Filtered by Topic: Monetary Policy Use setting Monetary Policy
Bank of Canada navigating without tariff roadmap The Summary of Deliberations from the Bank of Canada’s January policy meeting confirmed that tariff uncertainty had a hand to play in its decision to cut interest rates by 25bp. In particular, members of …
14th February 2025
SA 2025 Budget: Fiscal trade-offs to get harder In South Africa, the Treasury will face a difficult balance act in recommitting to fiscal while also appearing pro-growth in next week’s 2025 budget presentation. South Africa Finance Minister Enoch …
The potential tariffs that UK exporters could soon face for sending goods to the US became bigger this week. On Monday, Trump said that US imports of steel and aluminium from all countries would face tariffs of 25% from 12 th March. Then on Thursday he …
Chile: BCCh turns hawkish The minutes to Chile’s monetary policy meeting in January published this week, at which interest rates were left unchanged at 5.0%, were surprisingly hawkish. Policymakers made very clear that they’re concerned that inflation …
NBR leaves rates on hold, scope for cuts looking increasingly limited The National Bank of Romania (NBR) left its policy rate on hold again today, at 6.50%, and we think there is limited scope for interest rate cuts this year. Our forecast for the policy …
CBR leaves rates on hold, loosening still some way off The decision by the Central Bank of Russia (CBR) to leave interest rates on hold at 21.00% today was widely expected, and the hawkish communications suggest that policymakers are not going to bend to …
10-year JGB yield climbs to 14-year high Even though the 10-year US Treasury yield has been little changed, the 10-year JGB yield rose to a 14-year high of 1.35% this week and we think that it will climb further to 1.75% by year-end. See our Global …
Our base case is that Treasury term premia – and yields – rise only a little further. But we think disruptive US trade policy, among other things, poses a threat to that view and, relatedly, to Treasuries’ broader use as a hedge against any downturns in …
Africa Chart Pack (Feb. 2025) …
13th February 2025
BSP to resume easing cycle soon In a surprise move the central bank in the Philippines (BSP) left its policy rate on hold at 5.75% today, but we think this represents a pause, rather than a halt to the easing cycle. The announcement was predicted by just …
Soaring food inflation has been the key driver behind the recent strength in headline inflation. Processed food inflation will remain high for a while yet but that won’t prevent overall food inflation from falling sharply as the surge in rice and fresh …
The latest CPI data out of Central and Eastern Europe (CEE) have been stronger than expected, and leading indicators suggest that inflation across the region may be higher than we previously anticipated this year. We have revised up our interest rate …
12th February 2025
GDP growth in the Middle East and North Africa will accelerate in 2025 on the back of higher oil production in the Gulf. The UAE will be the Gulf’s top performing economy and, elsewhere, we think that growth in Egypt and Morocco will strengthen on the …
The Reserve Bank of New Zealand will almost certainly cut rates by 50bp, to 3.75%, at its meeting on 19 th February. Although the Bank is likely to revert to 25bp cuts thereafter, we think it has much more work to do to reduce excess capacity in the …
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. With real household incomes rising the most in years and the savings rate rather high, the rebound in consumer spending will continue in 2025. And with …
Powell gives little indication of rate cuts this year Fed Chair Jerome Powell stuck to the line that the Fed was in no hurry to adjust its policy stance in his semi-annual testimony to Congress today. Given that inflation remains above target and the …
11th February 2025
Fall in inflation won’t stop Copom from hiking again in March The fall in Brazil’s headline inflation rate in January, to 4.6% y/y, was mainly due a drop in housing inflation and is unlikely to prevent the central bank from delivering another 100bp hike …
Labour market remains tight and there are signs of green shoots in the economy But with inflation slowing markedly, RBA will cut by 25bp next Tuesday Scope for further policy loosening remains modest We expect the Reserve Bank of Australia to cut rates by …
We expect the euro-zone economy to grow at only a sluggish pace this year, with southern economies outperforming the core. Germany’s election will lead to only a modest loosening of its restrictive “debt brake”. France’s budget deficit will remain very …
10th February 2025
Inflation nudges lower as first rate cut edges closer Egypt’s headline inflation rate only slowed a touch to 24.0% y/y in January. But with earlier falls in the pound now starting to fall out of the annual price comparison, we expect Egypt’s headline …
The overall message from the Bank of England this week was decidedly dovish, raising the risk that interest rates will be cut further and faster than our forecast of a fall from 4.50% to 3.50% by early 2026. But as we unpacked in our reaction to the …
7th February 2025
Hawks fly in CEE, but further rate divergence likely The communications from policymakers following central bank meetings in Poland and Czechia this week struck a hawkish tone. After leaving rates on hold , Poland’s central bank Governor Glapinski focused …
While there is currently a lot of focus on r* at the ECB (which we wrote about earlier today ), the outlook for wage growth may prove to be more important in guiding monetary policy. And the ECB’s wage tracker, released on Wednesday, suggests that wage …
Comparing the ECB’s deposit rate to estimates of its equilibrium level suggests that monetary policy will soon be only slightly restrictive. But there is a huge amount of uncertainty around these estimates. With the economy struggling and underlying price …
Latin America’s economies have proven surprisingly resilient through the first half of the year and the region’s financial markets have been among the world’s best performers. Can this continue over the second half of 2025? Following recent awards for …
