Filtered by Topic: Monetary Policy Region: G10 Use setting G10 Use setting Monetary Policy
We think the three main economic themes of 2023 will be falling inflation, peaking interest rates and recession. We explained these forecasts in detail in our recent UK Economic Outlook , which carried the title a “A tough year”. (See here .) In short, …
16th December 2022
The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75 basis points (bps) in November to 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But unlike the hawkish Fed, the Bank sounded a touch …
15th December 2022
Easing off the brakes, but hikes may not halt until rates hit 4.50% The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75bps in November to a 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But …
Overview – Soaring interest rates and weak real income growth will result in a more pronounced slowdown in economic activity in both countries than most anticipate. With New Zealand’s central bank determined to push the economy into recession, we’re now …
12th December 2022
The Bank of Canada’s 50bp rate hike this week means that variable mortgage rates are now more than 400bp higher than the start of the year. This raises the risk that some will be forced to sell their homes, although there was little evidence of …
9th December 2022
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
We think price pressures in China cooled further in November… (01.30 GMT) … while a decline in US PPI could foreshadow a similar drop in CPI next week (13.30 GMT) University of Michigan consumer confidence is probably still historically weak (15.00 GMT) …
8th December 2022
Shift down from 75bps hike in November to 50bps hike in December MPC starting to think more about the level of rates rather than the pace of rate hikes We think rates will rise to a peak of 4.50%, before being cut sharply in 2024 A shift from the 75 …
Overview – The economy is heading for a moderate recession, as higher interest rates weigh on domestic demand and exports contract amid the global downturn. Weaker demand, together with lower commodity prices and an easing of supply shortages, should …
Overview – 2023 will be a tough year for the economy as the effects of the previous rises in inflation and previous hikes in interest rates (as well as a future rise from 3.00% now to a peak of 4.50% in early 2023) are felt. Our view that inflation and …
7th December 2022
Germany’s industrial output probably contracted by 0.5% m/m in October (07.00 GMT) We expect China’s exports to have fallen by 5.5% y/y due to cooling global demand We think the Bank of Canada will hike rates by 25bp, while Poland’s central bank stays …
6th December 2022
The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift the cash rate to 3.85% by April. The Bank’s decision to lift the cash rate from 2.85% …
RBA not backing away from rate hikes just yet The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift rates to 3.85% by April. The Bank’s …
The last big central bank decisions of 2022 resulted in another batch of hefty rate hikes – if smaller than recent – but also provided important signals about the direction of policymaking in the coming year. Group Chief Economist Neil Shearing and …
5th December 2022
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
2nd December 2022
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
Hopes may be rising that price pressures may finally be easing, but investors risk missing the fact that not all inflation cycles are alike. We think core inflation in the US will fall far faster than it will in the euro-zone, and this will have big …
1st December 2022
Higher interest rates weighing on domestic demand Core inflation pressures eased in October Bank to drop down to 25 bp hike as it balances risks of over- and under-tightening The easing of the three-month annualised measures of core inflation in October …
30th November 2022
Headline inflation close to a peak, but core may rise further November’s fall in headline inflation in Germany and Spain suggest that the euro-zone headline rate will come in lower than we had anticipated when it is published tomorrow, and is now close …
29th November 2022
Higher interest rates beginning to influence the economy October’s money and credit figures highlight how higher interest rates are starting to influence the economy. Higher interest rates are weakening the demand for credit, especially for mortgages, …
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
The Treasury has started to make payments to the Bank of England’s Asset Purchase Facility (APF) to cover the losses it has racked up because of the Bank of England’s gilt purchases. While this won’t force the Chancellor to tighten fiscal policy …
25th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
24th November 2022
With fiscal policy no longer expected to be ultra-loose and some signs emerging that domestic price pressures will ease further ahead, we no longer expect the Bank of England to raise interest rates to a peak of 5.00%. Our new forecast of an increase …
23rd November 2022
RBNZ will hike rates above 5.0% The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated and it now seems likely that rates will peak closer to 5.5% instead of our current forecast of 5.0%. The statement was very …
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
21st November 2022
