Filtered by Topic: Monetary Policy Use setting Monetary Policy
South Africa’s “BIG” plans won’t get very far The South African authorities appear to be devoting increased attention to the idea of a permanent basic income grant (“BIG”) but, in practice, such proposals are probably dead on arrival. The government …
20th August 2021
The recent reimposition of the strictest level of lockdown in New Zealand was enough to prevent the RBNZ from hiking rates in August. And our assumption that restrictions will now remain in place until near the end of this year means we now expect the …
Hike still on the cards With new cases of COVID-19 rising, most analysts expect the Bank of Korea (BoK) to leave rates unchanged on Thursday. While it is likely to be a close call, we are sticking with our view that the central bank will raise its main …
Lockdown upends RBNZ’s plans In contrast to what most had expected, the RBNZ didn’t become the first central bank in an advanced economy to hike interest rates after the pandemic at Wednesday’s meeting. The statement made it clear that the Bank was keen …
Normalisation still some way off… We’ve argued for some time that the RBI is in no rush to join several of its emerging market peers in tightening monetary policy. That view was reinforced by the MPC’s relatively dovish communications at this month’s …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 16th straight month today. But with the economy losing momentum, we think it won’t be long before the PBOC is guiding rates lower. Even so, another round of large-scale credit-led stimulus …
Inflation is at, or close to, multi-year highs across Latin America which has prompted a slew of interest rate hikes across the region. We think that central banks in Brazil, Mexico, Chile and Peru will continue their tightening cycles over the coming …
19th August 2021
The Central Bank of Sri Lanka (CBSL) hiked interest rates today to help support the currency. With the rupee likely to remain under downward pressure over the coming months, further rate hikes are likely. The decision to raise the deposit and lending …
Bank Indonesia left its main policy rate on hold at 3.50% today, and signalled that rates are likely to remain low for the foreseeable future. We think the policy rate will remain unchanged until at least the end of next year. The decision came as no …
Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds ( Chile , Czech Republic , Hungary ) and/or rising inflation concerns ( Brazil , Mexico, Peru , Russia ). A few others, …
18th August 2021
The RBNZ sounded hawkish when it left rates on hold today, but the decision demonstrates that the Bank is taking a cautious approach in light of the current lockdown. Assuming restrictions can be eased before long we still expect the Bank to hike rates to …
BCRP: same Governor, fresh tightening Peru’s central bank (BCRP), under the renewed stewardship of Governor Julio Velarde, fired the starting gun on its tightening cycle yesterday and we think it has much further to run over the next year. There were two …
13th August 2021
Mexico’s central bank hiked interest rates by 25bp, to 4.50%, yesterday but the split vote suggests that the tightening cycle will continue to proceed slowly despite the growing inflation risks. This reinforces our view that the policy rate will continue …
We expect Mexico’s central bank to hike its policy rate by 25bp later today (19.00 BST) Sweden’s core inflation was probably very weak in July (08.30 BST) Virus concerns likely to have weighed on US consumer confidence in August (15.00 BST) Key Market …
12th August 2021
Turkey’s central bank (CBRT) left interest rates on hold at 19.00% today and, with inflation likely to remain elevated over the coming months and the economy having bounced back quickly from May’s lockdown, an easing cycle is unlikely to commence until …
The Philippines’ central bank (BSP) left its main policy rate on hold at 2.00% today, but with inflation fears receding, more rate cuts to support the beleaguered economy are likely soon. The BSP has kept the policy rate on hold so far this year after …
With a whopping 1.0 million people on average having been asked by the NHS App or Test & Trace system to self-isolate in July, the “pingdemic” is likely to have stifled the economic recovery in recent months. (See here .) In July, our Capital Economics …
11th August 2021
The slowdown in credit growth resumes After stabilising in June, broad credit growth resumed its downward trajectory in July and is now at its slowest since February last year. We expect the slowdown and resulting headwind to the economy to continue in …
The New Zealand economy is now overheating The RBNZ will hike rates by 50 basis points in August OCR may reach 1.50% by the middle of next year The New Zealand economy is clearly overheating and the Bank’s mandates for both inflation and the labour market …
The US dollar is ending the week higher against most currencies, extending its gains alongside rising US Treasury yields following the stronger-than-expected July payrolls data . With Fed officials earlier this week suggesting that several more months of …
6th August 2021
The worsening prospects for the Thai economy and the shift in the current account from a huge surplus to a sizeable deficit mean the Thai baht is likely to weaken further over the coming year. The baht has fallen again over the past week and is now down …
NBP’s doves losing their nerve… A slew of comments from policymakers at the National Bank of Poland (NBP) this week suggest that the probability of the central bank delivering a rate hike before the end of this year has increased. Flash July CPI data …
We learnt three things from this Thursday’s Bank of England policy decision and were left in the dark on two key issues. As a result, some of our forecasts for money market rates and gilt yields have changed. What we learnt First, the Bank of England …
