Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
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
We think sovereign bond yields in Canada, Australia, and New Zealand will drop further by end-2023. The central banks of Canada, Australia, and New Zealand have generally been at the forefront of this tightening cycle in terms of starting to hike rates ( …
8th February 2023
Since the full effects of the previous surge in energy prices and the hike in interest rates have yet to be felt, we still think the economy will succumb to a recession this year. Admittedly, pandemic savings and the government’s handouts appear to have …
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
7th February 2023
We think euro-zone retail sales contracted sharply in December (Tuesday) UK Q4 GDP is likely to confirm the economy avoided recession in 2022 (Friday) We expect central banks in Australia, Sweden, India, Mexico and Peru to hike rates next week Key …
3rd February 2023
The strength of the early January data appears to rule out the possibility of an imminent recession, but that won’t prevent inflation from continuing to fall sharply from here. Jobs report appears to justify Fed’s caution Fed officials seem to agree …
While the Bank of England raised interest rates by a further 50 basis points (bps) yesterday, from 3.50% to 4.00%, it hinted that if Bank Rate is not already at a peak, it is very close to one. As we unpacked in our “Drop-In” webinar on this week’s policy …
We expect growth in US payrolls in January continued to slow (13.30 GMT) ISM Services Index likely to be consistent with mild US recession (15.00 GMT) We held a Drop-In on the Fed, ECB & BoE today – clients can catch up here Key Market Themes Despite …
2nd February 2023
While raising rates by 50 basis points (bps) today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but perhaps via two 25bps increases rather than one 50bps rise. …
Rates closing in on their peak, but rate cuts unlikely to come until 2024 While raising rates by 50bps today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but …
As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any hopes of a major dovish shift by maintaining the language in the statement …
1st February 2023
The Fed will probably deliver a smaller 25bp hike, pushing the FFR to 4.50%-4.75% (Wed.) We think strong recent data will prompt the BoE to raise rates by 50bp, to 4%... (Thu.) …while the ECB will increase its deposit rate by 50bp to 2.5%, as signalled …
With interest rates nearing a peak, the next two phases of monetary policy will most probably be rates being held at that peak and then being cut. The Bank of England may soon provide some guidance on both, although ultimately it will be the economy that …
The shift away from floating-rate to fixed-rate mortgages has meant that it was always going to take longer than in past tightening cycles for the rise in interest rates to feed through to the real economy. This is one reason why we think that once Bank …
Drag from higher interest rates intensified in December December’s money and credit figures revealed that higher interest rates further dampened economic activity at the end of last year. Moreover, the drag on activity will continue to intensify this …
31st January 2023
It’s well known that, with the yield curve inverting the Fed is now racking up losses, but what is less appreciated is that the higher interest payments it is making are going mostly to foreign banks and money market funds. The Fed earns interest on …
30th January 2023
The shift away from floating-rate to fixed-rate mortgages presents risks as well as benefits. It will protect homeowners who are lucky enough to have a long time remaining on their fixed rate contract from higher mortgage payments. But that reduces the …
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
27th January 2023
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
Despite some good news, another 50bps rate hike is most likely Next phase will be MPC pausing to assess influence of higher rates, but we’re not there yet Next big surprise may be that rates are cut by more than investors expect in 2024 Another 50 basis …
26th January 2023
We think the US economy expanded by nearly 2% annualised in Q4... (13.30 GMT) South Africa’s central bank will probably hike by 50bp on Thursday Sign up here for our Drop In on the latest economic and market developments in Asia Key Market Themes …
25th January 2023
The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate increases so far. While the Bank did not rule out future …
Bank hints that smaller 25 bp hike likely to be the last The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate …
As 2023’s calendar of central bank meetings began, we held a special briefing on the first Federal Reserve, European Central Bank and Bank of England policy decisions of the year. Chief Global Economist Jennifer McKeown lead a discussion with economists …
24th January 2023
