Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
Productivity crunch creates dilemma for RBA The RBA has been ringing the alarm bells about dismal productivity gains for a while now. In the minutes of its May meeting, the Board noted that if productivity growth did not return to the modest pace recorded …
19th May 2023
The rapid turnaround in the housing market and the upside surprise to CPI inflation in April have raised the case for another interest rate hike from the Bank of Canada, which we now judge is slightly more likely than not. The potential for US debt …
17th May 2023
Inflation is now on a downward trend and interest rates are at, or very close to, a peak. But central banks will only cut interest rates once there are clearer signs that underlying price pressures are under control. That could be as early as later this …
The RBNZ will lift its OCR by 25bp next week. With upside risks to inflation persisting, we’ve pencilled in another 25bp hike in July. However, we still think the Bank will pivot to rate cuts by year-end. The latest data don’t tell a compelling story as …
The RBA’s balance sheet has barely shrunk since it decided to stop reinvesting the proceeds from maturing bonds. While pressing ahead with quantitative tightening would make it easier for the Bank to engage in quantitative easing during future downturns, …
16th May 2023
RBA retains its tightening bias The minutes of the RBA’s May meeting were on the hawkish side, but we still think that the Bank’s tightening cycle is already over. Although the Board discussed the option of leaving the cash rate unchanged, it ultimately …
The resilience of PCE core services ex-housing inflation is only partly due to the strength of labour market conditions, and other factors are likely to play an important role in driving it lower over the rest of this year. That should reinforce the …
15th May 2023
Australia’s house prices have rebounded over the last couple of months and most leading indicators suggest that the recovery has legs. However, we doubt that a sustained recovery is on the cards. While false dawns in the housing market are rare, they did …
We think that investors are underestimating the scale of interest rate cuts in the UK next year. If we’re correct, that could propel Gilts to the top of the class for local-currency returns over the rest of 2023. Local-currency returns from ICE BofA’s …
12th May 2023
Yesterday’s 25 basis point rise in interest rates from 4.25% to 4.50% was widely expected in the end. But we’ve been forecasting that rates would rise to 4.50% since November last year. (See here .) The most striking thing coming out of yesterday’s …
Treasury won’t go on a spending spree Earlier this week, the Australian government boasted its first budget surplus in fifteen years. However, the picture in New Zealand is less rosy. The kiwi nation’s fiscal accounts are in worse shape than the …
Ueda leaves door open to acting before full review Bank of Japan Governor Ueda spoke on Tuesday in the Diet and mostly repeated what he said in the Bank’s post-meeting press conference on 28 th April, when he left monetary policy settings unchanged in his …
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
11th May 2023
Following the renewed concerns about regional US banks this week, markets are again pricing in interest rate cuts from the Bank of Canada later this year. From a domestic perspective, however, the strength of the local real estate board data in April and …
5th May 2023
The April employment report showed that while jobs growth remains solid enough, it is still trending lower and the surveys suggest activity growth is slowing too. With ongoing concerns over regional banks looking more likely to result in a further …
Hard data released this week paint a more downbeat picture of the euro-zone economy than the latest surveys. Three points are worth highlighting. First, the data confirm that the 0.1% q/q rise in euro-zone GDP in Q1 masks a greater weakness in domestic …
Will 4.50% be the peak? Markets and economists have come round to our view that rates will rise to 4.50% 4.50% may well be the peak Risk is that resilient economy and sticky inflation prompt rise to 4.75% or 5.00% With the financial markets and other …
4th May 2023
Today’s 25bp decision was in line with market expectations and the views of most forecasters polled by Reuters – though we had been in the minority forecasting 50bp. The move marks a slowing in the pace of policy tightening and suggests at face value that …
The market has finally come round to our long-standing view that Bank Rate will rise to 4.5%, with the Bank of England to likely to deliver another 25 basis point hike when it meets on 11 th May. But what will follow? Resilient activity data and …
The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation to convince officials to start cutting rates again …
3rd May 2023
Fed’s focus will turn to policy loosening before long The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation …
We expect a final 25bp rate hike from the Fed today, to 5.00-5.25%... (19.00 BST) ...and a 50bp hike from the ECB tomorrow, to 3.50% (13.15 BST) The US trade deficit probably narrowed sharply in March (13.30 BST) Key Market Themes The FOMC looks set to …
Labour market continues to run red hot New Zealand’s labour market remained extremely tight last quarter, presenting upside risks to our forecast for a 25bp rate hike later this month. The 0.8% q/q rise in employment was stronger than most had …
Tight labour market raises the risk of outsized RBNZ hike The strength of New Zealand’s labour market last quarter poses upside risks to our view that the RBNZ will lift rates by 25bp later this month. The 0.8% q/q rise in employment in Q1 was stronger …
The Reserve Bank of Australia retained its tightening bias when it lifted the cash rate by 25bp at today’s meeting, but we suspect that it won’t raise interest rates any further over the coming months . The Bank’s decision to lift the cash rate from 3.60% …
2nd May 2023
