Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
We think Japan’s exports rebounded by 7.0% y/y on February (23.50 GMT) The ECB may not hike rates tomorrow due to fears of a banking crisis (13.15 GMT) Sign-up here for our US Drop-in on our outlook for the US economy (15.00 GMT) Key Market Themes The …
15th March 2023
Fed has difficult decision to weigh financial stability needs against inflation target. On balance, we think the Fed will still push ahead with a 25bp hike. But inevitable pull-back in bank lending means Fed should be cutting before year-end. The Fed …
This year’s Shunto should result in the strongest negotiated pay hikes in decades. But the average Japanese employee will have little to rejoice in. Weaker corporate profits as well as a likely loosening of labour market conditions on account of a …
Euro-zone industrial production probably edged up in January (10.00 GMT) The UK’s Spring Budget may contain limited short-term fiscal loosening (12.30 GMT) We think that US retail sales fell by 0.8% in February (12.30 GMT) Key Market Themes How the …
14th March 2023
Strong inflation data counter financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is still likely …
Strong inflation data unlikely to outweigh financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is …
Even if the collapse of several mid-tier banks doesn’t develop into a full-blown systemic crisis, it will more than likely trigger a credit crunch. That raises the risk that the economy will suffer a harder landing, which would accelerate the needed …
13th March 2023
Overview – The economy is on the brink of a mild recession but with underlying inflation still accelerating, we expect new Bank of Japan Governor Ueda to end Yield Curve Control at the upcoming meeting in April. Key Forecasts Table Domestic Demand – We …
The circumstances of the Silicon Valley Bank (SVB) collapse are unique enough that it probably won’t trigger a widespread financial contagion. Nevertheless, it is a timely reminder that when the Fed is singularly focused on squeezing inflation by jacking …
10th March 2023
Powell in hawkish mood Fed Chair Jerome Powell confirmed this week that interest rates are set to rise higher than we previously anticipated. Powell noted that the strength of the January activity, employment and inflation data indicated that …
We have revised up our forecasts for real GDP and no longer think the economy will be quite as weak. This has very little to do with the 0.3% m/m rise in real GDP in January released this morning. Most of that was a rebound after the widespread strikes …
Governor Phil Lowe’s proclamation at Wednesday’s AFR business summit that the RBA was closer to a pause in interest-rate increases has fed speculation of a dovish pivot on the part of the Board. Indeed, financial markets have tamped down their …
Lower inflation means Norges Bank can stick to 25bp hikes February’s decline in headline and core inflation takes some of the pressure off the Norges Bank and means that it is likely to hike by 25bp at the meeting in two weeks’ time. After surprising on …
The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April . While that decision was widely anticipated, we were among the few who predicted the …
Case for end of YCC a touch weaker but still strong Contrary to our expectations, the Bank of Japan did not make any changes to Yield Curve Control (YCC) at today’s meeting. And the case for abandoning the policy now looks a little less compelling than a …
BoJ still likely to end Yield Curve Control The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April. We were among the few who expected the Bank …
The Fed is clearly trying to avoid a premature easing in financial conditions and a repeat of 1970s-style “stop-go” monetary policy. This Update discusses some lessons from that period for equity markets today. Equities have struggled over this week, …
9th March 2023
We think that most – perhaps two thirds – of the drag on activity from tighter monetary policy in advanced economies is still to come through in 2023. So, despite some surprisingly resilient data recently, we are sticking to our forecasts for advanced …
7th March 2023
The February employment report and Fed Chair Jerome Powell’s testimony to Congress next week should give a clearer indication of whether recent talk of interest rates going “higher for longer” is justified. Longer, but not necessarily higher? Market rate …
3rd March 2023
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
Bank under political pressure to abandon Yield Curve Control as inflation surges Incoming Governor Ueda seems to have been given a mandate to end the policy However, existing Governor Kuroda may well spring one last surprise Yield Curve Control is on …
We think inflation in Turkey eased slightly to 54% in February (07.00 GMT) Final PMIs in Europe may confirm that activity is holding up better than expected (09.00 GMT) We expect the US ISM services index to have fallen back in February (15.00 GMT) …
2nd March 2023
Encouraging signs in January CPI and economy has slowed sooner than expected But labour market still tight and wage pressures too strong Risk of higher interest rates elsewhere also keeps pressure on the Bank The fall in CPI inflation in January and …
1st March 2023
RBA’s hawkishness suggests rates will rise for a few more months However, softer incoming data suggest that the peak in rates isn’t far off Looming slowdown in activity and inflation opens door for rate cuts before year-end The RBA adopted a more …
