Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
RBA can pivot back to an easing bias The ABS’ monthly labour force survey published yesterday increasingly suggests that the Australian labour market is going through something of a soft patch. Indeed, the modest rise in employment in June just barely …
18th July 2025
Price pressures remain firm, but tariff uncertainties could still delay next rate hike Underlying inflation remains elevated and is almost certain to overshoot the Bank of Japan’s forecasts. However, with trade tensions looming large over the economy, the …
Tariff negotiations rumble on, but our base case remains that the tariffs ultimately imposed will not cause a recession – though we expect growth to slow. We forecast GDP growth of 1.6% this year and 1.5% in 2026. Price effects have been limited so far, …
17th July 2025
The market reaction yesterday provided a taste of what might be to come if President Trump followed through his threat to fire Fed Chair Jerome Powell, with the dollar, equities and short rates likely to fall but long rates potentially surging. Whether …
The economy faces a prolonged period of weak growth as US tariffs and uncertainty over the future of the USMCA weigh on exports and investment. We forecast quarterly GDP growth at or below 1% annualised over the rest of the year. Canada’s retaliatory …
This page has been updated with additional analysis since first publication. Unexpected rise in inflation probably won’t prevent further rate cuts The unexpected rise in CPI inflation from 3.4% in May to a 17-month high of 3.6% in June (consensus & BoE …
16th July 2025
New Zealand’s housing market is still struggling to recover from its steep post-pandemic downturn. Although we still expect it to turn the corner in the coming months, the risk is that it will remain a drag on the broader economy for longer than we …
15th July 2025
Deadline for trade deal extended to 1 st August The looming deadline for the imposition of reciprocal tariffs earlier this week proved to be a damp squib as Trump has now given Japan and a range of other countries until 1 st August to negotiate a deal. …
11th July 2025
Rates will bottom out in mid-2026 The RBA’s decision to leave its cash rate unchanged at its meeting this Tuesday shocked not only financial markets, which had fully priced in a 25bp cut, but also the overwhelming majority of economists. Setting aside the …
Fed in wait-and-see mode The minutes of the mid-June FOMC meeting show most Fed officials content to wait and see what impact tariffs and other government policies had on inflation and the labour market before committing to either holding rates or cutting …
9th July 2025
RBNZ pauses easing cycle, but signals more cuts are coming While the RBNZ predictably left rates on hold today, it signalled that it was likely to loosen policy further as long as capacity pressures continued to ease. The RBNZ’s decision to leave the …
While the Reserve Bank of Australia’s today defied widespread expectations of a rate cut, we still expect the Bank to resume its easing cycle at its August meeting. And with GDP growth still sluggish and inflation back at target, we expect the Bank to …
8th July 2025
RBA still likely to cut rates much further The Reserve Bank of Australia defied widespread expectations of a rate cut at today’s meeting, but we still expect the Bank to cut rates by another 100bp over the coming year. The Bank’s decision to leave the …
Our base case remains that Japan will reach a deal with the US to fend off the threatened 25% US tariff. If that deal is reached soon and includes no or only a modest increase in the US tariff rate, the case for another BoJ rate hike in October remains …
A cut remains more likely than not There is a growing sense amongst most observers that the Reserve Bank of Australia will deliver a 25bp cut at its meeting ending on 8 th July. Indeed, markets are pricing in a whopping 95% chance of that outcome. And …
4th July 2025
Japan back in the doghouse The temporary pause on the 24% “reciprocal” tariff Trump imposed on imports from Japan in April is due to expire next week. As things stand, a deal with Japan looks unlikely and it’s possible that Japan will face even higher …
Overview – The economy faces a period of weak growth as US tariffs and uncertainty over the future of the USMCA weigh on exports and investment. We forecast quarterly GDP growth of less than 1% annualised on average for the rest of 2025. Tariff effects …
2nd July 2025
With activity having rebounded strongly in Q1 and headline inflation firming up, the RBNZ is likely to leave rates unchanged at 3.25% next week. However, we’re not convinced that the economy has turned the corner. And with the output gap set to remain …
RBA to cut by 25bp next week, as recovery stumbles and price pressures ease Although labour market remains tight, it is not standing in the way of disinflation Bank will cut rates further than most analysts are anticipating We expect the RBA to cut rates …
Weak retail sales print locks in July cut for RBA With consumer spending remaining in the doldrums, there is a strong case for the RBA to cut rates faster and further than most are predicting. The 0.2% m/m rise in retail sales in May was markedly weaker …
The latest PMIs suggest that while global industrial activity gained some momentum at the end of Q2, this will probably prove short lived. Meanwhile, the surveys continue to suggest that tariffs are contributing to strong price pressures in the US, while …
1st July 2025
With the Fed divided between doves calling for a rate cut as early as July and hawks expecting no further easing this year, Fed Chair Jerome Powell struck a careful balance in his semi-annual testimony to Congress this week. He offered no signal that a …
27th June 2025
There were two key developments for the inflation outlook this week. First, some of the upside risk to CPI inflation posed by the conflict in the Middle East and higher energy prices has subsided. After the price of Brent oil ended the UK business day on …
Overview – Australia’s economy is struggling to gain momentum, while the recent rebound in activity in New Zealand isn’t likely to be sustained. As the lull in activity lifts spare capacity, underlying price pressures should continue to ease in both …
26th June 2025