The flash PMI might have edged up in the euro-zone in January… (09.00 GMT) … but we think it fell back in the UK (09.30 GMT) We expect central banks in Hungary and Nigeria to keep interest rates on hold Key Market Themes We don’t think government bond …
23rd January 2023
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
20th January 2023
Join Paul Ashworth , our Chief North America Economist, Stephen Brown , who leads our Canada coverage, and Jonathan Peterson , Senior FX Markets Economist, held a 20-minute briefing shortly after the Bank’s January decision announcement. Paul, Stephen …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
The Fed’s hawkish transformation has been so marked that, if its forecasts are to be believed, over the next couple of years it would effectively be adopting the same reaction function last followed during the Greenspan and Bernanke eras between 1987 and …
19th January 2023
Economic growth slowing and inflation falling But labour market still tight and inflation expectations too high Bank to drop down to 25 bp hike, but likely to add hawkish guidance The Bank of Canada is set to raise interest rates by a smaller 25 bp …
18th January 2023
The BoJ kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes over in April . Following the unexpected widening of the tolerance …
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Wage and price inflation expectations still too strong for comfort The Bank of Canada’s latest quarterly surveys leave no doubt that higher interest rates are weighing on demand, but still don’t show a convincing moderation in wage and inflation …
16th January 2023
The recent resilience of the economy to the dual drags of high inflation and higher interest rates doesn’t mean the pain has been avoided. Instead, our analysis suggests that higher interest rates will become a bigger drag on activity in the most …
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
13th January 2023
Inflation strong, consumption resilient On balance, the economic data released this week are consistent with our view that the RBA has more work to do. For a start, inflation rose back up from 6.9% to 7.3% in November, with trimmed mean inflation reaching …
The Bank of Korea is likely to implement one final 25bp hike (01.00 GMT) Chinese trade data will probably show falls in both imports and exports in December We think UK GDP fell by 0.3% m/m in November (07.00 GMT) Key Market Themes The latest evidence …
12th January 2023
Another more muted gain in core CPI Core CPI inflation was still an elevated 5.7% in December but, with another more muted 0.3% m/m gain, the three-month annualised rate fell to a 20-month low of 3.1%. Admittedly, the latter is still slightly above the …
Speculation is mounting that the Bank of Japan is finally moving to end its yield curve control (YCC) regime following December’s surprise policy tweak. How likely is the Bank to take this step, what would it mean for its monetary policy, and what impact …
11th January 2023
Widening of tolerance band has done little to improve market functioning Nomination of less dovish Governor would signal Yield Curve Control is on its way out However, renewed slowdown in inflation will prevent policy rate hikes The widening of the …
The resilience of the labour market is a risk to our view that the Bank of Canada will pause its tightening cycle after a final 25 bp hike this month, even as the slump in natural gas prices raises the chance that CPI inflation will fall faster than the …
6th January 2023
The past few weeks have brought the news that the UK economy is lagging even further behind its G7 counterparts. (See here .) One reason for this relative underperformance is real business investment, which accounts for 9.5% of real GDP and in Q3 was …
After November’s positive surprise, will December’s CPI report provide more evidence that US inflationary pressures are easing – and what would that mean for the Fed’s policy calculus? Chief US Economist Paul Ashworth and Senior US Economist Andrew …
The 0.3% q/q contraction in Q3 left real GDP 0.8% below its Q4 2019 pre-virus level and the UK economy lagging even further behind its major counterparts. In contrast, GDP has risen above its pre-pandemic level in all G7 economies, including the US …
5th January 2023
The nomination of a less dovish candidate to succeed BoJ Governor Kuroda would probably signal that Yield Curve Control will soon be abandoned, though we would still expect the Bank to keep its short-term policy rate at -0.1%. This would result in a …
4th January 2023
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. This will be a constant theme over the year ahead, …
Even though we expect the Bank of England to raise interest rates further from 3.50% now to a peak of 4.50%, we doubt the recent increase in gilt yields will be sustained. Instead, we think yields may fall from 3.60% currently to 2.75% by the end of 2023 …
21st December 2022
