Filtered by Topic: Monetary Policy Use setting Monetary Policy
Vietnam’s banks are likely to remain cautious this year and both credit and GDP growth are likely to come in below trend. The central bank will have to cut rates further to stimulate demand. The health of Vietnam’s banking sector worsened last year due to …
4th April 2024
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today confirms that policymakers have been spooked by the inflation surprises at the start of the year and has prompted us to nudge up our year-end rate forecast to …
3rd April 2024
ECB officials have stressed that evidence of easing wage growth will be key in determining the timing of the first rate cut. Accordingly, this Update assesses which of the euro-zone’s numerous wage measures investors should keep their eyes on. The main …
We expect the RBNZ to hold rates steady at its meeting next Wednesday. But with the economy in a deep slump and inflation clearly on the way down, the Committee is likely to tone down its tightening bias. As inflation risks continue to recede, we expect …
Slowdown in house price growth has further to run Australian house prices continued to pare their gains last month. And a further loss of momentum appears likely in the near term, especially given that the RBA is unlikely to come to the housing market’s …
2nd April 2024
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
February’s money and credit data suggest that the effect of tighter monetary policy has eased slightly. But the data are still very weak and we think that rate cuts later in the year will lead to only a gradual rebound. The narrow (M1) money supply …
28th March 2024
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024
We think investors are underestimating the extent of rates cuts that the Riksbank will make this year. Policymakers are, rightly in our view, increasingly confident that inflation will soon return sustainably to the 2% target. Accordingly, we think they …
Data released today showed that Spanish inflation picked up from 2.9% in February to 3.2% in March. We think it is likely to increase further over the coming months due to base effects in energy inflation, higher VAT rates on energy and foods, and …
The Central Bank of Sri Lanka today cut interest rates by a further 50bps and hinted at further rate cuts to come. With inflationary pressures under control and the economic recovery struggling, more policy easing is likely before the end of the year. …
26th March 2024
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 2024
We held an online Drop-In session last week to discuss the outlook for monetary policy following the US Fed and Bank of England policy meetings and comments by the ECB’s Christine Lagarde. (See a recording here .) This Update answers several of the …
Japan’s exit from negative interest rates could place some upward pressure on bond term premia elsewhere, but we don’t think it will prove too disruptive to markets even if the BoJ ultimately hikes a lot more than we expect. Investors largely took the …
22nd March 2024
The flash PMIs for March suggest that the euro-zone economy is still flatlining, while the UK and Japan seem to be pulling out of recession heading into Q2. The survey indicators of price pressures moved in different directions, but in general remain a …
21st March 2024
With the Bank of England striking a slightly more dovish tone whilst keeping interest rates at 5.25% and inflation likely to fall further and faster than the Bank expects, we still think a rate cut in June is possible and that rates will fall to 3.00% in …
Despite the booming economy, inflationary pressures in Taiwan are likely to remain subdued. Accordingly, we think today’s unexpected rate hike by the central bank (CBC) will prove to be a case of one and done. Today’s decision to raise the policy rate by …
The SNB under Chairman Thomas Jordan has never shied away from making big calls, so it was fitting that it surprised markets with a 25bp rate cut today, to 1.5%, only three weeks after Mr Jordan announced he would leave his post in September. We expect …
Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the Fed’s median forecast for interest rates still shows a cumulative 75bp of policy loosening this year. In contrast, we continue to believe that …
20th March 2024
We think the Riksbank will leave its policy rate unchanged at 4.0% next week but cut it by 25bp at the following meeting, in May. Beyond that, our forecast is for rates to come down much faster than the Riksbank’s own forecasts imply but broadly in line …
The Bank of Japan today called time on more than a decade of ultra-loose policy settings, but we don’t think it will lift its policy rate any further over the coming months. A Reuters survey conducted at the end of last week still showed that a majority …
19th March 2024
The RBA sounded a touch less hawkish at today’s meeting and we think the Bank will start to lower interest rates by August. The Bank’s decision to keep the cash rate unchanged at 4.35% was correctly anticipated by all analysts polled by Reuters, ourselves …
Inflation in Switzerland has surprised most other forecasters, including the SNB, this year by falling to just 1.2% in February, which was the ninth month in a row that it has been below 2%. We think this will encourage the SNB to reduce the policy rate …
14th March 2024
Inflation in Norway has fallen more quickly than Norges Bank expected, so at next week’s meeting it is likely to signal that it will cut interest rates sooner than it previously expected, perhaps in Q3. And we think there’s a good chance that it will make …
The ECB’s new operational framework for implementing monetary policy, announced this afternoon, was largely in line with our expectations and has no immediate implications for monetary policy. But it does mean that the Bank will maintain a portfolio of …