Tightening cycle over but rates will only be lowered in Q2 2024 The Reserve Bank of Australia retained its tightening bias when it lifted the cash rate by 25bp at today’s meeting, but we suspect that it won’t raise interest rates any further over the …
We expect the Fed to deliver a final 25bp hike… (Wed.) …while the ECB will probably raise the deposit rate by 50bp (Thu.) We think US non-farm payrolls rose by a softer 180,000 in April (Fri.) Key Market Themes With Yield Curve Control (YCC) set to stay …
28th April 2023
Although underlying activity growth rebounded in the first quarter, while wage and price inflation remained too high, we expect the second quarter to bring a sharper slowdown across the board. GDP data show weaker start to year The first-quarter GDP …
The Bank of Canada’s Summary of Deliberations suggests it was closer to resuming interest rate hikes in April than we thought. Nonetheless, as the data releases this week showed a fall in the job vacancy rate and point to a contraction in March GDP, it …
The Bank of England’s Chief Economist, Huw Pill, has come under fire this week after saying that everyone in the UK “needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices whether through higher …
Inflation figures suggest 50bp ECB hike next week still likely National inflation figures released today suggest that euro-zone headline and core inflation edged up in April. That adds to the reasons for the ECB to opt for a 50bp hike at its meeting next …
The Bank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into its policy measures, the results will only be unveiled next year. The …
RBNZ to relax lending rules On Wednesday, the RBNZ unveiled its proposal to ease Loan-to-Value Ratio (LVR) restrictions on mortgage lending by banks. With house prices now 18% below their January 2022 peak, the RBNZ has judged that threats to financial …
Yield Curve Control here to stay for now The B ank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into the Bank’s policy measures, the …
25bp hike next week likely to be the last, with rates peaking at 5.00%-5.25% Economic weakness and falling inflation to prompt rate cuts later this year We expect fed funds target range to have fallen to 2.50%-2.75% by end-2024 The Fed looks set to …
26th April 2023
Inflation moderating, but still far too strong to be consistent with RBA’s target Further tightening needed to return inflation to target by mid-2025 Rate cuts will start a bit later than most expect; our forecast is Q2 2024 Note: We’ll be discussing the …
RBA will deliver a final 25bp rate hike next week While inflation is moderating slightly faster than the RBA had anticipated, price gains remain far too strong to be consistent with the Bank’s 2-3% inflation target and we’re sticking to our forecast of a …
Inflation will only return to target in H2 2024 While inflation is moderating slightly faster than the RBA had anticipated, price gains remain far too strong to be consistent with the Bank’s 2-3% inflation and we’re sticking to our forecast of a final …
Once again the PMIs suggest that real activity in advanced economies continues to shrug off the effects of higher interest rates. According to the flash PMIs, GDP and employment growth both got off to a strong start in Q2, even amid the banking sector …
21st April 2023
We now expect the Fed to press ahead with another 25bp rate hike at the FOMC meeting early next month but, with the economic data softening and the risks of a debt ceiling crisis rising, we still think the Fed’s next move after that will be a cut. The …
We held an online Drop-In yesterday to present our new financial conditions indices and discuss how conditions have evolved in the wake of SVB’s collapse. (See a recording here ). This Update addresses some of the questions we received, a couple of which …
The stubbornness of CPI inflation in March, which seems more marked than elsewhere (see here ), has left us more comfortable than we were at the start of this week with our view that the Bank of England will raise interest rates by 25 basis points (bps) …
More signs of economic resilience… GDP data due next week are likely to confirm that, after stagnating in Q4, the euro-zone economy returned to growth in Q1. We have pencilled in a 0.2% q/q expansion in the region as a whole, with positive outturns in …
Note: We’ll be discussing the BOJ’s April decision and the fate of YCC in a 20-minute online briefing at 09:00 BST/16:00 SGT on Friday, 28th April . Register here . GDP growth falling short of expectations, but price pressures increasingly broad-based …
Note: We’ll be discussing the BOJ’s April decision and the fate of YCC in a 20-minute online briefing at 09:00 BST/16:00 SGT on Friday, 28 th April . Register here . BoJ will signal inflation target close to being met The Bank of Japan will release …
As the new Bank of Japan Governor prepares to chair his first policy meeting, the future of the Yield Curve Control policy is again in focus. Will Kazuo Ueda bring continuity or change? Marcel Thieliant , who leads our Japan coverage, Japan Economist …
20th April 2023
The recommendations by the RBA’s review panel unveiled today were broadly in line with what we had anticipated. While the 2-3% inflation target will be retained, sweeping changes to the Bank’s leadership structure are underway. And with a lot of the …
Inflation is coming off the boil Although inflation in Q1 was below what the RBNZ had expected, we don’t expect the Bank to take its foot off the brakes just yet. Indeed, with non-tradables prices continuing to rise at a rapid clip, the RBNZ is likely to …
Price pressures show signs of easing Amid ongoing concerns that non-tradables inflation will settle at an uncomfortably high level, we still expect the RBNZ to push ahead with one final 25bp rate hike in May. The 1.2% rise in consumer prices last quarter …
We think price pressures remained elevated in New Zealand in Q1 (22.45 BST) Sign-up here for tomorrow’s Drop-in on our revamped financial condition indices… …and here to catch up on yesterday’s Drop-In on China’s post-lockdown recovery Key Market …
19th April 2023
