Filtered by Topic: Monetary Policy Use setting Monetary Policy
We think that Swiss policymakers would be prepared to match any small interest rate cut by the ECB, albeit reluctantly. However, if policymakers in the euro-zone opt to ease policy in other ways, as we think is more likely, this may help to reduce …
22nd October 2020
Overview – Fresh virus outbreaks and tighter containment measures mean that the economies of Emerging Europe are likely to suffer a fresh downturn in Q4, but we still think that the region will bounce back more strongly from the crisis than many other …
The growing risk of a second national UK lockdown has spooked equity markets over the last week. We already expect the recovery to stall in Q4 and additional COVID-19 restrictions could easily throw it into reverse, which would hammer UK corporate …
The Central Bank of Sri Lanka (CBSL) left both its deposit and lending rate on hold at 4.50% and 5.50% respectively at its meeting today but, given the poor outlook for the economy, we think the easing cycle has further to run. The decision was correctly …
Overview – The picture has brightened for Latin America as new COVID-19 cases have fallen from their peaks, which should allow governments to ease restrictions and provide a boost to economic recoveries. Even so, with the number of new cases still very …
21st October 2020
New COVID-19 cases in India have dropped significantly over the past month. (See Chart 1.) Encouragingly, the share of tests returning positive has also dropped, indicating that the improvement in test results reflects a genuine drop in infections. That …
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
Bank set to lower GDP growth and inflation forecasts slightly Expansion in BoJ’s assets already very large by international comparison Bank is unlikely to announce additional easing The Bank of Japan may revise down its GDP growth and inflation forecasts …
While we wouldn’t rule out negative interest rates being used a bit further down the line, over the next 6-12 months we think 10-year gilt yields will be kept close to 0.15% by the Bank of England expanding quantitative easing (QE) by a further £250bn by …
20th October 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
Headwinds facing Czech economy growing The Czech government this week announced stricter containment measures for the next three weeks in an effort to control the surge in COVID-19 cases which, on a per capita basis, is now the worst globally. Last week, …
16th October 2020
West’s virus woes need not deal a major blow China’s goods exports have been strong despite the weakness of the global economy. Data published on Tuesday showed they rose 9.9% y/y last month, with the strength concentrated in shipments of consumer goods …
Political wrangling compounding COVID risks Malaysia’s economy has rebounded rapidly from the crisis. Second quarter national accounts data show that by the end of June the economy was just 3.2% smaller than it was a year ago. (See here .) Recent upbeat …
RBA doubles down on inflation commitment RBA Governor Phillip Lowe gave a speech this week outlining how the Bank can deliver more easing. One change he unveiled was to the RBA’s forward guidance. In recent meetings, the Bank has said that it won’t raise …
Fresh stimulus will have limited impact on demand After dragging its heels for several months, the Finance Ministry announced further stimulus this week with a package worth INR730bn (0.4% of GDP). Around half of this consists of cash vouchers and loan …
Rise in inflation to push next rate cut into 2021 The increase in Nigerian inflation in September, to 13.7% y/y, will probably be followed by similarly high inflation readings in the coming months. The central bank is likely to keep its benchmark rate on …
15th October 2020
Overview - Australia and New Zealand have had far greater success in containing the virus than most other large advanced economies. Coupled with huge fiscal support, that means that the recovery in economic activity could surprise to the upside next year. …
Food aside, prices continue to recover from COVID-19 downturn Headline consumer price inflation, weighed down by easing food price inflation, continued its decline last month. But core consumer prices rose again for the second straight month and factory …
WPI inflation rises by more than expected The rise in headline wholesale price inflation in September was sharper than expected but, with price pressures likely to ease in earnest over the coming months, we think further policy rate cuts are still on the …
14th October 2020
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and, with the economic recovery holding up relatively well, further rate cuts seem unlikely. Instead the focus of the BoK is likely to shift to cushioning the impact of loose fiscal …
Economy recovering, monetary policy set to stay loose for an extended period The Monetary Authority of Singapore (MAS) left policy on hold today as advanced GDP data showed that the economy rebounded well in Q3. However, with GDP still well below its …
Large output gaps look set to keep inflation low in most emerging markets over the next few years. But further out, we think that worrying public debt trajectories in some places (Brazil and South Africa), and greater emphasis on growth over inflation by …
13th October 2020
Bank Indonesia (BI) left interest rates on hold at 4.0% today, but it is too soon to call an end to the easing cycle. With the economy in need of further support, we think the central bank will resume its easing before the end of the year. BI left …
Download the pdf for the full Outlook Overview – China has become the first major economy to return to its pre-virus growth path, thanks to its rapid containment of COVID-19 and effective stimulus response. The rebound initially leaned heavily on …
12th October 2020
The post-Global Financial Crisis (GFC) experience suggests that the South African Reserve Bank (SARB) is unlikely to raise the repo rate within our near-term forecast horizon (to end-2022). Investors are anticipating that the SARB will hike the policy …
