Filtered by Topic: Monetary Policy Use setting Monetary Policy
Bank Negara Malaysia (BNM) left its main policy rate unchanged at 1.75% today, and with inflation set to remain subdued, rates are likely to stay on hold at their current all-time low throughout next year. We think financial markets are getting well …
3rd November 2021
If the RBA hiked rates by nearly 200bp as the financial markets were anticipating until recently, households’ debt servicing burden would hit an all-time high and housing would become the least affordable since the global financial crisis. That would slow …
We expect Poland’s central bank to hike rates by 25bp The euro-zone’s unemployment rate probably fell in September (10.00 GMT) The Fed is likely to announce the start of asset purchase tapering (18.00 GMT) Key Market Themes Although near-term inflationary …
2nd November 2021
The RBA abandoned its yield target and its pledge that rates will remain low until 2024 today, but still sounded dovish. While the financial markets expect the first rate hike in May next year, we expect the Bank to wait until early-2023. The Bank pinned …
Fed likely to announce start of tapering, and signal concerns about inflation (Wed.) We think that the BoE will be the next DM central bank to hike rates (Thu.) Labour shortages probably continued to limit US employment growth (Fri.) Key Market Themes …
29th October 2021
Following the Bank of Canada’s hawkish message this week there is a risk that it raises interest rates sooner than we anticipate. Nevertheless, we continue to doubt that the Bank will hike by as much in the coming years as market pricing now implies. The …
BCB between a rock and a hard place Brazil’s central bank (BCB) can’t win. The further falls in the real after the whopping 150bp hike in the Selic rate on Wednesday suggest that investors didn’t think that policymakers went far enough to allay concerns …
Two key points from the Budget Budget day produces a flurry of analysis but the most interesting reflections tend to come once the dust has settled and everyone has had time to digest the documents. Two points stand out to us. The first relates to the …
The ECB stuck to its script this week, with Christine Lagarde claiming that, after some “soul searching”, the Bank was comfortable with its view that the recent surge in inflation will prove to be transitory. Also, she didn’t sound too worried that other …
Strong rebound in Sweden Data released this week showed that Sweden’s economy grew by a stronger-than-expected 1.8% q/q in Q3, but the data weren’t as encouraging as they first appeared. The upside surprise in the third quarter was largely due to a …
Trimmed mean inflation rose to 2.1% in Australia in Q3, the first time it has entered the RBA’s 2-3% target band since 2015. Even more strikingly, trimmed mean inflation in New Zealand rose to 4.4%, way above the top end of the RBNZ’s 1-3% target. One …
The Central Bank of Egypt (CBE) kept interest rates unchanged at Thursday’s MPC meeting amid rising price pressures. Against this backdrop, we think that the central bank is likely to delay the resumption of its easing cycle until the middle of next year. …
RBA throws in the towel With retail sales rebounding even before lockdowns ended and nearly 90% of the population now fully vaccinated, our previous forecast that consumption will rebound by just 3.5% q/q in Q4 following a 10% q/q plunge in Q3 is no …
Despite a flurry of media reports in September hinting at widespread disruption, the data suggest that China’s recent power shortages have not been too severe. Electricity output actually rose 0.6% in seasonally-adjusted m/m terms last month, the fastest …
The ECB stuck to its script today, arguing that although the increase in inflation now underway will be larger and last longer than previously anticipated, it is still temporary. Meanwhile, confirmation that the PEPP will end in March tells us nothing …
28th October 2021
Table of Key Forecasts Overview – The EM recovery is now entering a more difficult phase as the boost from economic re-opening fades, supply shortages bite, growth in China weakens and the terms of trade worsen for major commodity producers. Lower vaccine …
Investors may be right that the MPC will hike rates in November or December But we think they are wrong to price in rates rising as far as 1.25% by end-2022 Our new forecast is for rates to rise to 0.50% by February, but no higher next year We now think …
COVID-19 vaccine coverage remains pitifully low across much of Sub-Saharan Africa, with less than 10% of populations having received at least a first dose in most countries. But there are signs that things may be slowly turning a corner. The rate of …
The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain …
The Brazilian central bank’s decision to up the pace of tightening to a 150bp rate hike (which took the Selic rate to 7.75%) was a clear response to concerns about a looser fiscal stance. With fiscal risks likely to persist, we now expect a 150bp hike in …
The Gulf countries will be among the biggest winners globally from the recent rally in energy prices but most other parts of the Middle East and North Africa are net oil importers and are likely to be negatively affected. Higher energy prices will push up …
27th October 2021
Overview – Extremely low vaccine coverage continues to cast a dark cloud over recovery prospects in Sub-Saharan Africa and this will be compounded by deteriorations in the terms of trade and tighter fiscal policy. As a result, rebounds in most economies …
The Bank of Canada called time on its QE program today and indicated that it could raise interest rates as soon as the second quarter of next year. The Bank’s GDP forecasts still look too upbeat to us, however, so we expect it will wait until the third …
Fed to announce $15bn per month asset purchase taper beginning in November Statement may reveal growing concern about higher inflation… …but we still expect weaker GDP growth to delay rate hikes until 2023 The Fed is set to announce at next week’s FOMC …
The near-term outlook for South East Asia has improved dramatically over the past month or so. Daily cases of COVID-19 have collapsed and are now less than one-third of the level they were at in August. With vaccination rollouts also making good progress …