Slowdown in inflation won’t prevent RBA from lifting rates to 4.1% GDP growth softened last quarter and inflation slowed sharply in January. But with inflation still very high, that won’t prevent the RBA from hiking the cash rate to a peak of 4.1% in May …
A widening in profit margins could mean that inflation is slower to fall back to the Bank of England’s 2.0% target than we expect. That would cause the Bank to raise interest rates even further than we currently anticipate and/or keep them higher for …
28th February 2023
The more hawkish tone in financial markets this week is justified. Prior to this week, investors seemed to be optimistic that the previous increases in interest rates would be enough to bring inflation back down to the Bank of England’s 2.0% target, and …
24th February 2023
We think Japan’s headline CPI inflation rose to a four-decade high in January (23.30 GMT) US income and spending data is likely to show a strong rebound in consumption (13.30 GMT) We expect headline and core US PCE price indices to have risen by 0.5% …
23rd February 2023
The recent resilience of economic activity has left us comfortable with our view that the Bank of England will raise interest rates from 4.00% now to a peak of 4.50%, rather than to 4.25% as analysts expect, and keep rates at that higher level all year. …
The January CPI data provided mixed signals about developments in underlying inflation. The CPI excluding food and energy and the CPI excluding the eight most volatile components each rose by just 0.1% m/m, which were the lowest gains since early 2021. …
22nd February 2023
Even though the Reserve Bank of New Zealand slowed the pace of tightening at today’s meeting, it still signalled a peak in the overnight cash rate of 5.50% by the middle of this year. Our more pessimistic forecasts for economic activity and wage growth …
The higher bond yields that would follow abandonment of Yield Curve Control would make it more difficult to stabilise Japan’s public finances. But the long maturity of government debt means that the government’s interest rate bill would only creep up …
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
21st February 2023
Being ranked by the Sunday Times as the top UK economic forecaster for 2022 is a great accolade and has generated a lot of interest in what we expect to happen next. Our forecasts for 2023 imply a tougher year than the consensus, with higher inflation …
20th February 2023
Governor Tiff Macklem reiterated this week that the Bank of Canada wants time to assess the impact of high interest rates, suggesting it will not respond to the strength of employment by immediately resuming interest rate hikes. The weakness of home …
17th February 2023
In a previous edition of the UK Economics Weekly we said that the CPI core services inflation and private sector pay figures released this week would prove pivotal in determining whether the Bank of England raises interest rates further or calls time on …
UK retail sales volumes probably rose by 0.5% m/m in January (07.00 GMT) We think Russia’s GDP fell by 3.5% y/y in Q4 (16.00 GMT) Catch-up here on yesterday’s Drop-In on our UK economic outlook Key Market Themes The recent strength of the US dollar and …
16th February 2023
Moderating services inflation makes Bank of England’s life easier The fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%, BoE forecast: 10.1%), the drop in the core rate from 6.3% to 5.8% and the easing in …
15th February 2023
The government formally nominated Kazuo Ueda as the next Bank of Japan Governor at yesterday’s Diet session. Since the initial announcement of his candidature last Friday , analysts and investors have been looking for clarity on Mr Ueda’s views. So far …
Data a touch softer than expected, but not soft enough for RBNZ to back away We still expect rates to peak at 5.5% by the middle of this year Looming recession will prompt looser policy by year-end The incoming data have been a touch softer than the RBNZ …
The surge in employment in January highlights that some sectors are still recovering strongly and raises the prospect that the economy could avoid recession, although we still judge that a modest one is more likely than not. As the employment gains have …
14th February 2023
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continued to support strong wage growth. The Bank of …
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth. The Bank of …
The surge in employment and rise in hours worked in January suggest that economic activity continued to expand at the start of 2023 and present clear upside risks to our forecasts for GDP growth. Nevertheless, we disagree with the market-implied view …
10th February 2023
Markets have continued to swing round to the Fed’s view that rate cuts are unlikely this year. We still believe that those cuts are coming, however, as economic growth disappoints and core inflation falls more rapidly than the Fed is expecting. Markets …
The main development of the week happened in the past few hours: the reported nomination of Kazuo Ueda as the next BoJ Governor. Our initial response is here . While analysts and investors are looking for clarity on Mr Ueda’s views, there is little to …
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
With trimmed mean inflation surpassing the Bank’s November forecast in Q4, the RBA turned more hawkish when it lifted the cash rate by 25bp on Tuesday. Today’s Statement on Monetary Policy shows that the Bank expects inflation to only touch the top end of …
We anticipate interest rate hikes in Mexico and Peru… (Thu.) … but think Russia’s central bank will leave rates on hold (Fri.) UK GDP data likely to show that the economy avoided a recession in 2022 (Fri.) Key Market Themes Shrinking central bank …
9th February 2023
