Filtered by Topic: Monetary Policy Use setting Monetary Policy
10-year gilt yields haven’t been significantly dragged higher by 10-year US Treasury yields because, unlike their US counterparts, break-even inflation rates in the UK have not been boosted by expectations of a big fiscal stimulus, a rise in inflation and …
27th January 2021
Consensus is for rates to remain on hold next week But we think sharp drop in inflation could trigger a 25bp policy rate cut We also doubt expectations of rate hikes over the next 12-18 months will materialise Financial markets and analysts appear …
RBA may choose to keep up with large asset purchases by overseas central banks But labour market doing much better than Bank had anticipated Balance of financial stability risks starting to shift as credit growth set to surge While the Reserve Bank of …
Canada will receive only enough doses of the Pfizer and Moderna vaccines to provide the equivalent of one dose to 16% of the population by the end of the first quarter. By contrast, even in the unlikely event that there is no further improvement in the …
26th January 2021
The recent rise in inflation appears to have stayed the hand of Nigeria’s central bank from delivering more monetary easing at today’s MPC meeting. But, as price pressures drop back towards the end of this year, we think that policymakers will lower the …
We now expect the RBNZ to tighten monetary policy in the years ahead as GDP growth, the labour market and inflation will be much stronger than the Bank has anticipated. We expect asset purchases to be wound down from this year before the Bank hikes rates …
Our base case remains that the RBA will end quantitative easing in April. However, one risk to that forecast is the rising share of long-term unemployment. According to estimates by both the RBA and the OECD, the natural rate of unemployment rose after …
25th January 2021
While yesterday’s ECB policy statement and press conference left many investors with the impression the Bank may be willing to tolerate higher peripheral bond yields, we doubt that this is the case. Either through words or action, the Bank is likely to …
22nd January 2021
Risks from JobKeeper phase out keep diminishing Even though the participation rate hit a fresh record-high, Australia’s unemployment rate fell to 6.6% in December. Across the fourth quarter, the unemployment rate has averaged 6.8%, far below the RBA’s …
Inflation to continue its rise in 2021 The sharp rise in underlying inflation in Q4 is consistent with our view that the RBNZ will tighten policy in the years ahead. Prices in Q3 rose 0.5% q/q, well above the analyst consensus or than the RBNZ’s latest …
21st January 2021
Turkey’s central bank left its benchmark one-week repo rate unchanged at 17.00% at today’s MPC meeting as concerns about the faltering economic recovery took priority. But the hawkish tone on inflation supports our view that rates will be unchanged …
As expected, the Norges Bank left its policy rate on hold at a record low of zero once again this morning and reiterated that it “will most likely remain at today’s level for some time ahead”. This supports our view that, while we expect Norway to be …
Overview – China’s economy will continue to beat most expectations in the near term, as households spend more freely. But momentum will soften during the second half of the year as props from stimulus and exports fade. Consumer Spending – Household …
Despite the headwind from the third virus wave, the Bank of Japan revised up its growth forecasts for the next couple of fiscal years. And while Governor Kuroda didn’t provide much insight into what to expect from the upcoming review due in March, we …
The Reserve Bank of India (RBI) is set to tighten regulation of non-bank financial companies (NBFCs) over the coming weeks. Alongside stricter audits of many smaller lenders, the RBI is likely to require NBFCs to maintain larger buffers of liquid assets. …
Unemployment Rate to continue to plunge The further decline in the unemployment rate in December is consistent with our view that the RBA will not extend its asset purchases beyond April. The 50,000 rise in employment was in December was exactly in line …
The main change to the Bank of Canada’s policy statement today was a signal that the pace of its bond purchases will be reduced as the Governing Council gains confidence in the strength of the recovery. As well as keeping the policy rate at 0.25% and …
20th January 2021
The surge in narrow money growth is entirely due to regulatory changes and a substitution out of savings accounts due to low interest rates. (See Chart 1.) Our measure of M3 shows broad money growth has slowed, dampening fears that a surge in money will …
Policy settings & guidance will be left unchanged Vaccinations & additional fiscal relief shift debate towards tapering asset purchases Fed won’t taper until 2022, but may pre-announce plans around Jackson Hole Aside from acknowledging the weakness in the …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with the country once again in lockdown following a surge in COVID-19 cases, we think that the Bank will eventually be forced into action. Of the 23 analysts polled by …
Our forecast for a 1.5% q/q fall in consumption in Q1 rests on the assumption that some businesses in virus hotspots will be forced to close in order to contain Japan’s most severe wave of the pandemic yet. But signs that new infections may already have …
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with monetary conditions already being tightened in practice and underlying inflation set to rebound, we think it is still likely that the PBOC opts to formally hike rates later this year. …
Overview – With additional large-scale fiscal stimulus likely to offset the near-term drag on activity stemming from the surge in COVID-19 cases – and the vaccination effort likely to reach critical mass by mid-year – we expect GDP growth to be 6.5% this …
19th January 2021
Overview – Our view that the economy will return to its pre-pandemic size in Q1 2022 and that it won’t be permanently smaller due to the pandemic is a more optimistic take than that of most forecasters. It implies that the government doesn’t need to …
Overview - The recovery in GDP and employment in both Australia and New Zealand is set to continue surprising to the upside. As such, we expect the RBA to stop its QE programme in April. Meanwhile, we estimate that New Zealand’s economy has already …