12th June 2025
We think the Swiss National Bank will cut interest rates by 50 basis points at its meeting on 19th June – taking the policy rate into negative territory for the first time since 2022. In this special preview of the June meeting our Europe and Markets …
Will the Fed remain on the sidelines in the face of dovish inflation data? How will the Bank of England react to fresh signs of a stagnating economy? How much further will the ECB go in cutting rates? Our senior economists reviewed the latest monetary …
11th June 2025
The ECB’s April meeting comes amid falling inflation – but also rising global risks, not least the potential growth shock from Trump’s aggressive tariffs. How will heightened macro uncertainty shape the Governing Council’s decision and communications? …
7th April 2025
Fiscal restraint, monetary easing It’s been a busy week on the domestic policymaking front. The FY25/26 Union Budget contained some tax breaks aimed at boosting household consumption, but fiscal prudence was still very much the order of the day: the …
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 25bps today to 6.25% confirms that, under new leadership, its priorities have tilted from containing inflation to providing more support for the economy. We think a further 75bps of cuts …
New governor kicks off easing cycle The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by 25bps today to 6.25% confirms that, under new leadership, its priorities have tilted from containing inflation to providing more support for the …
Pickup in consumption won't nix RBA rate cut Data released this week suggest that the Australian consumer felt rather upbeat last quarter. To start with, we learnt that retail sales held steady in December, a better result than most had anticipated. As a …
Wage growth strongest since 1997 According to the preliminary estimate released this week, labour cash earnings rose by 4.8% y/y in December, the largest increase since 1997. But while those strong gains boost household incomes, on their own they don’t …
Our latest Global Inflation Watch publication highlights a growing divergence between US and European inflation dynamics and the uncertainties facing the world economy from Donald Trump’s tariff plans. Our senior economists hosted an online client …
6th February 2025
Banxico steps up easing as it adopts a more dovish tone Mexico’s central bank stepped up the pace of monetary easing to 50bp at today’s meeting, lowering the policy rate to 9.50%, and the overall communications were dovish. While a tariff-induced drop in …
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
The threat of US tariffs will hang over the economy for the foreseeable future, weighing on confidence and reducing investment. We have therefore revised down our GDP growth forecast for 2025 to 1.5%, from 1.8%. We still expect the Bank of Canada to cut …
While cutting interest rates from 4.75% to 4.50% today, which was the third 25 basis point (bps) cut in seven months, the Bank of England showed some signs that it may cut rates faster and further than our forecast of a decline to 3.50% by early 2026. …
Easing cycle resumes, rates on their way to neutral The Czech National Bank (CNB) cut its policy rate by 25bp today, to 3.75%, and we think that further easing lies in store this year. Our forecast for the policy rate to fall to 3.00% by end-2025 would …
For updated and more detail analysis see here . Dovish development adds downside risk to our forecast for Bank Rate to fall to 3.50% While cutting interest rates from 4.75% to 4.50% today, which was the third 25bps cut in seven months, the Bank of …
Despite the recent weak news on activity and the uncertainty around the global outlook due to Trump’s US import tariffs, the stronger news on domestic price pressures means the Bank of England will probably continue to cut interest rates only gradually. …
5th February 2025
NBP a long way from resuming its easing cycle The National Bank of Poland (NBP) left its policy rate on hold again today, at 5.75%, and we think that interest rates will remain on hold throughout 2025. That’s a more hawkish forecast than the consensus …
We held an online Drop-In session last week to discuss the outlook for interest rates in major advanced economies as the Fed hit the pause button while the ECB cut again. (See a recording here .) The key message was that the threat of US tariffs and the …
4th February 2025
The threat by President Trump to cut funding to South Africa due to the controversial land expropriation bill will (if implemented) have limited direct economic effects. The bigger concern is that the threat will create tensions within the ruling …
3rd February 2025
Still on course for another large rate cut The sharp jump in the m/m rate of Turkish inflation, to 5.0%, was largely driven by one-off factors. And so long as the February CPI figures come in much softer (as we expect), we still think it’s most likely …
Australia’s housing slowdown continued into the new year, as demand softened further. Although the prospect of imminent rate cuts could temporarily buoy buyer sentiment, we don’t expect a meaningful rally in the housing market given that affordability is …
Despite the best efforts of the Canadian government to convince US officials that the border is secure, President Trump reiterated on Thursday that his administration will impose a 25% tariff on imports from Canada this Saturday. That would be a big blow …
31st January 2025
EU policymakers have stepped up their calls for progress towards Capital Markets Union and there will be steps in that direction in the coming years. But we aren’t holding our breath for major change. And even if policymakers do more than we anticipate, …
Putin’s turn to up the ante We argued last Friday that President Trump’s comments on the war in Ukraine were likely to be met with a cold reception in Russia, dampening hopes of a quick end to the conflict. And an interview given by President Putin this …
Something’s coming… Latin America has been at the forefront of President Trump’s tariff latest threats. These included a (short-lived) announcement that he would slap punitive measures on Colombia, reports that the US will press ahead with a 25% import …
