Filtered by Topic: Monetary Policy Use setting Monetary Policy
While the Norges Bank will start hiking in Q3, and we now expect the Fed to raise rates twice in 2023, developments in Frankfurt will continue to set the tone at the Swiss National Bank. Having left the policy rate on hold at -0.75% again this morning, …
17th June 2021
The hawkish statement from the Brazilian central bank meeting (at which the Selic rate was raised by 75bp to 4.25%) indicates that policymakers are more confident in the economic recovery but also more worried about energy inflation than we had …
Bank Indonesia (BI) left its policy rate unchanged at 3.5% today and signalled that it was in no rush to adjust its monetary policy settings again this year. We expect rates to remain low to support the recovery for some considerable time. The decision …
We expect the RBNZ to impose new lending restrictions in the months ahead which, in addition to rising interest rates, should result in house prices declining next year. The median house price in New Zealand was up 32.3% y/y in May. Part of that was due …
We expect both the SNB and Norges Bank to leave interest rates on hold… (8.30/9.00 BST) … and Turkey’s central bank is likely to also stand pat, for now (12.00 BST) Read our highest conviction macro forecasts and their market implications here Key Market …
16th June 2021
The broad-based rise in inflation across EMs this year has elicited varying degrees of policy responses from central banks. Those facing above-target inflation and most worried about credibility (Brazil, Russia) have already started hiking rates and will …
Fed may begin discussion of how to eventually begin tapering its asset purchases (19.00 BST) We think industrial production growth in China slowed last month (03.00 BST) We expect the central bank of Brazil to raise its policy rate by 75bp to 4.25% (22.30 …
15th June 2021
A rate hike by the Norges Bank in September would make it the first G10 central bank to start to raise interest rates after the pandemic, by a comfortable margin. As a result, the NOK is likely to gain ground on the euro and the SEK by the end of the …
UK unemployment rate probably fell while wage growth rose in April (07.00 BST) We think that US retail sales fell back from a high level in May (13.30 BST) US industrial production may have risen at a slower pace last month (14.15 BST) Key Market Themes …
14th June 2021
Nigeria’s government has turned to the central bank to plug ever larger budget deficits in recent years and policymakers are unlikely to kick their deficit monetisation habit, particularly if the fiscal position worsens next year (as we expect). This will …
WPI inflation close to peaking Wholesale price inflation surged to a three-decade high in May on the back of the sharp rise in global commodity prices and will be a concern for policymakers. However, there are reasons to think that WPI inflation has …
The RBNZ’s hawkish rate outlook has prompted us to bring forward our forecast for the first RBNZ rate hike from November to May next year. But in contrast to the RBNZ, we don’t think the pandemic will cause lasting damage to the labour market so we’ve …
Although Treasury yields somewhat surprisingly fell after the larger-than-expected rise in inflation last month in the US, the dollar is ending the week slightly stronger against most currencies. Attention next week will focus on the FOMC meeting, and …
11th June 2021
The communications from the Bank of Canada this week confirmed that it is not worried about inflation surpassing its forecasts for this year, and that it remains committed to keeping the policy rate unchanged until economic slack is fully absorbed. …
Peru at a crossroads The victory for left-wing candidate Pedro Castillo in Peru’s presidential election last Sunday caused local markets to tumble. However, if his more moderate post-election comments are borne out by policymaking, history provides …
Russian ruble gains as Biden-Putin summit nears The Russian ruble has appreciated markedly recently and the balance of forces now increasingly favours further gains. But a lot also depends on geopolitics; a positive outcome from the Biden-Putin summit …
Russia’s central bank (CBR) raised its policy rate by another 50bp, to 5.50%, at today’s meeting and the accompanying communications delivered a much more hawkish tone about inflation risks and the need to raise interest rates further. With inflation set …
We expect both the Swiss National Bank and Norges Bank to leave interest rates on hold next Thursday. But while rate hikes by the SNB are many years away, a tightening cycle in Norway is edging closer. Given that the SNB last changed interest rates in …
Application deadline for emergency lending facility to be extended to end of year Security holdings set to remain flat as shrinking TB holdings offset rising JGB holdings Bank may only purchase ETFs when stock market falls sharply At its June meeting we …
Victorian lockdown lifted The two-week lockdown in Victoria has now been lifted, two weeks earlier than we had expected. While social distancing restrictions will remain in place, consumers can now shop again, which will provide a meaningful boost to …
Having left the pace of its PEPP purchases unchanged and made big upgrades to its GDP forecasts, we think the ECB will start to taper the PEPP later this year. But we think it will eventually make an offsetting increase to other asset purchases and will …
10th June 2021
US consumer confidence and inflation expectations probably picked up in April (15.00 BST) We think UK GDP expanded by 3% m/m in April (07.00 BST) Read our highest conviction macro forecasts and their market implications here Key Market Themes Despite the …
The risks to our forecast that CPI inflation will rise from 1.5% in April to a peak of 2.6% in November before dropping back in 2022 are increasingly on the upside. Rises in shipping costs and global agricultural commodity prices as well as shortages of …
The Bank did not provide any new hints about the direction of policy in its statement today but, with GDP likely to start growing strongly again this month as the coronavirus restrictions are lifted, we expect the Bank to cut the weekly pace of its asset …
9th June 2021
Fed to begin discussion of how asset purchases might eventually be tapered But disappointing payrolls suggest “substantial further progress” still some way off Surging inflation means Fed’s projections need a re-think Fed officials may finally begin …
