Filtered by Topic: Monetary Policy Use setting Monetary Policy
The unexpected contraction in the Israeli economy in Q2 amid the war with Iran should reverse this quarter, and so we think it is unlikely that the Bank of Israel (BoI) will cut interest rates at its meeting this Wednesday in response to weak activity. …
18th August 2025
Strong domestic demand and inflation point to rate hold in September The Chilean economy isn’t as weak as the slowdown in GDP growth to 0.4% q/q would suggest; there was a large drag from net trade while domestic demand remained very strong. This, …
Many central banks across Sub-Saharan Africa have cut interest rates over the past year or so and Nigeria will soon join the rate-cutting club. With inflation low or falling in most countries, we generally expect more monetary easing than the consensus by …
Weaker-than-expected growth, but strong inflation to keep BanRep hawkish The weaker-than-expected 0.5% q/q expansion in Colombia’s economy is unlikely to change the central bank’s thinking and we remain comfortable with our above-consensus interest rate …
15th August 2025
After its July policy meeting, we felt the Bank of Canada had moved closer to our view that inflation risks had diminished. The Bank devoted considerable effort explaining why it expects underlying inflation to fall soon , citing the recent appreciation …
All eyes on Jackson Hole Ahead of the Fed’s annual Jackson Hole Symposium, which kicks off late next week, markets are still wholly convinced that the Fed will cut rates by 25bp at the upcoming FOMC meeting in September and follow that up with at least …
Brazil: rate cut expectations starting to shift The latest data out of Brazil support the view that GDP growth slowed in Q2, which alongside softening inflation, has led to a shift in the debate towards interest rate cuts, perhaps by year-end. The …
SA: rise in joblessness bolsters case for more easing The rise in South Africa’s unemployment rate in Q2 reinforces our view that inflation will stay subdued, further interest rate cuts are coming and local currency bond yields will continue to decline. …
Malaysia – another rate cut coming Malaysia published the final estimate of its Q2 GDP figures earlier today. Growth came in at 4.4% y/y. That was the same as the initial estimate and unchanged from Q1 but below the 5.1% pace of expansion recorded in …
Capacity pressures remain at bay The RBA’s decision to lower its cash rate by 25bp, to 3.60%, at its meeting this Tuesday was widely anticipated. Broadly speaking, the Board’s messaging was little changed from the July meeting. However, there were …
The recent slowdown in wage growth across CEE is a welcome development for central banks, but we don’t think it will ease much further, limiting how quickly services inflation continues to fall. Meanwhile, other inflation pressures in the region, …
14th August 2025
The Q2 GDP figures out so far point to robust growth across much of the emerging world, but we think growth will soften over the second half of the year. While growth across much of Asia will exceed consensus expectations, we think growth will disappoint …
Egypt: reforms key regardless of CBE governor The term of the incumbent Central Bank of Egypt (CBE) governor, Hassan Abdalla, is due to expire next week and, while it is not yet clear if Mr. Abdalla will be kept on or a successor appointed, it will be key …
The economy has mostly held up against US tariffs so far, thanks largely to resilient consumer spending. But exports have weakened, and investment is showing signs of slowing. With the upcoming USMCA renegotiation set to prolong trade uncertainty, both …
We think the Riksbank is likely to be in wait-and-see mode when it meets next week and will keep its policy rate at 2%. While some of the economic data were underwhelming in the second quarter, they were not bad enough to justify another rate cut at this …
13th August 2025
Polish economy outperforming amid tariff storms The 0.8% q/q growth in the Polish economy in Q2 was a bit weaker than consensus expectations, but still confirms that the economy maintained solid momentum last quarter and supports our view that Poland will …
BoT cuts rate, further easing to come Thailand’s central bank (BoT) cut interest rates by 25bps today to 1.50%, and its dovish commentary supports our view that further easing is likely in the coming months. The decision was anticipated by 23 of the 28 …
The RBNZ is all but certain to cut rates by 25bp at its meeting ending on August 20 th . Although inflation is set to remain in the upper half of the Bank’s 1-3% target band in the near-term, we suspect the Committee will be more concerned about timely …
Inflation falls, but rate cuts unlikely before the end of the year The fall in Brazilian inflation, to 5.2% y/y in July, won’t change the outcome of the central bank’s next meeting in September, where interest rates will be left unchanged. But it lends …
12th August 2025
Inflation at eight-year low opens door to further rate cuts The larger-than-expected fall in India’s headline inflation rate in July, to an eight-year low, raises the prospect of the RBI cutting interest rates further this year. But with inflation set to …
The RBA endorsed market expectations of further easing when it lowered the cash today and we think the Bank will ultimately slash rates to 2.85%. The Bank’s decision to lower the cash rate from 3.85% to 3.6% was correctly anticipated by all 40 analysts …
RBA will cut rates below 3% by mid-2026 The RBA endorsed market expectations of further easing when it lowered the cash today and we think the Bank will ultimately slash rates to 2.85%. The Bank’s decision to lower the cash rate from 3.85% to 3.6% was …
Housing market on steadier footing Beginning with the good news, local real estate board data show that sales in four of Canada’s “early releaser” cities rose by 9% m/m in July, including a bumper 13% rise in Toronto. That gain points to a 6% rise in …
8th August 2025
After an extraordinarily divisive Bank of England policy meeting, Group Chief Economist Neil Shearing explores why it’s become so difficult to get a clear read on the UK economy. Part of the problem lies with the data – an issue now making headlines in …
The Bank of England’s hawkish tone at its policy meeting on Thursday has inevitably led to questions about whether interest rates will be cut again this year and whether the Bank’s rate-cutting cycle will soon end. (See here .) In some ways, the Bank’s …