Sharp fall in inflation likely to reinforce RBA’s dovish pivot With price pressures easing markedly in May, the RBA may well front-load monetary easing to a greater degree than we’re predicting. According to the monthly CPI indicator, headline inflation …
25th June 2025
The latest data suggest that the boost to industry and trade from businesses front-running US tariffs is over. Manufacturing activity softened in April and May, and new orders have weakened. While consumer confidence has partially rebounded from …
24th June 2025
Fed’s Powell offers no hint of near-term rate cut Fed Chair Jerome Powell’s prepared semi-annual testimony to the House today offered no hint that a rate cut is coming any time soon. Despite the recent dovish comments from Trump-appointed Governors …
Core inflation easing, but probably still too high for imminent rate cuts The Bank’s preferred CPI-trim and CPI-median core measures rose by a smaller 0.21% m/m on average in May, with the three-month annualised rate declining to 3.0%, but that is …
Overview – The euro-zone’s strong first-quarter growth rate was a result of tariff front-running and will be reversed in Q2 and be followed by weak growth in the second half of the year. Further ahead, we think the euro-zone will grow more slowly than …
23rd June 2025
Overview – The Bank of Japan will stay on the sidelines for a few more months as GDP growth softens and trade tensions cloud the outlook. But with the labour market set to remain very tight, wages rising strongly and inflation on track to overshoot the …
The Summary of Deliberations from the Bank of Canada’s June policy meeting, released on Tuesday, revealed it held rates for three reasons: the economy had slowed but not significantly, uncertainty remained high, and recent inflation data had firmed. …
20th June 2025
Downside risks persist in Australia Australian employment unexpectedly fell by 2,500 last month, as a 38,700 rise in full-time employment was more than offset by a 41,200 fall in part-time employment. However, with the unemployment rate holding steady at …
Case for tighter monetary policy remains strong The Bank of Japan tweaked its bond purchases at this week’s meeting but retained the dovish tone adopted at its May meeting. Indeed, the minutes of the May meeting showed that Board members were worried …
We’re discussing the outlook for Bank of England, Fed and ECB policy in a 20-minute online Drop-In at 3pm BST today. (Register here .) And a t our in-person Roundtables in London on Tuesday 1 st July, clients can discuss with our economists and their …
19th June 2025
Dovish hold supports our view of August cut and rates falling to 3.50% or below next year The Bank of England sounded a bit more dovish while leaving interest rates at 4.25% today, despite the extra upside risks to inflation from events in the Middle …
RBA’s easing cycle has further to run Labour market and population data published today are sending mixed signals about capacity pressures in the Australian economy. Either way, they probably won’t prevent the RBA from cutting rates further in the months …
Despite strong bounce in Q1, economy not out of the woods yet Although New Zealand’s recovery gained traction last quarter, there are signs that the upshift in momentum will prove short-lived. Accordingly, we still think there’s a strong case for the RBNZ …
The Fed will remain on the sidelines for some time, waiting to see what impact tariffs will have on price inflation. We suspect that lingering fears of a more persistent impact will persuade the Fed to hold off cutting interest rates until the first half …
18th June 2025
Fed splitting into two camps The Fed’s new interest rate projections still just about show a median of 50bp of cuts to its policy rate for this year, but it was very close. Back in March, 11 of 19 officials anticipated two 25bp cuts this year, with four …
This page has been updated with additional analysis since first publication. We’ll be discussing the outlook for Bank of England, Fed and ECB policy in a 20 minute online Drop-In at 3pm BST on Thursday 19 th June. (Register here .) We're hosting in-person …
The Bank of Japan decided to taper its bond purchases at a slower pace from next year and retained its pessimistic outlook for the economy. However, we expect that mounting upside risks to the Bank’s inflation forecasts will prompt the Bank to hike rates …
17th June 2025
Bank of Japan will hike rates again before year-end The Bank of Japan decided to reduce its bond purchases at a slower speed from next year but gave little away in terms of the outlook for interest rates. With inflation set to surpass the Board’s …
Downside risks growing There are growing signs that economic conditions in Australia have continued to weaken. According to a new NAB business survey, business conditions fell to their lowest point since August 2020 last month. On past form, the data are …
13th June 2025
Falling employment and easing wage growth suggest MPC won’t slow pace of cuts Growing chance that rates fall below 3.50% Limited influence of rate cuts pose questions over speed of QT The Bank of England will almost certainly leave interest rates at 4.25% …
12th June 2025
Underlying economic strength signals no need to cut Updated SEP may feature higher median interest rate projection Speculation around Powell’s replacement will plague proceedings We expect the underlying strength in the economy and uncertainty over the …
11th June 2025
Canada Chart Pack (June 2025) …
Board will remain downbeat about economic prospects for a while However, inflation set to surpass Bank’s forecasts by large margin We expect the Bank to hike again in October We suspect that the Bank of Japan will stick to its downbeat outlook for …
10th June 2025
This page has been updated with additional analysis since first publication. Looser labour market driving softer wage pressures With payrolls plunging, the unemployment rate climbing and wage growth easing, today’s labour market release leaves us more …
Lingering inflation risks complicate matters There is no sugarcoating the fact that Australia’s economic recovery is struggling to take off. National accounts data released this week showed that real GDP grew by just 0.2% q/q in Q1, well below the 0.45% …
6th June 2025
The Bank of Canada avoided surprising markets by keeping its policy rate at 2.75% today, as it continues to wait to see the full impact of US trade policy on the economy. Nonetheless, the Bank confirmed that its bias remains toward loosening policy …
4th June 2025
