Filtered by Topic: Monetary Policy Use setting Monetary Policy
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
5th February 2024
Events in Egypt yesterday, including a large interest rate hike and comments that a disbursement of more IMF funding is close, suggest that a shift towards more orthodox policy is nearing. If a new, enhanced IMF deal is agreed, that will almost certainly …
2nd February 2024
Inflation in Mexico has dropped back over the past year but rapid wage growth continues to fuel strong underlying price pressures and means that the headline rate won’t return to Banxico’s 2-4% tolerance band until late-2024. Coming alongside pushback …
1st February 2024
While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent a signal that the next move will be a cut, but it pushed back strongly against the idea that rates will be cut soon or far. Our forecast that inflation …
While Latin American central banks seemed to act in unison when raising interest rates (albeit with Brazil a bit ahead of the pack), the raft of interest rate decisions in the region yesterday highlighted that, on the way down, policymakers have very …
The Riksbank signalled unequivocally in today’s policy statement that interest rates may be cut sooner than they previously anticipated. While a March rate cut is possible, particularly if the January and February inflation data come in below …
Powell suggests first rate cut more likely to be May Based on the surprisingly explicit steer provided by Fed Chair Jerome Powell halfway through today’s press conference, we now expect the first Fed rate cut to come at the early-May FOMC meeting rather …
31st January 2024
Panama’s time as a Latin American growth star is set to come to an end this year. This will have a knock-on effect on the government’s revenues and means that the public debt ratio is set to rise further. That could put Panama’s coveted investment grade …
MNB errs on the side of caution The Hungarian central bank’s (MNB’s) communications following its meeting today confirm that the decision not to accelerate the pace of its easing cycle was due to the recent ratcheting up of tensions between the government …
30th January 2024
The EM monetary easing cycle began to broaden out late last year. Mexico’s central bank will probably be the next to cut rates later this quarter, and many Asian central banks will join the fray in April and May, which is sooner than most expect. India is …
29th January 2024
The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today but weaker growth and easing concerns about inflation are likely to prompt the central bank to loosen policy in April. The decision to remain on hold today, for the …
The Riksbank is set to leave its key policy rate unchanged next week but we think it will begin to cut rates in the second quarter and reduce them faster than policymakers are forecasting. As a reminder, the Riksbank left its policy rate at 4.0% at its …
25th January 2024
The ECB kept interest rates unchanged and stuck to the argument that a first rate cut is most likely in the summer. An earlier move is still possible if the inflation data are weak in the next few months, but the risks are shifting towards rates staying …
Wage growth remains soft across much of Emerging Asia, supporting our view that the region’s central banks will start monetary easing cycles sooner than most expect. Wage pressures have softened elsewhere in the emerging world in recent months, although …
Norges Bank today reiterated that it will leave its policy rate at 4.5% “for some time”. But we think that inflation will fall rapidly this year, so when the Bank does start to cut rates, it will do so more quickly than its forecasts suggest. The decision …
January’s flash PMI surveys suggest that GDP growth in advanced economies ticked up from a very weak pace at the start of 2024. And with price pressures still strong, central banks will probably continue to push back against expectations for rate cuts in …
24th January 2024
The Bank of Canada’s decision to drop its tightening bias today is the first step toward interest rate cuts, particularly as the Bank also hinted that it may be willing to look through elevated mortgage interest costs and rent inflation. We continue to …
The People’s Bank’s policy announcements today will provide only a small boost for China’s economy. Meaningful improvements in household or corporate borrowing would require substantial rate cuts or a significant change in economic sentiment. Neither …
Central banks will probably continue to push back on expectations of rate cuts at their scheduled policy announcements in the coming weeks. But with inflation and wage pressures clearly moderating, we still think the Fed, ECB and Bank of England will cut …
23rd January 2024
The Bank of Japan sounds increasingly confident that it will be able to achieve its inflation target on a sustained basis. With Mr Ueda at the post-BOJ-meeting press conference again emphasising the importance of the spring wage negotiations, we think the …
We think Norges Bank will keep its policy rate unchanged at 4.50% next week but, given the weakness in the krone and tight labour market, retain a hawkish bias in its guidance. Further ahead, we think rates will be cut sooner than the Bank expects as …
18th January 2024
The latest euro-zone inflation data, published this morning, will dampen policymakers’ concerns about the strength of domestic price pressures. But with underlying inflation still too high for comfort, this won’t be enough for the Bank to change its …
17th January 2024
The Bank of Canada’s quarterly business and consumer surveys continue to flash warning signs about the outlook for the economy and labour market. The normalisation of inflation expectations remains painfully slow, however, presenting a risk to our view …
15th January 2024
Economic growth in Jordan has been sluggish for the best part of a decade and the outlook doesn't look much brighter. While the renewed IMF programme will help to contain external strains, the Israel-Hamas conflict will weigh on the crucial tourism sector …
11th January 2024
