Filtered by Topic: Monetary Policy Use setting Monetary Policy
Tech crackdown goes to New York… Decoupling has entered a new phase over the past year. Where China previously was trying to temper US efforts to decouple, in key areas it now appears to want the same. The Five-Year Plan’s push for self-sufficiency in …
9th July 2021
The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. …
MNB to stay hawkish for now The surprisingly large rise in Hungarian inflation to 5.3% y/y in June – its highest rate in almost nine years – suggests that the risks to our interest rate forecast are skewed to the upside. The central bank (MNB) took a …
Inflation won’t threaten monetary policy outlook The yield on India’s ten-year government bond this week jumped to its highest since the start of April. (See Chart 1.) Overnight index swap rates have also spiked since mid-June. Taken together, they point …
RBA starts to taper RBA Governor Phillip Lowe has had a hectic week, with two speeches and the RBA’s July Policy decision. While the Governor reiterated that the RBA still believes policy support is likely to be needed for a long time, the stance of …
Security holdings may edge down as JGB purchases are tapered further Near term inflation forecasts to be revised up Climate change funds likely to be interest-free but impact will be small At its July meeting we expect the Bank of Japan to outline that it …
Price pressures start to ease After reaching a 12-year high in May, producer price inflation dropped back in June as the rally in global commodity prices faltered. Consumer price inflation declined too, on the back of a sharp drop in pork prices. We think …
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
ECB announces revamp of its policy framework, including new inflation target China’s June inflation data may point to easing price pressures (02.30 BST) UK GDP probably grew strongly in May as COVID-19 restrictions lifted (07.00 BST) Key Market Themes …
The details of the monetary strategy review were slightly less radical than had been suggested in parts of the financial media. But the changes announced today still amount to a historic shift away from Bundesbank orthodoxy and towards the mainstream. We …
Rising inflation to prompt rate hikes in Brazil and Chile The further rise in Brazilian inflation, to 8.3% y/y, means Copom will continue to hike when it meets next month. But the data are not quite enough to prompt a shift from 75bp hikes to a larger …
Strong inflation will keep Banxico in tightening mode The rise in Mexico’s core inflation to 4.6% y/y in June was largely driven by temporary factors which will gradually unwind. Nonetheless, given Banxico’s recent hawkish shift, and with headline and …
If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may …
The fact that Bank Negara Malaysia (BNM) left its policy rate on hold at 1.75% today despite the poor economic outlook means any further loosening is unlikely. But with the recovery set to be slow and fitful, we think BNM will leave interest rates at …
CBE to keep rates on hold for now as inflation drifts higher Egypt’s headline inflation rate edged up to 4.9% y/y in June and is likely to increase further over the coming months. Against this backdrop, we think the Central Bank of Egypt (CBE) will keep …
Inflation rise will spook CBR The further rise in Russian inflation to a stronger-than-expected 6.5% y/y in June means the central bank (CBR) is likely to up the pace of tightening when it meets in a couple of weeks. A 75bp hike (to 6.25%) seems most …
7th July 2021
We expect Poland’s central bank to stay on hold but revise up its forecast for GDP and inflation Inflation probably remained unchanged in Mexico last month (12.00 BST) … … while inflation is likely to have edged up in Brazil and Chile (13.00 BST) Key …
Economy has developed as expected, so Bank likely to announce further taper Bank to keep signalling interest rates on hold until at least second half of 2022 New measures of labour market slack may shed light on reaction function As it is widely …
Economic recovery continues to beat RBNZ expectations Bank likely to end QE in the months ahead We expect the RBNZ to hike rates in May next year We doubt the RBNZ will adjust any policy settings when it meets next Wednesday 14 th July. However, as the …
Overview - Japan’s lagging vaccine rollout has finally reached cruising speed, which should allow a rapid recovery in activity over the second half of the year. The labour market may soon be as tight as it was before the pandemic, but we expect this …
Fed minutes may shed more light on officials’ latest thinking about tapering (14.00 BST) We expect Germany’s industrial production to have edged up in May (07.00 BST) Russia’s headline inflation probably rose last month (17.00 BST) Key Market Themes …
6th July 2021
We expect some major central banks to issue digital currencies later this decade, with those in countries where cash is rarest proceeding the fastest. The first generation of central bank digital currencies (CBDCs) will be purposely designed not to shake …
By tapering its bond purchases and watering down its commitment to keep its policy rate unchanged until 2024, the RBA is paving the way for interest rate hikes in 2023 . The Bank's decision to shift to a flexible form of quantitative easing that doesn't …
Israel’s strong economic recovery prompted the central bank to phase out one of its emergency support programmes at today’s meeting and Governor Yaron’s comments suggest that the next step towards policy normalisation may involve the end of the bond …
5th July 2021
The US dollar is ending the week stronger against most currencies, although it has fallen back a little this afternoon despite the stronger-than-expected non-farm payrolls report . While that reaction is perhaps a bit puzzling, the bigger picture is that …