As the dust settles on this week’s Autumn Statement, we take a step back and answer three key questions. (Clients can catch up on our detailed analysis and our Drop In webinar following Thursday’s fiscal event here and here .) With the economy entering …
18th November 2022
Although the data this week showed renewed rises in the annual rates of CPI-trim and CPI-median inflation in October, our calculations show that the timelier 3-month annualised measures both declined. That could persuade the Bank of Canada to drop down …
Core inflation pressures better than they look Although the annual rates of CPI-median and CPI-trim edged up in October, the 3-month annualised rates that the Bank of Canada is now focussed on declined. As that for CPI-median is now in the 1% to 3% …
16th November 2022
Inflation may have peaked, but battle not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October will mark the peak. But core inflation may yet rise further, which is why we think the …
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
11th November 2022
While the risk premium that pushed gilt yields up and the pound down after the mini-budget has mostly been reversed under the stewardship of Sunak and Hunt, the fear that the markets will baulk at any fiscal indiscipline means that the Chancellor will …
10th November 2022
Goods deflation begins; health insurance flips The better than expected 0.3% m/m increase in core consumer prices in October won’t on its own persuade the Fed to drop its hawkish stance. But we expect this to mark the start of a much longer …
The modest fiscal loosening unveiled in the Fall Economic Statement this week is unlikely to move the needle much for monetary policy, but the surge in employment in October and the acceleration in wage growth nevertheless leave the Bank of Canada’s …
4th November 2022
Composite PMIs for Italy and Spain probably fell further in October (09.00 GMT) We think US non-farm payrolls rose by 225,000 in October (12.30 GMT) Sign-up to our Global Economics Drop-In on the upcoming recession Key Market Themes We’re inclined to …
3rd November 2022
Although the Monetary Policy Committee (MPC) raised interest rates today by 75 basis points (bps), from 2.25% to a 14-year high of 3.00%, it sent the strongest signal yet that it thinks rates won’t need to rise much above 4.00%. But with price/wage …
Dovish tilt, but rates may still rise to 5.00% Although the Monetary Policy Committee (MPC) raised interest rates today by 75bps, from 2.25% to a 14-year high of 3.00% (consensus 3.00%), it sent a strong signal that it is unlikely to raise rates to the …
Labour market strength will encourage RBNZ to hike by 75bp this month New Zealand’s labour market remained very tight last quarter and coupled with the continued strength in inflation. the RBNZ will probably hike by 75bp in a couple of weeks. The 1.3% q/q …
1st November 2022
This dashboard gives a holistic overview of financial conditions across major developed economies. It presents our proprietary financial conditions indices (FCIs) as well as a selection of input variables used in our FCIs. Our FCIs indicate the ease with …
The dovish tilt among central banks has led to more talk of “pivots”, but this will mean different things for different banks. The ECB may be shifting to a slower pace of tightening, but the peak in rates is still some way off. That peak is closer for …
RBA will lift rates more sharply than most anticipate The Reserve Bank of Australia hiked rates by 25bp today and the upward revision to its inflation forecasts are consistent with our view that rates will peak at an above-consensus 3.85%. The Bank’s …
The 2.6% annualised rise in third quarter GDP was a lot worse than it looked, with growth in underlying demand grinding to a near-halt. At the same time, there are mounting signs that economic weakness will soon feed through to disinflation in core …
28th October 2022
The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between incomes and wages . As widely anticipated, the Bank kept its interest rate …
Window for tighter policy is closing The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between prices and wages. As widely …
Rising price/wage expectations will prompt the MPC to hike rates aggressively on Thursday It’s almost 50-50 between a 75bps and 100bps hike, but we are going for 100bps Our forecast that rates will peak at 5.00% remains higher than the consensus …
27th October 2022
Our Global Economics team held a 20-minute online briefing on the outlook for the global economy and policy on Tuesday, 8 th November. During this session, the team answered client questions as they highlighted key takeaways from their recently published …
Governor Tiff Macklem shifted his tone notably today, reassuring that the Bank was “trying to balance the risks of over- and under-tightening”, whereas previously the emphasis had stressed that it was better to tighten too much rather than too little. …
26th October 2022
The reversal of Truss/Kwarteng’s fiscal policies and Rishi Sunak’s appointment as the UK’s new Prime Minister has ushered in a period of calm in UK financial markets after the recent storm. Indeed, much of the extra political risk premia on gilts that …
Bank won’t make a U-turn and will opt for another 25bp hike next week But the upside surprise in Q3 inflation points to a higher peak in interest rates With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 While the …