The Bank of Korea left its policy rate on hold today (at 3.5%), but struck a more dovish tone than after previous meetings. With inflation on the way down and growth likely to struggle over the coming months, we expect the central bank to start cutting …
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
Some ECB Governing Council Members have called for an increase in reserves requirements, primarily in order to reduce the Eurosystem’s interest expenditure. If implemented – which we think is likely – this would have the effect of tightening monetary …
The redirecting of trade ships away from the Red Sea and the associated rise in shipping costs are unlikely to lead to a resurgence in global inflation. However, if the warfare underpinning the disruption to shipping escalates into a wider regional …
4th January 2024
In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November. We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025. That’s …
3rd January 2024
In the past few years, Egypt’s economy has been hit by the successive impacts of the pandemic, the war in Ukraine, and, more recently, currency devaluations. With further currency falls on the cards, high inflation, and tightening of fiscal and monetary …
Data released this morning showed that bank lending in the euro-zone picked up towards the end of last year. But we doubt that this is the start of a sustained turnaround. We expect the impact of tight monetary policy to weigh on lending and keep the …
2nd January 2024
GDP growth in Vietnam picked up in Q4 but this strength is unlikely to last if, as we expect, exports weaken and commercial banks pull back on lending in response to a sharp rise in non-performing loans. With inflation likely to remain within target, we …
29th December 2023
This page has been updated with additional analysis from the post-meeting press statement and press conference. CNB kicks off its easing cycle The Czech National Bank (CNB) maintained a hawkish tone as it started its easing cycle today, but we still think …
21st December 2023
House prices will limp along in 2024 Although house prices in Melbourne have started to fall anew, we doubt that they are the canary in the coal mine. A persistent shortfall in housing supply should ensure that house prices across most of Australia keep …
The decisions yesterday by Colombia’s central bank to kick off its easing cycle and by Chile’s to accelerate the pace of easing appears to have been driven by the substantial improvement in the external environment. We expect both central banks to …
20th December 2023
At face value, the Argentine central bank’s (BCRA’s) decision yesterday to switch (and essentially lower) its policy rate seems at odds with the goal of tackling the country’s severe inflation problem. But the move appears to be aimed at shifting the …
19th December 2023
Last week, Christine Lagarde cited high wage growth and “domestic inflation” as reasons for the ECB to keep interest rates high. While domestic price pressures are easing, it will take several months for policymakers to see enough evidence that they have …
The Bank of Japan left policy settings unchanged today as widely anticipated. And while Governor Ueda is sounding more confident that 2% inflation will be sustained, we now expect the Bank of Japan to end negative interest rates in March rather than in …
There is considerable uncertainty surrounding our forecast that GDP will increase by 1.2% next year, but we have a relatively high conviction in our call that core PCE inflation will be very close to the 2% target by mid-2024. Nevertheless, even small …
18th December 2023
We recently held an online Drop-In session to discuss the December policy meetings and the outlook for monetary policy in the year ahead. (See a recording here .) This Update answers several of the questions that we received. Would the Fed ease policy …
The ECB left interest rates on hold today and pushed back against expectations that it will start cutting rates as soon as March next year. However, we think inflation and GDP growth will be lower than the ECB forecasts next year and anticipate five 25bp …
14th December 2023
Today’s SNB decision and statement were largely in line with expectations as the policy rate was held at 1.75% and policymakers removed any mention of FX sales. We think the latter decision signals that loosening is imminent and will probably first …
The Fed’s reluctance to acknowledge that it will need to begin cutting its policy rate soon – to prevent a run-up in real rates – was predictable enough based on its intransigence ahead of previous turning points in the policy cycle. We continue to expect …
13th December 2023
We doubt that the removal of the RBNZ’s employment objective would make much difference to economic outcomes, but forcing the Bank to achieve its inflation target within too short a period of time could cause unnecessary swings in output when inflation is …
11th December 2023
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. Against a backdrop of robust economic growth and a renewed rise in food inflation, we doubt the central bank will loosen policy until the second half of …
8th December 2023
Even though we expect the economy to be weaker than the consensus in 2024, we think that lingering constraints on domestic supply will prevent wage growth and services CPI inflation from falling quite as fast as is widely expected. As a result, we think …
7th December 2023
SNB Chairman Thomas Jordan recently reiterated the Bank’s line that “we will not hesitate to tighten monetary policy further if necessary” but the actual question is whether policymakers will hesitate to cut rates. We think the answer is yes and that they …
We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception. The …
The Bank of Canada is clinging on to the idea that restrictive policy is still needed to get inflation back to 2%. Nonetheless, with core inflation pressures muted, GDP and house prices falling, and labour market conditions loosening rapidly, it won’t be …
6th December 2023
We held two online Drop-In sessions today to discuss the outlook for 2024 and the risks to our forecasts. (See a recording here .) This Update summarises the answers to several of the questions that we received. Are there recessions coming in advanced …
5th December 2023