18th January 2021
A strong Q4 & a tough Q1 This week’s data from Sweden and Norway add to the signs that both economies ended Q4 on a decent note and outperformed even the best-performing major euro-zone economies in 2020. Mainland GDP in Norway contracted by less than …
15th January 2021
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today in a unanimous decision, and with signs that the latest virus outbreak is coming under control, further rate cuts seem unlikely this year. Korea’s third wave of the virus had …
Governing Council under no pressure to loosen policy further… …but will commit to keeping financial conditions loose for as long as needed. Main risk is that the lockdowns are extended well into the second quarter. Having adjusted their policy settings in …
14th January 2021
Overview – Despite a rockier start to 2021 than we previously anticipated, we continue to expect the economy to recover strongly from the second quarter onwards, as the vaccine rollout allows restrictions to be lifted. Our forecasts for growth of 4.6% …
The Norges Bank will almost certainly leave its key interest rate on hold at zero next Thursday, but there is an outside chance that it could start to re-tighten macroprudential policy to tame the housing market. Having slashed the policy interest rate by …
No signs of stress in financial markets and policy already extremely loose Bank has already started to address side effects of aggressive easing Upcoming review still shrouded in mystery The Bank of Japan is unlikely to respond to the worsening virus …
Speculation that Bank could cut interest rates looks overdone. Bank set to upgrade its GDP forecasts. Macklem faces communications challenge as Bank attempts to keep yields low. The Bank of Canada is set to upgrade its growth forecasts next week, despite …
13th January 2021
While the economic fallout will not be as severe as it was with the first lockdowns, the surge in virus cases will weigh on activity in Q1. Vaccine rollouts should provide a boost to the global recovery, but not until the second half of the year. …
12th January 2021
Overview – The drop in new COVID-19 cases and the resulting scaling back of containment measures in India has provided a much-needed boost to the economy, and an effective vaccine will further support the recovery in 2021 and 2022. But even widespread …
11th January 2021
Consumer price deflation reverses as food prices rise Headline inflation returned to positive territory last month as the drag from pork prices eased. Broader price pressures also edged up on the back of stronger demand. With underlying inflation likely …
US headline CPI inflation probably ticked up in December (Wednesday) We think that UK GDP fell by 8% in November due to lockdown restrictions (Friday) Read our highest-conviction macro and financial market forecasts on our dedicated page Key Market Themes …
8th January 2021
COVID-19 battle not over but vaccines offer hope Shijiazhuang, a city of 11 million and the capital of Hebei, was put into lockdown on Thursday, after recording 117 new coronavirus cases the previous day (67 of them asymptomatic). Mass testing is being …
The extension of lockdowns has dashed hopes of an early rebound in economic activity. Instead, the economy is likely to contract in the first quarter of this year. After falling quite steeply at the end of last year, the number of new virus cases in the …
7th January 2021
The Bank of England may not be ready to use negative interest rates until H2 2021. And by then, COVID-19 restrictions might be easing and the economy could be growing rapidly. In any case, if the Bank does loosen policy further, we suspect it will use …
The lockdowns implemented at the end of last year did not lead to another surge in bank lending, probably because they were less strict and more focused on limiting social activity. But if lockdowns are extended or made more draconian, firms’ demand for …
5th January 2021
House prices may rise by 10% in 2021 House prices continue to rise strongly in Australia and we now think they will rise by 10% between the end of 2020 and the start of 2021. Across the eight capital cities, house prices rose by 0.9% m/m in December. …
4th January 2021
COVID-19 has ravaged India’s economy in 2020, and GDP is all but certain to have suffered its largest slump on record this year. But there are reasons for optimism as the year draws to a close. Several activity indicators point to a continued recovery in …
23rd December 2020
The new Tier 4 COVID-19 restrictions, which closely resemble November’s lockdown, raise the chances that the economy stagnates, if not contracts, in the first three months of 2021. If the economy is heading for a double-dip, at least the second leg down …
21st December 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with China’s leadership eyeing a gradual withdrawal of policy support, we think the PBOC will start to hike its policy rates next year. The one-year LPR was unchanged at 3.85% (both the …
The Bank of Japan’s decision today to extend its emergency loan facility by six months didn’t come as a surprise. The announcement that the Bank would soon conduct an assessment of its easing strategy is more striking, but it appears unlikely to result in …
18th December 2020
Indonesia’s central bank left interest rates unchanged today, but given the poor outlook for growth, further easing is likely early next year. The decision by Bank Indonesia to leave interest rates unchanged at 3.75% came as no real surprise – 24 of the …
17th December 2020
PM Suga’s decision on Tuesday to halt the Go To Travel campaign for two weeks from 28 th December may put the recovery in services spending into temporary reverse. It comes after authorities in Tokyo, Osaka, and Nagoya this week extended requests for bars …
Upside surprise is under way The fall in the unemployment rate to 6.8% in November leaves it on track to fall to 6% by the middle of next year and is consistent with our view that the RBA won’t expand quantitative easing any further. The 90,000 rise in …
The Fed tweaked the guidance for its asset purchases in the statement issued after the conclusion of today's FOMC meeting, with the new language implying those purchases could continue for longer than previously believed. Nevertheless, with yields already …
16th December 2020
