Filtered by Topic: Monetary Policy Use setting Monetary Policy
Growing pressure on South Africa’s Reserve Bank (SARB) to do more to support the economy and finance the government is unlikely to result in a major shift in policymaking over the next year or two. But it’s a distinct possibility further out and, while …
12th August 2020
The Reserve Bank of New Zealand (RBNZ) further expanded its quantitative easing programme at today’s meeting and we think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated by all …
If strains in Turkey’s balance of payments fail to ease, the central bank will probably tighten monetary conditions more aggressively within the interest rate “corridor”. But use of the corridor alone would not allow real interest rates to return to …
10th August 2020
Household incomes should continue to rebound Wage growth improved a little in June and household incomes are rebounding now that most furloughed workers are back in work. Meanwhile, the surge “core” household spending in June supports our view that …
7th August 2020
The Monetary Policy Committee (MPC) left its interest rate and quantitative easing (QE) policies unchanged today and its new projections appear to suggest that no further loosening is required. But its dovish language is more important for the future path …
6th August 2020
The only new step taken by the RBI today was the introduction of a new framework to help struggling borrowers manage their bank debt. The MPC voted unanimously to keep the repo and reverse repo rates on hold. But, with the growth outlook worsening amid …
The 25bp cut in the Selic rate, to 2.00%, at last night’s Brazilian central bank meeting probably marks the last reduction in the cycle, but the accompanying statement supports our view that rates will remain at rock bottom levels into 2022. The reduction …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% despite the very poor outlook for the economy suggests further rate cuts are unlikely. In its statement, the BoT hinted at further measures it could take to support growth, …
5th August 2020
RBNZ on track to meet its QE targets New Zealand economy broadly recovered The RBNZ will hold off until 2021 to launch negative rates to combat weak inflation The RBNZ has stabilised the pace of asset purchases in recent months and is on track to meet its …
The RBA turned more pessimistic about the outlook for the economy when it kept policy settings unchanged today and we think it will engage in additional asset purchases before long . As widely anticipated, the RBA kept both its cash rate as well as the …
4th August 2020
Lockdown to weigh on recovery Retail sales and external trade both rose in the month of June but may weaken again before long as imports begin to normalise and the renewed lockdown in Victoria weighs on retail sales. The 2.7% m/m rise in retail sales …
The MPC is unlikely to expand QE before November But it may signal that further stimulus will be needed at some point It could revise down the effective lower bound, leaving the door open to negative rates We expect the Monetary Policy Committee (MPC) to …
30th July 2020
Consumer spending should continue to recover The surge in retail sales in June suggests that consumer spending will rebound across Q3 even if some restrictions on activity are reimposed to curb the renewed spread of the virus. The 13.1% m/m rise in retail …
Initial bounce-back in activity has been stronger than expected But renewed lockdown in Melbourne is weighing on recovery and inflation is slumping We still expect a resumption in asset purchases before long The renewed lockdown in Melbourne is set to …
29th July 2020
Signs that recovery is stalling should prompt further easing Aware of inflation risks, a smaller 25bp policy rate cut is likely next week But persistent economic weakness means loosening cycle won’t end there The Reserve Bank of India (RBI) has been …
28th July 2020
Policy measures from governments and the ECB to keep banks lending during lockdowns appear to have been successful, but as we have argued was likely to happen, loan growth is now slowing. Consumers’ and firms’ ability and willingness to borrow will be …
27th July 2020
Russia’s central bank cut its policy rate by 25bp, to 4.25%, today and continued to provide signals that further easing lies in store. But the communications suggest that the pace of easing will slow. We maintain our forecast for the policy rate to be …
24th July 2020
Divisions on South Africa’s MPC suggest that some policymakers are keen for the easing cycle to be brought to an end following today’s 25bp cut (to 3.50%). And that seems to be the view priced into markets. Even so, with growth and inflation likely to be …
23rd July 2020
After hitting an all-time low in April, the rupee has strengthened by 3% against the US dollar as risk appetite has returned to global financial markets. (See Chart 1.) But while we think risky assets generally – and most EM currencies – will continue to …
22nd July 2020