Money growth has slowed this year and is likely to decline further next year. Meanwhile, although the pandemic has resulted in a huge increase in the money supply, we do not think this will cause inflation to rise because the relationship between the …
Underlying inflation strongest in years, but wage growth has yet to pick-up RBA to shift forward guidance for first rate hike to 2023 in February, ditch yield target We think the first hike will happen in early-2023 The acceleration in underlying …
The growing likelihood that Brazil’s government will circumvent its spending cap adds to broader signs that austerity is becoming politically difficult to implement across the region. For instance, Ecuadorian President Lasso recently U-turned on a plan to …
26th October 2021
Table of Key Forecasts Global Overview – The global recovery will slow in the coming quarters as the initial post-lockdown rebound fades and policy support is reduced. At the same time, supply shortages are likely to persist well into next year, which …
COVID-19 outbreaks have surged across the region in the past month. Record high daily cases have been reported in Russia, Romania, Bulgaria and Latvia and infections are rising sharply elsewhere. Governments have tightened containment measures, including …
Wage growth remained moderate over the summer but, with labour shortages intensifying, it seems likely to accelerate sharply soon. The Bank of Canada’s third-quarter Business Outlook Survey (BOS) added to the evidence of widespread labour shortages, which …
Overview - The economy slowed sharply in Q3. Weakness in services is already reversing as virus controls have been relaxed again. But industry and construction are on the cusp of a deeper downturn that could pull down China’s growth to just 3% next year. …
The minutes of the Reserve Bank’s October policy meeting suggest greater divergence of opinion within the MPC, with two members calling for more definitive steps towards policy normalisation. But most members – including Governor Shaktikanta Das – are …
25th October 2021
With a couple of exceptions, currency markets have had a quiet week; the US dollar is ending the week a touch weaker against most other currencies, but in aggregate it remains close to its strongest level for the year. With US bond yields continuing to …
22nd October 2021
The winding down of government support to households and firms means the economy faces a large fiscal contraction this quarter, which we think will cause GDP growth to disappoint. The three programs that expire tomorrow are the Canada Recovery Benefit …
The extent of the shift in investors’ expectations of interest rates over the past month has been staggering. Investors are now pricing in an 80% chance of a hike to Bank Rate, from 0.10% to 0.25%, at the Monetary Policy Committee (MPC) meeting on 4 th …
Russia’s central bank (CBR) stepped up the pace of its tightening cycle again at today’s meeting with a larger-than-expected 75bp interest rate hike, to 7.50%, and the hawkish tone of the accompanying communications suggest that further tightening will be …
Surging inflation puts pressure on RBNZ The 2.2% q/q rise in New Zealand’s consumer prices was the strongest since 2011 and well above the RBNZ’s forecast of a 1.4% increase. In fact, the quarterly increase was enough to meet the RBNZ’s 1-3% annual …
We’ll publish our quarterly China Economic Outlook next week. Since the last edition , exports have performed better than we’d expected but this didn’t make up for the disruption caused by measures to contain the Delta variant outbreak in August. That …
Flash composite PMIs for the euro-zone and the UK probably dropped back in October We expect the central bank of Russia to hike its policy rate by 50bp, to 7.25% (11.30 BST) Inflation in Mexico likely to have stayed above target in mid-October (12.00 BST) …
21st October 2021
ECB will acknowledge upside risk to inflation but say the rise is mostly temporary. The Bank will also push back against expectations for a rate hike next year. The bigger decisions on future asset purchases will be delayed until December. Nobody expects …
Strong employment gains should be enough for Bank to call time on QE Labour shortages suggest Bank is overestimating the degree of economic slack But with wage growth low, unlikely to bring forward plans for rate hikes We expect the Bank of Canada to call …
Any remaining confidence in the credibility of Turkey’s central bank (CBRT) was shattered after today’s larger-than-expected 200bp interest rate cut, to 16.00%. The lira hit a fresh record low against the dollar and we think that it will continue to …
We are confident in our new forecasts that GDP growth will be a disappointing 2.7% in 2022 and 2.0% in 2023, while core inflation remains elevated at close to 3%, but we are less confident in our predictions of how the Fed will react to that particular …
New PM Kishida won’t touch yield curve control Weaker yen unlikely to faze Governor Kuroda Near term growth forecasts to be revised down on supply shortages Sitting comfortably with continuity candidate PM Kishida in charge, the Bank of Japan won’t alter …
Lebanon’s long and winding road to recovery The IMF confirmed this week that technical talks with Lebanon have restarted, suggesting that the country is making tentative steps to emerge from its crisis. Prime Minister Najib Mikati has said he hoped a deal …
A renewed tightening of the labour market next year means that wage growth will accelerate further. That pick-up will be underpinned by a stronger minimum wage hike, the lifting of caps on public sector wage growth and more employees switching jobs. And …
UK public borrowing may have fallen by more than expected in September (07.00 BST) We anticipate a 100bp rate cut from Turkey’s central bank (12.00 BST) Read our highest conviction macroeconomic forecasts and their market implications here Key Market …
20th October 2021
Overview – We now expect GDP growth to be 4.8% in 2021, rather than 5.0%, and 3.5% in 2022, down from 4.0%. Worsening labour shortages imply that spare capacity has been rapidly absorbed and point to a sharp acceleration in wage growth. In that …
Overview – The region has experienced a rapid recovery, but the re-opening boost has now faded and the region is likely to face stronger headwinds in the near term due to surging COVID-19 cases, rising inflation and supply disruptions. Central European …