Labour market weakness justifies September rate cut The Labour Force Survey has once again made a mockery of the economist consensus, with the surprise 83,000 surge in employment in June followed by a 40,800 slump last month. We are now a bit more …
NBR unlikely to cut until (at least) mid-2026 The National Bank of Romania (NBR) left its policy rate on hold today, at 6.50%, as expected, and its communications suggest a restart of the easing cycle remains some way off. We expect rates to remain on …
EU protected from higher chip and pharma tariffs President Trump this week threatened a 100% tariff on semiconductor imports produced by firms that do not plan to invest in the US. We wrote about the global implications here . But in principle, the EU has …
Trump-Putin meeting in the spotlight Expectations that the touted Trump-Putin meeting could lead to a breakthrough in talks to halt fighting in Ukraine are likely to be fairly low. After all, little progress has been made towards ending the war so far. …
50% tariff may not be the end of the story for India President Trump this week followed through on his threat to punish India for its continued economic ties with Russia: India is set to face an additional 25% tariff on top of the 25% tariff that took …
Strong case for RBNZ to provide more stimulus The Reserve Bank of New Zealand has been bemoaning the weak state of productivity growth for a while now, arguing that it is stifling the speed limit of the economy. Yet, the Bank has quietly been revising up …
Bonus payments coming back to earth The economic data released this week at the margin would support the case for keeping monetary policy unchanged for longer. For one thing, while the Bank of Japan’s consumption activity index rebounded in June, it was …
Miran a good pick for the Fed President Donald Trump’s decision to nominate Stephen Miran to replace Adriana Kugler as Fed Governor, albeit only on a temporary basis to begin with, is a welcome surprise. Miran is currently the Chair of Trump’s Council of …
7th August 2025
Banxico slows the pace of easing, but more rate cuts still likely Mexico’s central bank (Banxico) lowered its policy rate by a smaller 25bp, to 7.75%, as expected at today’s meeting and the accompanying communications suggest that cuts are likely to …
Next week, we expect Norges Bank to leave the policy rate unchanged at 4.25% but reiterate that it is likely to loosen policy later this year. We forecast two 25bp cuts by year-end. At its last meeting, Norges Bank cut its policy rate by 25bp, to 4.25%, …
Saudi: cuts kick in, but more tightening needed The Saudi Ministry of Finance published its Quarterly Budget Performance Report for Q2 last Friday which showed that the government is on track to run a larger deficit than projected. While spending cuts …
Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some signs that it may cut rates slower and/or not as far as our forecast of a decline to 3.00% in 2026. We are sticking to our view that …
Further rate cuts unlikely this year The Czech National Bank (CNB) left its policy rate on hold again today, at 3.50%, and in contrast to most other analysts, we think that further monetary easing is unlikely this year. The decision to leave the policy …
Inflation drop seals the deal on a 25bp cut later today The drop in Mexican inflation to 3.5% y/y in July paves the way for Banxico to deliver the clearly-signalled 25bp cut, to 7.75%, at its meeting later today. The outturn was down from 4.3% in June and …
For an updated and more detailed version of this analysis, click here . Rates cut to 4.00%, but BoE appears in no rush to cut again soon Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some …
Economic growth has been fairly resilient to tariffs so far and, as long as tariffs stay around the 15% agreed in the EU-US trade deal, the hit to activity should be small. But growth will be sluggish this year as low confidence and slowing income growth …
The high-beta Antipodean currencies had been the worst victims of global trade tensions but have fared better since early April, relative to their G10 peers, as global risk appetite steadily improved. Nevertheless, we think the best days for the Aussie …
Despite the unexpected rise in CPI inflation in June, we still think the weakness in the labour market means it’s only a matter of time before wage growth and inflation slow to rates consistent with the 2% inflation target. We think the Bank of England …
6th August 2025
The Reserve Bank of India (RBI) kept the repo rate on hold at 5.50% and maintained its “neutral” policy stance today, despite India already being hit by a 25% US tariff with the potential for it to rise further if Trump follows through on his latest …
RBI's easing cycle at an end The Reserve Bank of India’s (RBI’s) decision to keep the repo rate on hold at 5.50% while maintaining its “neutral” policy stance reinforces our non-consensus view that the easing cycle is at an end. Today’s decision was …
Weak labour market bolsters the case for further easing With New Zealand’s labour market continuing to slacken in Q2, the RBNZ is all but certain push ahead with a 25bp cut at its meeting later this month. The 0.1% q/q fall in employment last quarter was …
With inflation trending lower, RBA will cut by 25bp next week Nascent recovery and still-tight labour market will keep the Board vigilant However, as incoming data remain soft, Bank will ease further than most expect With underlying inflation within …
5th August 2025
Household consumption showing signs of life The strong pickup in household spending last quarter won’t keep the RBA from handing down a 25bp cut when it meets next Tuesday. Looking ahead, however, the data do suggest upside risks to our below-consensus …
Disinflation paves the way for easing cycle to continue in large steps The larger-than-expected fall in Turkish inflation in July, to 33.5% y/y, will encourage the central bank to continue its easing cycle next month. For now, we maintain our forecast for …
4th August 2025
The Bank of Canada justified its decision to keep interest rates unchanged at 2.75% this week on three factors: persistent uncertainty, signs of economic resilience, and concerns about underlying inflation. In our initial reaction during an online …
1st August 2025