2nd July 2021
CBRT unlikely to win the war with dollarisation Turkey’s central bank (CBRT) took steps this week to tackle deposit dollarisation in the banking sector, but these efforts will fail to make headway in the absence of a stronger commitment to rein in high …
We aren’t convinced that it will mark the start of a sustained acceleration, but the stronger gain in June payrolls will embolden those Fed officials calling for an earlier end to the Fed’s asset purchases. The 850,000 rise in non-farm payrolls in June …
“Stockholm Street” or “Stockholm-enders”? This week saw the latest instalment of the political soap opera in Sweden. Having lost a “no confidence” vote on the 21 st June (see here ), the resignation of Prime Minister Stefan Löfven on Monday means the …
Thailand’s reopening Thailand’s tourism sector will remain heavily depressed despite this week’s reopening of Phuket to foreign tourists. Since Thursday, fully-vaccinated foreigners have been allowed to visit the island without needing to quarantine …
Vacancies off the chart The Australian Bureau of Statistics’ measure of job vacancies surged 23.4% in Q2 which means they are now more than 50% above their pre-virus level. Job vacancies are now equivalent to 2.62% of the labour force, far higher than the …
Overview – India’s ferocious second virus wave is subsiding as quickly as it emerged, enabling the recovery to get back on track. However, the rapid scaling back of containment measures that is underway increases the threat of further outbreaks. And …
1st July 2021
The Riksbank was always likely to maintain the status quo this morning, but against the backdrop of recent hawkish shifts by other central banks, notably the Fed, the focus was on how its thinking had shifted. The short answer is: not a lot. You did not …
We think Sweden’s Riksbank could signal a rate hike in late 2023 (08.30 BST) June’s ISM Manufacturing Index may provide insight on recent supply shortages (15.00 BST) Read our highest conviction macro forecasts and their market implications here Key …
30th June 2021
High inflation has driven up rate expectations everywhere. But the inflation outlook is varied, and other aims will determine policy too. Norway and New Zealand will be first to tighten among DMs, others will delay. The rise in inflation and the question …
The virus situation in Emerging Asia has improved compared with a month ago. Although cases are rising sharply in Indonesia, daily numbers have come down in Taiwan, Singapore, India and Malaysia, and appear to have stabilised in the Philippines. That …
With the more contagious delta variant spreading in Australia, half of the population is now in lockdown. This highlights the Achilles heel of both countries’ virus management: their slow vaccine rollout. Just 8% of New Zealanders and 5% of Australians …
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
We expect that China’s manufacturing PMIs edged down in June (02.00 BST) The flash estimate of euro-zone HICP inflation probably fell slightly in June (10.00 BST) Read our highest conviction macro forecasts and their market implications here Key Market …
29th June 2021
Latin America is once again the global epicentre of COVID-19 but, from an economic perspective, the region has built up significant immunity to the virus. Indeed, despite the surge in new virus cases at the start of Q2, the latest activity data show that …
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
Bank to move to flexible QE while keeping weekly pace of bond purchases at $5bn RBA expects wage growth to pick up slowly and gradually; we expect a faster rebound We expect the Bank to taper QE in November, with first rate hikes in early-2023 The Reserve …
UK consumer credit likely to have increased as the economy reopened (09.30 BST) We think economic sentiment in the euro-zone continued to improve (10.00 BST) Colombia’s central bank will probably stay on hold, but sound more hawkish Key Market Themes …
28th June 2021
The further tightening of virus containment measures in South Africa for at least the next two weeks is unlikely to inflict severe damage on the economy. But it reinforces our view that the Reserve Bank will be in little rush to follow other EM central …
The next EM central banks likely to raise interest rates are those whose economic recoveries are relatively advanced and can focus on inflation and/or financial risks. Chile and Korea fit into this group and we expect rate hikes from both in August. …
Central bank hawkishness sweeping the region Latin American central banks are becoming increasingly hawkish, not just in Mexico but also in Brazil and Chile. Colombia may soon join this club. The biggest hawkish shift this week was in Mexico. After a …
25th June 2021
Ghana: bumper harvest to support recovery Media reports suggest that Ghana may be heading for its biggest cocoa harvest in at least a decade. High rainfall and better farming practices have, according to the same reports, helped push output to its highest …
Virus clouds lift over Turkey’s outlook The sharp improvement in Turkey’s virus situation has brightened the near-term outlook and presents a risk to our view that the central bank will start an aggressive easing cycle in the coming months. The number of …
Global developments driving the Nordic majors After last week’s seemingly counterintuitive drop in the NOK following the hawkish message from the Norges Bank (see here ), it was the turn of the Swedish Krona to apparently defy the laws of the market: the …
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
Another week, another set of euro-zone survey data highlighting the strength of the region’s economic bounce back as virus restrictions are lifted on the services sector. The flash Composite PMI for the euro-zone rose to its highest level in 15 years and, …