Thailand and Philippines to cut rates soon Whereas several EM central banks are in the middle of aggressive tightening cycles, Thailand and the Philippines are likely to resume rate cutting soon. The Bank of Thailand left its policy rate unchanged at its …
The Central Bank of Egypt (CBE) kept its policy rate on hold on Thursday, and we continue to hold a non-consensus view that a fall in inflation later in the year will allow the CBE to resume its easing cycle in Q4. The decision to keep the benchmark …
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 economic recovery. We don’t expect policy normalisation to …
New Zealand economy running hot New Zealand’s unemployment rate plunged from 4.6% to 4.0% in Q2, matching its pre-virus low. By contrast, the RBNZ had expected the unemployment rate to remain at 4.7% for more than a year. And unlike in Q1, other …
The Reserve Bank of Australia signalled today that it’s unlikely to reverse the tapering of its bond purchases even as Sydney’s virus outbreak is getting worse. We still expect the tight labour market to deliver stronger wage growth and inflation than the …
Rising infections in Kerala a big cause for concern Economic activity has been staging a very strong recovery since the second virus wave receded. But we’ve argued for some time that the rapid reopening would increase the risk of new outbreaks, …
The Czech National Bank (CNB) raised its two-week repo rate by 25bp to 0.75% at today’s meeting, and its communications signalled that policymakers will raise rates more quickly than they had previously signalled to tackle above-target inflation. We …
5th August 2021
Overview – Vaccination campaigns across Sub-Saharan Africa will continue to struggle, leaving the region vulnerable to renewed virus outbreaks. This, combined with tight fiscal policy, a slow return of tourists and falls in commodity prices means that …
The Monetary Policy Committee’s (MPC) policy statement sent a clear signal that higher interest rates are on the horizon. But there were few signs that it is preparing to hike rates soon. What’s more, we continue to envisage inflation dropping back more …
The hawkish statement accompanying yesterday’s 100bp rate hike by the Brazilian central bank (to 5.25%) means that the Selic rate will increase further than we had anticipated. We now expect it to be raised to 7.50% by year-end (previously 6.50%). The …
The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer …
4th August 2021
The Bank of Thailand (BoT) left its policy rate on hold at 0.5% today as expected. Given the deteriorating outlook for the economy and with two of the six MPC members voting for a rate cut, we now think the central bank will loosen policy further this …
US ADP report will give first clues about the health of the labour market in July (13.15 BST) We expect Brazil’s central bank to hike its policy rate by 100bp, to 5.25% (22.30 BST) Euro-zone retail sales probably rose by around 2% m/m in June (10.00 BST) …
3rd August 2021
The Reserve Bank of Australia delivered a hawkish surprise by not delaying the tapering of its bond purchases. And by predicting that it will hit its full employment mandate and make further progress towards its inflation target, it has opened the door …
The slightly disappointing second-quarter GDP data released this week and another dovish press conference from Chair Jerome Powell strengthen our belief that the Fed is unlikely to begin tapering its asset purchases until early next year. The 6.5% …
30th July 2021
Peru’s President Castillo off to a concerning start The first steps from Peru’s newly-inaugurated President, Pedro Castillo, provide plenty of worrying signs for investors. The president officially took office on Wednesday and his inauguration speech …
Global factors driving Swiss industry and the franc We would not overplay the importance of the second consecutive fall in the Swiss KOF Economic Barometer (July data were released this morning). After all, the indicator is still well above its long-run …
With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though …
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
GDP to contract, but recession unlikely As new infections in Sydney have hit fresh highs this week, the lockdown there has been extended until end-August. The blanket ban on construction has been lifted, but construction will remain banned in hotspots. …
A bankruptcy code to aid the COVID recovery The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Lok Sabha (lower house of parliament) this week would, if passed in the Rajya Sabha, provide much-needed support to India’s …
The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to …
29th July 2021
Table of Key Forecasts Overview – Low vaccine coverage means that the threat to economic recoveries from the highly-contagious Delta variant is much larger in the emerging world than in developed economies. And EMs will take longer to return to their …
RBI likely to keep rates on hold next week as inflation pressure looks set to ease Central bank will underline its commitment to supporting the economic recovery Policy normalisation will happen only very gradually, and not until well into next year …
The Fed took a small step toward the eventual tapering of its asset purchases by altering the language in the statement released today, but officials appear to be in no rush. We still expect an announcement in August or September, with the taper itself …
28th July 2021
Sweden’s GDP likely to have risen back above pre-pandemic level (08.30 BST) We think the euro-zone’s ESI rose to a 22-year high this month (10.00 BST) US GDP growth probably accelerated in Q2, but Q3 looks less promising (13.30 BST) Key Market Themes The …
The end of the impasse within OPEC+ this month will result in higher oil output and boost recoveries in the Gulf over the second half of this year and in 2022 . Output quotas will rise by 400,000bpd each month after the UAE backed down in return for …
