Filtered by Topic: Monetary Policy Use setting Monetary Policy
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 …
17th April 2025
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 …
RBA will go slow and steady The minutes of the RBA’s April meeting revealed that the Bank’s decision to leave rates unchanged at 4.10% was underpinned by its view that risks to its outlook were two-sided. Granted, that assessment was made prior to Trumps’ …
The Bank of Korea today left interest rates unchanged, but the dovish commentary from the press conference and the statement suggest further cuts are coming. We are sticking with our view that rates will end the year at 2.0% (from 2.75% currently). The …
Tariff impact may not be as big as feared The OIS markets imply that it’s a coin flip whether the Bank of Japan will raise rates again this year. That makes sense because the Bank sent some rather dovish signals this week. Governor Ueda noted in an …
Strong labour market lessens the need for aggressive cuts With the labour market broadly on solid ground, we expect the RBA to deliver only a shallow easing cycle. The 32,00 rise in employment in March was a touch softer than the 40,000 increase that we …
Interest rates on hold, but BoK to resume easing cycle soon The Bank of Korea today left its main policy rate unchanged at 2.75%, but we think this represents a pause not an end to the easing cycle. The decision was correctly predicted by 24 out of 37 …
RBNZ won’t fret the modest uptick in inflation Although headline inflation in Q1 was stronger than it had anticipated, we suspect the RBNZ will take comfort from the fact that measures of core inflation continued to fall towards the mid-point of its 1-3% …
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
Overview – Our working assumption is that the 90-day pause on the Trump administration’s reciprocal tariffs will be made permanent, with tariffs remaining at 10% for most countries apart from China. Providing Congress soon recycles the tariff revenue into …
Bank holds but further cuts likely amid dovish communications The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and …
Middle East & North Africa Chart Pack (Apr. '25) …
Africa Chart Pack (Apr. 2025) …
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
Latin America generally got off lightly on ‘liberation day’, but the indirect effects on confidence and, more importantly, demand from China could be larger. Meanwhile, the sell-off in the region’s currencies amid the recent turmoil in financial markets …
15th April 2025
The ECB’s Bank Lending Survey paints a positive picture of the housing market. Conditions for consumer credit and corporate loans were less encouraging, and the tariff chaos of the past two weeks might have made banks more cautious about lending and …
Japan's economy will be hit less hard than many other large economies by the recent escalation of the trade war. While mounting uncertainty will keep the Bank of Japan on the sidelines for a few months, we expect the labour market to remain tight and …
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
14th April 2025
Singapore’s central bank loosened monetary policy again today and with inflation set to remain low and the economy weak, further easing looks likely in the coming quarters. The MAS conducts monetary policy by targeting the nominal effective exchange rate …
With the Swiss currency having experienced its largest two-week appreciation since the “Frankenshock” in 2015, the SNB may already have started selling francs in the FX market. We have a 25bp cut pencilled in for June, but the risks are that policymakers …
11th April 2025
Pause on reciprocal tariffs reduces risks for CEE President Trump’s 90-day pause on “reciprocal” tariffs has reduced the scale of downside risks to the global economy, and our new working assumption is that US tariffs on most economies stay at the 10% …
The extraordinary tariff chaos over the past week and associated fallout in the financial markets (see our coverage here ) have increased the chances that the damage to the UK from the US trade war will be larger and that inflation and interest rates will …
China rather than US trade big concern for Africa Africa’s direct damage from tariffs imposed by the US should be limited, but the indirect hit will be larger if global growth weakens, and financial spillovers materialise. After US President Trump dialed …
This week’s historic changes in US trade policy and the associated market fallout point in the direction of a weaker euro-zone economy, lower inflation and looser monetary policy. While US tariff policy has become extraordinarily volatile, we are assuming …
