Filtered by Topic: Monetary Policy Use setting Monetary Policy
Headwinds are gathering for the Swedish economy, and we expect the Riksbank to strike a dovish tone in its statement next week. But it will probably stop short of cutting the policy rate as it waits for some of the economic uncertainty to fade. Meanwhile, …
1st May 2025
Despite the Bank of Japan’s dovish tone today we think it won’t be long before JGB yields start to rise again. And even though concerns about Japanese capital repatriation have seemingly been back on investors’ minds lately, we don’t think higher JGB …
The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the Bank has become far too downbeat about the outlook for inflation and we’re sticking to our forecast of …
Bank of Japan will hike rates again in July The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the trade war won’t be as damaging as feared and we’re sticking …
Contraction in first-quarter GDP not a worry Core inflation yet to capture tariff impacts Fed will remain in “wait-and-see” mode for some time A contraction in GDP and near-flatlining in core PCE prices would usually be more than enough to persuade …
30th April 2025
A robust monsoon this year – as predicted by experts – wouldn’t have as big an impact on India’s economy as it would have had a couple of decades ago. But it could boost employment and energy production. What’s more, it would anchor prices of key crops …
This Rapid Response has been amended from our original response to correct the food CPI figure. Fall in inflation paves the way for May rate cut The larger-than-expected fall in Polish inflation, to 4.2% y/y, in April, is probably enough to tip the …
Dovish BoT and rising downside risks prompts forecast change Thailand’s central bank (BoT) today cut interest rates by a further 25bps (to 1.75%) and the poor prospects for the economy mean more easing is likely soon. The decision was correctly …
CPI data don’t support the case for below-neutral rates Although trimmed mean CPI gained a bit of momentum in q/q terms last quarter, it probably won’t keep the RBA from cutting rates by another 25bp at its May meeting. However, given lingering price …
Japanese banks are the one sector benefitting from the BoJ’s tightening cycle as higher interest rates lift their income by more than their expenses. And although they’ve struggled more recently amid the “Liberation Day” fallout, we think their …
China Chart Pack (Apr. 25) …
29th April 2025
MNB to stay on hold as above-target inflation persists The Hungarian central bank (MNB) left its base rate on hold today, at 6.50%, and despite downside risks to activity from US tariffs, we think its easing cycle will remain on pause throughout 2025. …
India’s economy is emerging from its recent soft patch. Headline CPI inflation should remain close to the RBI’s 4% target over the coming months, enabling the central bank to continue easing monetary policy. We’re expecting a further 50bp of cuts to the …
This publication has been updated with additional analysis ESI points to small hit from tariffs in April The ESI for April point to a small hit to the euro-zone from US tariffs in April and suggest that growth remained quite weak. With the drag from …
Sentiment holds up well in the face of Trump’s tariffs The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) provide a tentative sign that the impact of US tariffs on the region has been fairly contained so far. The …
US import tariffs have largely focused on China. For some EMs (such as India and South East Asia), this creates near-term opportunities to take US market share from China. But there will be offsetting effects if confidence has been hit. And EM commodity …
28th April 2025
The IMF’s decision to pause Colombia’s access to its flexible credit line is not particularly concerning given the country’s robust external position, but the Fund has shone the spotlight back onto the country’s fiscal problems. With general elections …
Saudi Arabia’s economy enjoyed a relatively strong start to the year underpinned by its non-oil sector. But while GDP growth will accelerate this year as oil output rises, the coinciding slip in oil prices is already resulting in a firmer turn to fiscal …
SA 2025 budget closer, but fiscal slippage coming South Africa’s 2025 budget took a vital step forward after the Treasury scrapped its proposed VAT hike this week. With the DA also recommitting to the GNU, this will provide some of the certainty that the …
25th April 2025
Inflation rises but end of tightening cycle is near The further rise in Brazil’s headline inflation rate to 5.5% y/y in the first half of April means that Copom will press ahead with a 50bp hike in the Selic rate at its next meeting in early May. But …
Business surveys for April suggest that US tariffs have not done much damage in the euro-zone so far. The euro-zone Composite PMI edged down rather than collapsing and the Ifo Business Climate Index for Germany, which is the most vulnerable of the larger …
The fall in market interest rate expectations since ‘Liberation Day’ is striking. On 31 st March, investors were pricing in just two more 25 basis points (bps) interest rate cuts this year from 4.50% now to 4.00%. Now they are fully pricing in three more …
CBR drops tightening bias, rate cuts likely in Q3 The Central Bank of Russia (CBR) left its policy rate on hold at 21.00% again today and dropped the language in its statement that further interest rate hikes are possible. With inflation nearing a peak, …
Trump policies may be levering India towards US US Vice President JD Vance hailed “very good progress” on a potential trade deal between Washington and New Delhi during his visit to India this week, and prospects do appear to have brightened with the two …
Leadership signals policy flexibility in the face of trade uncertainty The Politburo has just concluded its April meeting which, as usual, focused on economic affairs. The communique signalled that monetary policy easing is still on its way and that …
