Filtered by Topic: Monetary Policy Use setting Monetary Policy
Bank Negara Malaysia (BNM) cut its main policy rate by 25bps to 1.75% today, and with the economic recovery still in its infancy, we doubt this marks the end of the central bank’s easing cycle. The decision to cut was no surprise, 18 of the 25 analysts …
7th July 2020
The RBA sounded more optimistic when it left policy settings unchanged today. But with the recovery set to remain bumpy and inflation likely to weaken more sharply than the Bank is anticipating, we still expect the Bank to resume its bond purchases before …
Wage growth to weaken further even as household incomes rebound Wage growth weakened further in May, but we think household incomes are recovering as furloughed workers either return to work or receive their mandatory leave allowance. According to today’s …
Online sales surged during the lockdown and rose further even as the Australian and New Zealand economies were opening up again. We suspect online sales will remain high which means measures of physical location may understate the resilience of …
6th July 2020
May activity data consistent with our views The May activity data were weaker than most had anticipated but broadly consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. While consumption soared in the US and many European countries …
3rd July 2020
Consumption to surge in Q3 Retail sales rose above pre-virus levels in May and probably kept rising in June. As such, a sharp rebound in consumption in Q3 following Q2’s slump is all but guaranteed. However, services spending will probably fare worse and …
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
2nd July 2020
Uptake of central bank lending facilities has been mixed But lending is reaching firms, either through governments or central banks… … and central bank backstops are offering important reassurance to investors This month has seen a further shift among the …
The decision by the Colombian central bank to slow the pace of easing from 50bp to 25bp at last night’s meeting suggests that the rate-cutting cycle is approaching its conclusion. We remain comfortable with our forecast for two more 25bp cuts in the …
1st July 2020
The Riksbank has put its money where its mouth is when it comes to expanding its balance sheet, but in our view all roads still lead to a return to negative interest rates, either in late-2020 or early-2021. While the Riksbank’s decision to leave the repo …
Restrictions on activity have lifted in both countries. (See Chart 1.) While some states in Australia still limit the size of groups and capacity at restaurants, New Zealand has now lifted all domestic restrictions. The reduction in restrictions has …
30th June 2020
Activity and labour market exceeding Bank’s expectations But unemployment set to remain far above pre-virus levels, weighing on wage growth Bank may resume bond purchases at some point, perhaps early next year Given that the economy has coped better with …
Household incomes will continue to rebound The sharp drop in the number of furloughed workers in May supports our view that household incomes will rebound in the second half of the year. And while industrial production plunged again in May, it should also …
Rebound in consumption will continue to disappoint The subdued rise in retail sales in May suggests that the lifting of the state of emergency didn’t provide a big boost to consumption and we reiterate our forecast of a 9% q/q plunge in Q2 GDP . And the …
29th June 2020
The current burst of bank lending suggests that governments’ loan guarantees and the ECB’s TLTROs are having the desired effects. Now that economies are re-opening, corporate revenues should begin to recover, making firms less reliant on state-backed …
26th June 2020
The ECB has used the minutes of this month’s policy meeting to try to defuse the dispute in Germany over the legality of its asset purchase programmes. Helped by the Bundesbank, this should be enough to smooth things over for now. But future court cases …
25th June 2020
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
The central bank in the Philippines (BSP) today cut its policy rate by a larger-than-expected 50bps, to 2.25%, and with economic activity unlikely to recover fully anytime soon, we expect further easing. The timing of today’s decision was a surprise given …
While we still expect the Riksbank to cut its repo rate back into negative territory later this year, it is set to keep its powder dry at its policy announcement next Wednesday (1 st July). Recall that the Riksbank left its repo rate unchanged at zero …
24th June 2020
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% today despite the dire outlook for the economy suggests that further cuts to the policy rate are unlikely. Instead, the emphasis over the coming months is likely to be on what …
After tightening dramatically in March following the outbreak of the coronavirus, our proprietary index shows that financial conditions in India have eased substantially over the past couple of months. (See Chart 1.) This is in large part due to the RBI’s …
The Reserve Bank of New Zealand (RBNZ) sounded fairly balanced when it left policy settings unchanged today. But we still think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated …
The generosity of CERB, signs the government will continue payments for as long as needed, and the fact that household savings have already risen sharply all suggest the initial stages of the rebound in consumer spending will be stronger than we thought. …
23rd June 2020
Hungary’s central bank (MNB) unexpectedly cut its base rate from 0.90% to 0.75% at today’s monetary policy meeting, and we now think another cut is likely in the second half of this year. With the economic recovery likely to fall short of the central …
The Fed’s balance sheet has started to shrink again, as the emergency liquidity measures deployed at the height of the crisis have started to wind down, the pace of Treasury purchases has slowed dramatically and the rollout of the new 13( 3 ) lending …
Consumer spending is bouncing back more strongly than we had anticipated. However, that partly reflects pent-up demand and the strong support from government initiatives. Employment income has slumped and we only expect spending to return to pre-virus …