Factory-gate inflation hits twelve-year high Producer price inflation continued to surge and reached its highest level since September 2008 last month, on the back of a further rise in global commodity prices. That said, there are some signs in the data …
We now expect the RBA to refrain from announcing a target for the overall amount of bond purchases at the July meeting while keeping the weekly pace of purchases unchanged at $5bn . A more flexible approach to bond-buying would make it easier for the Bank …
8th June 2021
SA lockdown level up, recovery outlook (still) down The recent tightening of containment measures to curb South Africa’s third virus wave is unlikely to be as damaging for the economy as earlier rounds of restrictions. Even so, the prospect of further …
4th June 2021
Inflation likely to surprise on the upside this year May’s inflation data were a little stronger than we or the consensus had expected (see here ), and inflation looks set to keep rising in the second half of the year. There is a laundry list of factors …
Financial support unlikely to trigger baby boom The big news this week was that couples in China will soon be allowed to have three children, up from two currently. We covered the initial announcement here , noting that since the shift from a one-child …
The Reserve Bank kept the repo rate on hold at a record low today and announced plans to ramp up government bond purchases on the secondary market, underlining its commitment to supporting the recovery. With the economy likely to take time getting back to …
Korea: vaccines to supercharge the recovery Thanks to a fresh batch of supply, Korea has administered nearly three million jabs in the past seven days, covering over 5% of its population. (See Chart 1.) And there are hopeful signs that this pace will be …
The ECB is likely to set the stage next week for a very gradual taper. It will probably end net PEPP purchases next March, but scale up the APP. No big forecast changes likely, but Bank will acknowledge the outlook is brighter. We think the ECB will tweak …
3rd June 2021
India’s ferocious second wave of COVID infections is likely to have caused the economy to contract by about 5% over Q2 as a whole. The good news is that the outbreak is quickly subsiding and activity appears to have bottomed out. But the recovery is …
Recent economic weakness should be offset by stronger third quarter Tone of policy statement likely to be similar to April Bank may signal further reduction in asset purchases likely at the July meeting Inflation surpassed the upper limit of the Bank of …
2nd June 2021
We expect inflation to rise to the mid-point of the RBA’s target band over the next couple of years. The main driver is a continued tightening of the labour market and a pick-up in wage growth. By contrast, we think that the goods supply shortages …
The Reserve Bank of Australia still sounded dovish when it kept policy settings unchanged today. We think it will expand its bond purchase program by another $100bn next month. The RBA’s decision to keep interest rates and the parameters of its bond …
1st June 2021
State media announced today that China’s family planning policy will be relaxed to allow all families to have three children, up from the current limit of two. This comes shortly after China’s once-a-decade census showed that its population is aging even …
31st May 2021
Australian Treasurer Josh Frydenberg noted in October that the Government would not pursue budget repair until the unemployment rated was comfortably below 6%. However, the unemployment rate fell much more rapidly ahead of the May Budget than almost …
With the economy rebounding strongly from the crisis, the Bank of Korea (BoK) is starting to shift its attention away from supporting growth and towards containing financial risks. We expect the BoK to begin raising interest rates at its meeting in …
Banxico minutes: cautious but not too concerned The minutes to Banxico’s latest meeting revealed that Board members are becoming more wary about the outlook for inflation. Even so, we think that there is a high bar for a tightening cycle to begin. The …
28th May 2021
Renminbi turning point deferred Regulators pledged to squeeze speculation out of domestic commodity markets last week. This week it was the turn of the foreign exchange market. A number of local analysts and researchers in recent weeks have called for …
Investment rebound offset by lockdown The whopping 9.1% rise in machinery and equipment investment in the private capital expenditure survey was more than enough to offset the small decline in non-residential construction in the building works done data. …
Recovery might be more gradual than last year New virus cases in India continue to drop sharply and have almost halved from their peak just a couple of weeks ago. The drop has coincided with an apparent bottoming out in some of the real-time activity …
We forecast that emerging market (EM) equities will make further gains between now and end-2022 as the global economy recovers further. However, they have lost a bit of ground to developed market (DM) equities recently and we doubt they will perform much …
27th May 2021
The strength of inflation and expectations for a strong economic recovery have prompted a clear hawkish shift among Central European central banks. In Hungary, the MNB has set in motion the start of a tightening cycle in June and used its meeting this …
The Norges Bank has a history of beginning to tighten policy earlier than the ECB and we think it will follow that pattern again this year. Meanwhile, although it’s not the most likely scenario, we think that financial markets are under-estimating the …
RBI likely to keep rates on hold next week as second virus wave subsides However, recovery may be more gradual than last year as states reopen with caution As such, policy will stay loose for a long while yet We agree with financial markets and the …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and given that the recovery still has a way to go, the BoK is likely to leave policy accommodative for at least the next few quarters. But concerns about financial stability are …
We think US durable goods orders grew by a healthy 4.2% m/m in April (13.30 BST) With inflation subdued, we think the Bank of Korea will leave interest rates unchanged Read our latest views on currencies on our recently launched FX Markets Service here …
26th May 2021