Case for aggressive easing remains weak Flash PMI data released this Wednesday suggest that ongoing global tensions are doing little to dent business confidence in Australia. Although firms reported a second successive decline in new export business as a …
Underlying inflation set to surpass 3% Inflation excluding fresh food and energy picked up from 2.6% to 2.9% in March. And the big jump in inflation in Tokyo in April at first glance would suggest that the Bank of Japan is starting to fall behind the …
Our View: The economies of Central and Eastern Europe are generally less exposed to higher US tariffs than other EM regions, but we have still become more concerned about the hit to growth this year from US trade protectionism. Alongside signs that wage …
24th April 2025
The latest data suggest that the world economy got off to a weak start in 2025 even before most tariffs were implemented. While tariff front-running provided a boost to global industrial activity and exports to the US in Q1, this should soon fade. …
Inflation rises, but Banxico more focussed on weak economy The rise in Mexico’s headline inflation rate in the first half of April, to 4.0% y/y, is unlikely to shift Banxico’s focus away from the weakness of the economy and we expect it to deliver another …
At first glance, Australia and New Zealand should be fairly insulated from the brunt of the US’s ongoing trade war. Both countries have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. That said, second-round …
Board will revise down forecasts for GDP growth due to trade tensions But Bank will signal continued confidence in meeting its 2% inflation target We expect another hike in July, with the policy rate climbing to 1.5% by 2027 The Bank of Japan will …
We are assuming that the 90-day pause on reciprocal tariffs becomes permanent, keeping tariffs at 10% for most countries except China which will face a steeper 60% levy. If Congress quickly redirects the tariff revenue back into the economy, a recession …
23rd April 2025
The latest flash PMIs suggest that tariffs and trade policy uncertainty weighed on activity and confidence in most DMs at the start of Q2 and boosted price pressures in the US. Our estimate of the weighted average of the flash composite output PMIs for …
Rates on hold amid currency concerns, BI in no rush to cut The decision by Bank Indonesia to leave interest rates unchanged at 5.75% came as little surprise and was correctly predicted by 24 out of the 26 analysts polled by Reuters, including ourselves. …
Reuters’ latest monthly Tankan survey, which was conducted between 2 nd and 11 th April, showed that business conditions among large manufacturers rose to an eight-month high. Granted, that survey has often lagged behind the manufacturing PMI around …
Fears over the independence of the Fed can now be added to the growing list of things troubling investors. Market moves over the past couple of days shed some light on the likely market consequences of any attempt by President Trump to ouster Fed Chair …
22nd April 2025
The Central Bank of Egypt (CBE) decided to cut interest rates on Thursday and we think monetary conditions will be loosened a lot further than most expect over the course of this year. That said, administered price hikes and spillovers of the US-China …
Odds of a May rate cut shorten The weaker-than-expected Polish industrial production and wage data for March have increased the probability that the central bank (NBP) will restart its easing cycle at its next meeting in May, but that decision will still …
If President Donald Trump does fire Fed Chair Jerome Powell, we suspect that the initial market reaction might not be disastrous, as long as Trump quickly lines up a relatively-qualified replacement, like Kevin Hassett or Kevin Warsh. In all likelihood, …
21st April 2025
Policymakers at the ECB appear to agree with us that risks to growth and inflation are increasingly skewed to the downside, supporting our view that the 10-year German Bund yield will stay around its current level and that the euro will give back some of …
17th April 2025
Markets were almost evenly split on what the Bank of Canada would do yesterday, right up until the last minute. In the end, the Bank opted to keep interest rates unchanged at 2.75%, rather than loosen policy by an additional 25bp. In his opening …
More cuts to come from the ECB This week’s decision by the ECB to cut interest rates came as no surprise, and the Bank’s overall messaging reinforces our view – which is shared by investors – that the Bank will keep cutting. (You can read our response …
Recession looking even less likely For all the recent anguish about tariff-induced equity selloffs and plunging sentiment, this week served as a valuable reminder that the only true measure of the health of the US economy remains the hard data. On …
The ECB’s decision to cut its deposit rate from 2.5% to 2.25% today was expected. And the monetary policy statement sent a clear signal that the Bank will cut rates further to counter the impact of trade policy uncertainty. We are forecasting two more …
CBRT hikes rates amid significant capital outflows Turkey’s central bank (CBRT) delivered a hawkish surprise in raising its one-week repo rate to 46.00% today. While this won't tighten monetary conditions, it does formalise the tightening delivered …
SARB’s inflation uncertainty may be falling The SARB’s Monetary Policy Review (MPR) published this week set out plenty of upside risks to inflation. But it looks like some of the risks from VAT hikes and tariffs have diminished, which could give the SARB …
ECB acknowledges downside risks from trade uncertainty While the ECB’s decision to cut its deposit rate from 2.5% to 2.25% today was expected, the monetary policy statement clearly points to further policy easing to come. The statement says the outlook …
CBRT signals tight policy here to stay The decision by the Turkish central bank (CBRT) to hike its one-week repo rate by 350bp, to 46.00%, formalises the emergency monetary tightening delivered last month and is a strong signal of commitment to a tight …
