the economy. However, with growth slowing sharply, further rate cuts …
While the Swiss National Bank left its key policy rate on hold at -0.75% this morning, it made all the right noises by making its exemptions to the banking sector from negative interest rates even more generous, and pledging to provide liquidity to the …
The Brazilian central bank’s (BCB’s) statement accompanying last night’s decision to cut the Selic rate by 50bp was surprisingly cautious and suggested that further easing isn’t on the cards. With the effects of the coronavirus on Brazil’s economy likely …
The ECB announced late yesterday evening a new €750bn programme of bond purchases which is intended to contain borrowing costs for southern economies. This gives it a lot more firepower which should help to contain financial stress in the near term, but …
The central bank in the Philippines is likely to ease further in the months ahead after opting to cut its main policy rate by 50bps today. The BSP has not yet introduced loan programmes or targeted support for financial institutions and businesses …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
Activity data from January suggest that the economy was already contracting before the coronavirus reached South Africa. The outbreak will add to economic headwinds. Policymakers are likely to spring into action by cutting their key rate on Thursday, but …
18th March 2020
In response to the rapidly worsening outlook for the economy, Pakistan’s central bank (SBP) today slashed its key policy rate by 75bp to 12.5%. With growth likely to slow sharply this year and inflation set to fall back further, more rate cuts are likely. …
17th March 2020
The Bank of England can’t prevent the economy from falling into recession. But like the Fed, we think it will soon throw everything in its policy arsenal at the coronavirus crisis to try to prevent the markets from seizing up and to reduce the risk of a …
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
Last week’s ECB decision gave it more ammunition to combat the fallout from the coronavirus, but it will not be enough. We now think the Bank will soon make an explicit commitment to keep sovereign bond yields low for all governments at least for the …
16th March 2020
The RBI announced some measures to boost bank liquidity in a hastily-arranged press conference today but disappointed the bond market by not lowering policy rates. With the coronavirus a growing threat to domestic activity, we think rates will be trimmed …
The Fed’s decision to slash interest rates to near-zero won’t stop the economy falling into a recession, but the package of liquidity-boosting measures will help prevent credit markets seizing up, reducing the risks a deeper downturn. We expect the Fed to …
The Bank of Korea today finally responded to the coronavirus outbreak by cutting the policy rate by 50bp and introducing a number of other measures to ease financing constraints. Further measures, including the adoption of quantitative easing, are now …
The measures announced by the Bank of Japan today lack teeth and we still expect policymakers to cut the short-term policy rate over the coming weeks. The Bank of Japan brought forward the meeting scheduled to end on Thursday to today but decided not to …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
13th March 2020
The Fed has already slashed interest rates and flooded the markets with liquidity, but it will have to go further in the coming weeks, with a return to near-zero interest rates and a resumption of large-scale quantitative easing now likely . Following the …
The measures unveiled by the ECB today were as substantial as expected. But, along with Ms Lagarde’s comments, they underlined that the ECB has little firepower left, that there has been no coordinated fiscal response, and that the Bank is reluctant to …
12th March 2020
The Bank of England’s 50bps emergency interest rate cut, from 0.75% back to the record low of 0.25%, and other measures aimed to support loans to businesses announced this morning is the first salvo in a day of coordinated action designed to cushion the …
11th March 2020
We think that the coronavirus outbreak and the related disruptions in China and to tourism more broadly will push the New Zealand economy into recession. That’s why we expect the RBNZ to slash rates by 75bp to help offset the impact of the coronavirus …
Based on the continuing slump in stock markets and the global spread of the coronavirus, we agree with the view in markets that the Fed will cut interest rates to near-zero within the next couple of months. Fed officials would prefer to wait for evidence …
9th March 2020
On top of the rapidly spreading coronavirus outbreak, the slump in oil prices raises the risk of recession this year and suggests that the Bank of Canada will slash its policy rate to just 0.25%. Saudi Arabia’s decision to start an all-out price war, …
Against a backdrop of rising pressure on major central banks to loosen policy in response to coronavirus, we now forecast the Riksbank to cut its repo rate back into negative territory at its 28 th April decision, if not before. However, as in other …
Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
5th March 2020
The Central Bank of Sri Lanka (CBSL) left interest rates unchanged today, and while it kept the door open to loosening, high inflation and the CBSL’s concern over the rupee limits the scope for further cuts. Having cut rates three times since last May, …
Headline consumer price inflation is likely to have dropped sharply in February, in large part due to a moderation in food inflation. This should further embolden the RBI to follow its global peers and cut interest rates over the coming weeks in response …
With the coronavirus outbreak spreading across Europe and its disruption to economic activity likely to mount, we think that the Polish central bank will ease policy this year. But the tone of the MPC’s post-meeting press conference today suggests that …
4th March 2020
The growing risk of COVID-19 to the outlook suggests that the Bank of Canada will follow today’s 50 bp cut in interest rates with an additional 25 bp cut in April. Given the Governing Council’s lingering concerns that looser policy will boost an already …
The continued spread of the coronavirus and the Fed’s emergency rate cut will result in more aggressive loosening in EMs than we previously envisaged. We expect central banks in much of Emerging Asia to continue cutting interest rates, and have now …
In a change to our previous forecast, we now think that the economic effects of the coronavirus will result in GDP growth slowing to just 0.7% this year and will soon prompt the Bank of England to cut interest rates from 0.75% to 0.50%. That said, we …
3rd March 2020
In a dramatic turnaround from last week, when even the most dovish of Fed officials didn’t appear to support any additional policy loosening, the Fed announced an emergency inter-meeting 50bp rate cut this morning – lowering the fed fuds target range to …
It is now likely that the central banks of major developed markets (DMs) will follow Australia in loosening monetary policy to help their economies weather the impact of the coronavirus. But there is a limit to what this can achieve; more effective will …
Two developments over the past couple of days have caused us to change our thinking on the outlook for monetary policy in Japan. We now assume that the coronavirus will spread widely across most of the world’s economies including Japan and that this will …
Bank Negara Malaysia (BNM) today cut its policy rate from 2.75% to 2.50%, and with headwinds to growth worsening, we think the central bank will ease policy again at its next policy meeting in May. 15 of the 24 analysts polled by Bloomberg, including …
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
We suspect that the BoJ’s response to the coronavirus will mostly consist of liquidity provision to banks and a renewed acceleration of its ETF purchases. We are not forecasting a cut in the Bank’s short-term policy rate. The Bank of Japan today issued a …
2nd March 2020
The slump in China’s PMIs in February and the continued spread of the coronavirus beyond China has raised the odds that the RBA will cut interest rates at tomorrow’s meeting. On balance though, we still think the Bank will wait until April before cutting …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
27th February 2020
The Bank of Korea (BoK) unexpectedly left its main policy rate on hold at 1.25% today. But with the economic cost of the coronavirus mounting, policy support will have to be ramped up soon – we are forecasting a cut in April. Today’s decision was the …