Inflation rises again, Copom to deliver a bit more tightening The jump in Brazil’s headline inflation rate to 5.5% y/y in March looks set to be followed by further increases towards 6% y/y over the coming months. Copom will almost certainly deliver a bit …
BoJ will stay on sidelines for now The relief that followed the suspension of reciprocal tariffs for all countries except China on Wednesday proved short-lived as bilateral tariffs between China and the US are still being ratcheted up to eye-watering …
Downside risks to the economy that prompted March cut have eased Meanwhile, underlying inflation pressures are far too strong for comfort Bank likely to pause next week, but we still expect further cuts this year Despite the economy facing the existential …
10th April 2025
Despite President Trump’s latest decision to pause the US’s “reciprocal” tariff regime for 90 days, there is still a real risk that the second-order effects of higher US tariffs on the UK economy are bigger and that UK inflation and interest rates fall …
We have updated our forecasts for Canada to account for the latest changes in US trade policy. (See Table below.) A recession should be avoided, but the harsh tariffs on the vehicle sector and uncertainty about the future of the USMCA mean GDP growth is …
We think the ECB will cut its deposit rate next week and again in June and July. The Trump tariff shock has heightened downside risks to inflation. But policymakers will give little forward guidance next week. Despite President Trump’s latest decision to …
Despite the 90-day pause to the US’s “reciprocal” tariff regime, ECB policymakers will still need to assess the impact of higher US tariffs for euro-zone inflation. Some have argued that tariffs could boost euro-zone inflation in the medium term, but our …
Inflation picks up, but loosening cycle still set to begin next week Egypt’s headline inflation rate increased to 13.6% y/y in March, but we still expect policymakers at the Central Bank of Egypt (CBE) to deliver the first interest rate cut in nearly five …
Low inflation and tariff uncertainty supports case for further monetary easing The central bank in the Philippines (BSP) resumed its easing cycle today by lowering its policy rate by 25bp (to 5.50%) and in its communications highlighted the threat to …
While Canada escaped “liberation day” relatively unscathed, the imposition of US tariffs and risk of more to come will still weigh on exports, consumer confidence and investment. With immigration also plunging, we now expect GDP to expand by just 0.4% …
9th April 2025
Higher US tariffs will be a substantial drag on the euro-zone economy this year. Looser fiscal policy in Germany will give a small boost in 2026, but overall we expect the euro-zone to grow fairly slowly in the coming years. We also think that the tariffs …
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by another 25bps today to 6.00% comes as no surprise given the recent sharp drop in inflation and the headwinds from US tariffs. But the dovish tone of the communications reinforces our …
RBI’s easing cycle will run further than most expect The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by another 25bps today to 6.00% comes as no surprise given the recent sharp drop in inflation and the headwinds from US tariffs. But the …
Even if Japan’s attempts to negotiate a trade deal with Trump succeed quickly, concerns about the impact of escalating tensions between the US and other trading partners will force the Bank of Japan to keep interest rates unchanged for a few more months. …
RBNZ will cut further than most anticipate The RBNZ cut rates by 25bp at its meeting today, while signalling that further easing would be forthcoming in the months ahead. We think the Bank will ultimately loosen policy settings to a greater degree than …
Europe Chart Pack (April 2025) …
8th April 2025
The Bank of Canada’s quarterly business and consumer surveys were nowhere near as bad as we feared, but that may only be because the survey periods preceded the most recent tariff announcements. Either way, it’s clear that those tariffs and uncertainty …
7th April 2025
Israel holds rates steady ahead of Trump-Netanyahu talks The Bank of Israel (BoI) left its policy rate on hold again today, at 4.50%, and sounded a bit more hawkish than at its previous meeting despite highlighting possibly quite a large hit to economic …
Tariffs unlikely to bring forward rate cuts The communications accompanying the decision by the National Bank of Romania (NBR) to leave its policy rate on hold today, at 6.50%, highlighted two-sided risks to inflation and economic activity from US trade …
Australia and New Zealand are safe havens in the current global trade storm because they have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. We’re therefore sticking to our forecast that the RBA will only …