Inflation has held up better than we had anticipated in recent months. The surge in spare capacity suggests that it could weaken more sharply as social distancing measures are relaxed. But we only expect underlying inflation average -0.2% next year. One …
IMF wades in on fiscal policy... The IMF made headlines this week with the suggestion in its latest Fiscal Monitor that governments across the globe should continue to spend to support economic recoveries. It’s giving a similar message to Mexico. Indeed, …
9th October 2020
Spending recovered further during Golden Week Tourist activity and spending during the nine-day “Golden Week” holiday that ended yesterday was substantially stronger than during holidays earlier in the year, but still depressed. That might point to …
Surge in Vietnam’s exports puts it in danger Vietnam has so far emerged as the biggest winner of the US-China trade war, as tariffs on goods from China have led US importers to switch suppliers. Vietnam’s exports to the US have doubled since the start of …
Big budget spend up Josh Frydenberg unveiled the 2020/21 Budget on Tuesday announcing nearly $100bn of additional stimulus measures. Of particular note, the Budget brought forward stage 2 of the tax cuts to June 2020 (to be back-dated), introduced a 100% …
It came as no surprise that the new MPC voted unanimously to keep the repo and reverse repo rates on hold today. But the relatively dovish tone of the statement, along with the dire growth outlook, mean we remain comfortable with our non-consensus view …
Reasons for caution despite improvement in data This week brought some much-needed good news for India’s beleaguered economy. Activity data for September have been promising. The manufacturing PMI jumped to an eight-year high, while export growth turned …
The account of the last ECB Governing Council meeting suggests that policymakers were in no hurry to increase the size of the PEPP. There has been more disappointing news on the economy since then, but on balance we still think the Bank will leave the …
8th October 2020
The further slowdowns in monthly GDP growth in Norway and Sweden in August support our view that it will take a long time for output to recover to pre-crisis trend levels anywhere in Europe. The 0.6% m/m increase in mainland Norwegian GDP in August was …
Overview With the virus under control in most of the region, Emerging Asia is bouncing back from the crisis faster than other parts of the world. But the pace of recovery is uneven. China is leading the way. In the countries hit worst economically, the …
Overview – Japan’s success in containing the virus without imposing draconian restrictions on activity should enable a faster return to pre-virus levels of output than in many major economies. We expect GDP to rise by 3.5% next year, after this year’s …
After dragging its heels for several weeks, the government has finally appointed three new members to the RBI’s monetary policy committee (MPC). Not a great deal is known about their views on monetary policy but, given that the MPC tends to follow the …
6th October 2020
The RBA kept policy settings unchanged today but signaled that more stimulus is forthcoming. We now expect the Bank to cut the cash rate target, the 3-year yield target and the interest rate on the term funding facility to 0.1% next month. We suspect the …
Consumers appear to be much more miserable than the economic fundamentals would imply. But the prospect of a second wave of unemployment and the risk of future lockdowns are not captured well by the models. As such, consumer confidence is likely to stay …
5th October 2020
Geopolitical risks grow for Turkey The conflict in Nagorno-Karabakh has opened up another schism between Turkey, the EU and Russia. An escalation in tensions could trigger sharp falls in the lira and push the central bank into more aggressive monetary …
2nd October 2020
Fiscal policy to remain supportive in Indonesia Indonesia has signalled that fiscal policy will remain supportive of the economic recovery after it unveiled a budget for next year that envisages only a very small fall in the budget deficit. Earlier this …
Government dragging its heels once more We have become accustomed to central banks holding emergency meetings over recent months, but the RBI sprung a surprise this week by postponing at the last minute the meeting that was scheduled to conclude on …
Golden Week to spur consumption growth China’s “Golden Week”, a nine-day holiday that combines both National Day and the Mid-Autumn Festival, kicked off yesterday. It could provide a much-needed boost to consumption, which has lagged the recovery in …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.25% today for a second consecutive meeting, but with the economic recovery proving to be one of the slowest in the region, we doubt the Bank has finished easing yet. The …
1st October 2020
Overview – The continued rapid spread of COVID-19 in India and the need for prolonged containment measures has plunged the economy into a double-digit contraction this year. A tepid fiscal response means the recovery will underwhelm too. The dire economic …
The latest figures suggest that the number of COVID-19 infections in the region has passed its peak – new cases are down by 35-60% compared to their July/August peaks in most of the large Latin American countries. And strains in healthcare sectors have …
30th September 2020
Softer inflation unlikely to change policymakers’ mind The slight fall in South African inflation, to 3.1% y/y in August, is likely to be followed by subdued inflation rates over the next few months. Even so, the SARB’s easing cycle has now come to an …
The surge in case numbers due to the second wave in Melbourne has been brought under control with new daily cases falling back towards zero. Heavy restrictions on activity still remain in place in Melbourne, although they have been eased for rural …
Recovery in activity to continue Retail sales rebounded back to pre-virus levels in August as the second wave began to dissipate, and we expect consumer spending to recover further over the coming months. Meanwhile, industrial production edged higher in …