Underlying inflation to weaken much further While headline inflation was unchanged for the third-straight month in June, we expect it to fall much further over the medium-term. We think inflation will turn consistently negative in the second half of the …
21st July 2020
Following today’s decision to keep interest rates on hold, we think that Nigerian policymakers will cut interest rates once more this year as inflation stabilises and the economic recovery proves weaker than the central bank expects. Following a surprise …
20th July 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Further rate cuts seem increasingly unlikely as the focus of monetary policy appears to be shifting from stimulating activity to containing financial risks. The one-year rate was unchanged at …
High savings mean plenty of room to spend more The main event this week was the Q2 GDP release . It beat expectations with growth of 3.2% y/y, fully reversing the contraction in Q1 and taking the level of output above its pre-virus high. This strong …
17th July 2020
The detailed breakdown of China’s Q2 GDP data published today raises some questions about the purported speed of the recovery. Generally though, it is consistent with broader evidence of a sharp rebound, led by industry and construction. Conditions in the …
Russia’s central bank has lowered its policy rate to a post-Soviet low during the current crisis and, with the economy likely to recover slowly and inflation set to remain subdued, further monetary easing lies in store. We expect the policy rate to be …
16th July 2020
At the press conference following today’s Governing Council meeting, ECB President Christine Lagarde dampened any suggestion that the Bank may not use the full €1.35 trillion in its emergency purchase programme. In fact, we still think it is likely to …
Bank Indonesia’s (BI) decision to cut interest rates today suggests that for now at least it is prioritising the economy over supporting the rupiah. We think further rate cuts are likely over the coming months, but the pace of easing is set to be gradual. …
The Bank of Korea (BoK) left its policy rate on hold at 0.50% today and while it did not unveil any further unconventional policy measures, the Bank gave hints it could employ them in future. With growth likely to disappoint, we still expect a more …
The Bank of Canada’s pledge today to keep the policy rate unchanged until the “2 percent inflation target is sustainably achieved” implies that it has no plans to raise interest rates until at least 2023. The Bank reiterated in its statement that the …
15th July 2020
A dip into deflation lies ahead The small rise in CPI inflation from +0.5% in May to +0.6% in June probably won’t be sustained for long as the effects of the Chancellor’s VAT cut for the hospitality/tourism sectors and the “Eat Out to Help Out” restaurant …
The Bank of Japan kept policy settings unchanged today as widely anticipated and we think it won’t announce major new measures over the coming months . The Bank’s decision to keep both its short-term policy rate as well as its target for 10-year …
Several EMs in Latin America, as well as South Africa, Nigeria, India and Turkey could use financial repression policies to deal with the legacy of higher public debt burdens resulting from the coronavirus crisis. This Update explains what form these …
9th July 2020
Supporting the economy through the crisis The main priority for Singapore’s ruling People’s Action Party (PAP), which is certain to win tomorrow’s general election, is ensuring a strong recovery from the crisis. There are good reasons to expect a rapid …
The Central Bank of Sri Lanka (CBSL) cut both its deposit and lending rates by 100bps to 4.50% and 5.50% respectively at its meeting today, and given the poor outlook for the economy, we think the easing cycle has further to run. The decision was …
Daily price data suggest that food inflation has eased over recent weeks and, with demand also likely to remain depressed, inflation does not appear to be a pressing concern. The focus of policymakers should therefore be to support the economy as much as …
Bank unlikely to announce any major policy changes. May present only partial set of forecasts in its new Monetary Policy Report. Little need for yield curve control at this stage. As the latest high-frequency data and surveys look encouraging, and policy …
8th July 2020
Lending schemes still well below ceilings and appetite for bank lending has declined Strains in foreign currency funding markets subsiding Concerns about financial stability will prevent rate cuts The Bank of Japan is likely to leave policy settings …
Overview – India’s failure to contain the coronavirus and the government’s underwhelming policy response mean the economy will suffer its largest drop in annual output on record this year. In addition, the recovery is likely to be one of the weakest among …
7th July 2020
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 …
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 …