13th March 2024
The devaluation of the Nigerian naira earlier this year appears to have brought it much closer to fair value, which will help to put the balance of payments on a more stable footing. The key now is for the CBN to allow the naira to move in line with …
The latest data from major advanced economies typically show that unemployment rates are rising and pay pressures are easing. While wage growth is still too high for comfort in most cases, we suspect that further signs of a slowdown will support the case …
12th March 2024
Given our view about monetary policy, we expect government bond yields in some developed markets such as the UK to fall markedly this year. In some other places, like the euro-zone, we doubt central banks will have much impact on yields. And we see scope …
7th March 2024
Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
6th March 2024
The announcement of an agreement over a new IMF package for Egypt, coming on the back of the rate hike and devaluation earlier today, represents a shift towards more orthodox policymaking. While it is still early, Egypt now appears to be on the path out …
Money growth remains weak but is rebounding steadily, with our broader M3 measure recovering to its strongest since mid-2022. But there is no reason to expect this to drive a rebound in inflation. Although M1 continues to decline, the pace of contraction …
4th March 2024
Morocco’s improving balance of payments position and the sharp slowdown in inflation should provide the central bank, Bank Al-Maghrib (BAM), with the confidence to take the next step toward a fully floating dirham. We think the currency will appreciate …
The Reserve Bank of New Zealand handed down another hawkish hold at its meeting today. However, with inflation on track to return to its 1-3% target by mid-year, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave its …
28th February 2024
Following suggestions from South Africa’s Deputy Finance Minister David Masondo that an announcement will be made “very soon” regarding the country’s inflation-targeting regime, we have refreshed this Update that was first published last year. Talk of the …
27th February 2024
January’s money and credit data are consistent with our view that the improvement in the data towards the end of last year was not the beginning of strong recovery. After falling sharply throughout most of last year, the money and credit data improved a …
The Bank of Korea left its policy rate on hold today (at 3.5%) and attempted to push back against expectations for an early rate cut. However, with inflation likely to be back to target soon and domestic demand struggling, we expect easing to begin in …
22nd February 2024
Headline inflation in Brazil has declined in recent months, but a deeper dig into the data shows that underlying price pressures are starting to build again. Although another 50bp cut in the Selic rate at the next central bank meeting in March is nailed …
20th February 2024
Data published today show that negotiated wage growth in the euro-zone remained strong at the end of last year. But these data won’t stop the ECB from cutting interest rates in April – as we are forecasting – as long as other indicators continue to point …
The Czech economy has had the weakest performance of any EU country since the pandemic, and we think that growth will disappoint expectations again in 2024. This will keep inflation contained and put pressure on the central bank to loosen monetary …
16th February 2024
Argentine President Javier Milei’s ambitious economic reform plans have quickly run into political obstacles. There’s still plenty of fiscal tightening that Milei is likely to undertake and there have been some areas of success such as the peso …
15th February 2024
With activity and inflation both softer than it had expected a few months ago, the RBNZ will likely stay put at its meeting at the end of the month. However, with a still-tight labour market fuelling uncertainty about domestically-sourced price pressures, …
14th February 2024
Current fixed mortgage rates of around 4.6% are based on investors’ forecast that Bank Rate will be cut from 5.25% to 4.50% by the end of the year. We think that rates will be reduced a bit faster than that, in which case further declines in mortgage …
13th February 2024
Chairman Thomas Jordan’s recent comments about the franc raise questions over whether the SNB might use FX interventions to loosen monetary conditions. But we think policymakers will use the policy rate as the main tool to achieve price stability, and …
A key point that stands out from the raft of EM central bank decisions over the past couple of weeks is that policymakers are focussed much more on domestically-generated price pressures than the Fed. We expect a pivot towards monetary easing in the …
12th February 2024
CNB steps up its easing cycle The Czech National Bank (CNB) accelerated the pace of its monetary easing cycle today with a 50bp interest rate cut, to 6.25%, and the post-meeting communications support our view that an even larger interest rate cut is on …
8th February 2024
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. With the economy holding up well and inflation likely to remain above the 4% target for a few more months yet, we doubt the central bank will loosen …
We have argued that most of the inflation battle is already won and fears that “ the last mile will be the hardest ” are overdone. But during our online Drop-In session last week, clients asked whether inflation in the major advanced economies might …
7th February 2024
With the Reserve Bank of Australia still striking a hawkish tone at its meeting today, we’re pushing back our forecast for the Bank’s first rate cut from May. But we still think that incoming data will show enough of a drop in inflation alongside …
6th February 2024