22nd June 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place. The one-year rate was unchanged at 3.85% (the Bloomberg …
Russia’s central bank (CBR) didn’t disappoint at today’s meeting, cutting the key policy rate by 100bp to a new post-Soviet low of 4.50%. With disinflationary forces proving stronger than expected and financial markets stabilising, the accompanying …
19th June 2020
Shallower downturns forecast in the Nordics Amid increasing signs that the Nordic economies have weathered the Covid crisis better than most (see here ) we have upgraded our forecasts for GDP growth over the coming years. (See Table ) As flagged in an …
TLTROs raise concerns about the doom loop There was record demand for the ECB’s ultra-cheap Targeted Longer-Term Refinancing Operations this week, at €1.3 trillion. (See here .) This is not surprising given that the interest rate on these loans will be …
Bank lending jumped in Q1, to the highest level relative to trend GDP since 2009. And recent data suggest that it has remained very strong this quarter. But comments yesterday by PBOC Governor Yi Gang suggest that bank lending will drop back in the second …
EU leaders set to discuss the EC’s proposal for a €750bn joint recovery fund (09.00 BST) Russia’s central bank is likely to cut its policy rate to a post-Soviet low of 4.50% (14.00 BST) May UK retail sales data to give first indication of the speed of the …
18th June 2020
Peru’s economy appears to be suffering one of the largest economic hits of any country from the coronavirus, which is likely to spur further policy easing. With short-term interest rates essentially at zero, further monetary loosening would initially …
We think today’s Monetary Policy Committee (MPC) decision to keep rates on hold at +0.10% and increase Quantitative Easing (QE) by £100bn is unlikely to be the last act of policy loosening. And while we wouldn’t rule out the Bank of England cutting …
Data published today show huge demand for the ECB’s targeted lending to commercial banks. So far, these operations and government loan guarantees have been successful in raising bank lending to the private sector, and there is scope for the ECB to make …
Bank Indonesia (BI) cut interest rates today for the first time in three months, but the modest 25bp cut suggests that it remains worried about the outlook for the rupiah. Given the bleak growth outlook we expect further gradual easing over the coming …
This morning’s decisions by the SNB and the Norges Bank to leave interest rates on hold at -0.75% and zero respectively were never really in doubt. Both banks are set to leave policy unchanged throughout our forecast horizon and, in the case of the SNB, …
The statement from yesterday’s Brazilian central bank meeting poured cold water on expectations in the market that the Selic rate would be cut further from its current level of 2.25% to as low as 1.00-1.50%. It seems that policymakers will consider only …
RBNZ beginning to slow the pace of QE New Zealand economy recovering solidly The RBNZ will hold off until 2021 to launch negative rates to address low inflation The RBNZ has started to reduce the pace of asset purchases as economic activity has recovered. …
The decision by Chile’s central bank to leave its policy interest rate unchanged at 0.50% was accompanied by a statement which appeared to unveil a QE programme. The finer details will be fleshed out in the coming days but, along with a recently announced …
17th June 2020
Central bank of Brazil likely to cut its policy rate by 75bp to 2.25% We think that headline inflation fell from 0.8% to 0.6% in the UK last month … (07.00 BST) … and that it remained in negative territory in Canada (13.30 BST) Key Market Themes Even if …
16th June 2020
The Bank of Japan today expanded its lending facilities further. The total amount of support for corporate funding is now equivalent to nearly 20% of the debt of non-financial firms and we don’t expect any further increases over the coming months. As …
There is still huge uncertainty over how quickly activity will recover from the pandemic, but it’s clear that the economy is set for an unprecedented period of near-zero interest rates. The Fed sprang no real surprises on the policy front this week, but …
12th June 2020
Our Taylor Rules suggest that monetary easing cycles have further to run in Brazil, Mexico and Colombia, and we have pencilled in additional interest rate cuts in all three countries. Moreover, monetary policy across the region is likely to be looser than …
11th June 2020
The Swiss National Bank and the Norges Bank are all but certain to leave their policy settings unchanged at the scheduled announcements next Thursday (18 th June) and for the foreseeable future. Recall that the SNB left interest rates on hold at -0.75% at …
MPC likely to announce another £100bn of QE in June… …and that won’t be the last expansion Negative interest rates possible, but far from guaranteed The Bank of England has much more work to do. It will probably start by announcing £100bn more …
TARGET2 imbalances are set to rise to record levels over the year ahead on the back of the ECB’s planned wave of asset purchases. While this may be dismissed by some as a benign and technical side-effect of the ECB’s policies, it would indicate that, …
The Fed left its policy stance broadly unchanged at the conclusion of today’s FOMC meeting, but it did strengthen its forward guidance a little – by publishing interest rate projections that show nearly all officials believe the fed funds rate will still …
10th June 2020
Existing lending schemes still well below ceilings But latest supplementary budget foresees additional subsidised lending Bank to secure funding for commercial lenders by further increase in lending schemes The Bank of Japan has already done a lot to …
9th June 2020
The minutes of the Reserve Bank’s late May policy meeting – in which it trimmed both the repo and reverse repo rates – show that the MPC has become markedly more bearish on the outlook for economic growth amid the coronavirus containment hit. And with …
8th June 2020
