Filtered by Topic: Monetary Policy Use setting Monetary Policy
As the lockdowns have largely come to an end in both countries, output is starting to recover. In New Zealand, most activity is now allowed to resume, though gatherings are limited to 100 people. In Australia, states are easing restrictions at different …
29th May 2020
The ECB is likely to increase the PEPP by a minimum of €500bn next week. Policymakers may also say the PEPP will run until at least mid-2021. We no longer anticipate a further reduction in the deposit rate. Policymakers have signalled their intention to …
28th May 2020
We think that today’s 100bp interest rate cut by the Nigerian central bank, to 12.50%, will be followed by further loosening as economic recovery proves weaker than the central bank expects. We have pencilled in an extra 50bp cut, most likely at the …
The prospect of a joint European fiscal response has helped to ease upward pressure on the Swiss franc and means that there is light at the end of the tunnel for the SNB following its recent bout of FX interventions. While monetary policy will remain …
The Bank of Korea (BoK) cut its policy rate by 25bps to a new record low of 0.50% and gave some vague assurances that it would act to keep long term government bond yields down. With growth likely to disappoint and conventional policy reaching its limit, …
First meeting for new governor Tiff Macklem. Some positive signs since last meeting, but some worrying ones as well. Downside risks raise the case for more policy support. We expect the Bank of Canada to announce additional corporate bond purchases next …
27th May 2020
The Labour Force Survey shows that the number of hours worked dropped by 28% between February and April. As the bulk of the hours lost have been in relatively low-productivity sectors, GDP should not fall by that much. But we still expect a total decline …
26th May 2020
Previous government bond purchases were focused on restoring liquidity Unemployment is rising and inflation set to slump Bank may launch fresh round of purchases focused on lowering long-term rates We suspect that the Reserve Bank of Australia will keep …
Policymakers have more work to do The account of April’s ECB meeting, published today, shows that the Governing Council has left the door wide open to further monetary policy support. As a reminder, at that meeting the Council made the Targeted …
22nd May 2020
Bank of Korea to get unconventional The Bank of Korea is likely to cut its policy rate to a record low of 0.5% and step up non-conventional support at its meeting on Thursday. At its last meeting in early April, the Bank held rates steady. (See here .) …
The RBI has further stepped up its response to the collapse in economic activity from the coronavirus and containment measures in another emergency announcement today. The central bank has also left the door open for further loosening and, with the …
This Update summarises the key announcements from the National People's Congress. For in depth analysis, see this Focus . We had anticipated that the National People’s Congress (NPC) would lay out plans for a further ramp up in policy support and it did …
The Bank of Japan launched a new lending facility today to support bank lending to small businesses and we suspect its measures will now be sufficient to secure the financing needs of firms throughout the coronavirus crisis. As widely anticipated, the …
Inflation drops sharply and will turn deeply negative Headline inflation turned negative in April for the first time since 2016 adjusting for the impact of October’s sales tax hike. We expect it to weaken further over the coming months as services and …
South African policymakers continued to cut interest rates today, taking the repo rate down by 50bp to 3.75%, but the end of the easing cycle appears to be on the horizon. At this stage, we expect one more cut, of 25bp, to 3.50%. With the eventual …
21st May 2020
Turkey’s central bank stepped up its monetary support for the economy with a 50bp cut in interest rates today and recent announcements of financial support from Qatar and Japan probably tips the balance in favour of further easing at June’s meeting. A …
With policy rates close to the zero bound in Korea, Taiwan and Thailand, we think it is only a matter of time before central banks in these economies implement full-blown quantitative easing (QE) programmes. Malaysia may not be far behind either. But …
Despite a stringent lockdown that has lasted nearly two months, new recorded cases of COVID-19 in India remain on a sharp upward trajectory and hit a record high yesterday. (See Chart 1.) The true number of cases is likely to be higher still given limited …
20th May 2020
With the economy in a massive slump and prices falling sharply, today’s decision by the Bank of Thailand (BoT) to cut interest rates by a further 25bp to a new all-time low of 0.50% came as no surprise. With the policy rate now not much above zero, the …
Commercial banks left the Loan Prime Rate (LPR) on hold today. But the dovish tone of the PBOC’s latest monetary policy report and growing pressure on the central bank to do more, including calls for QE, suggest that this is a pause in, rather than an end …
We think that Nigerian policymakers will have to allow the naira to weaken further in order to address mounting strains in the balance of payments. But hopes of a unified, flexible exchange rate regime will probably be dashed. Nigeria’s external position …
19th May 2020
Bank Indonesia’s (BI) decision to leave interest rates unchanged today at 4.5% is a big surprise given the slump in economic activity and the rebound in the rupiah. We think it will cut interest rates again soon. Having cut interest rates by 25bp in both …
In response to the rapidly worsening outlook for the economy, Pakistan’s central bank (SBP) today slashed its key policy rate by a further 100bp to 8.0%. With the economy in freefall and the authorities struggling to contain the spread of the virus, more …
15th May 2020
Canadian banks and households are in some respects better placed to deal with the side-effects of negative interest rates that their peers elsewhere have faced. But in contrast to the banking sectors of economies with negative rates, Canada’s is very …
Growth target and policy signals After a delay of over two months, the annual meeting of the China’s legislature, the National People’s Congress (NPC), will kick off next Friday. A schedule has yet to be made public but the key events, the annual work …
The Central Bank of Egypt’s decision to keep interest rates unchanged today was not a major surprise given that efforts to prop up the pound have taken precedence over supporting the economy. If the IMF manages to persuade the central bank to loosen its …
14th May 2020
We think it is far more likely that the Bank of England will use further rounds of Quantitative Easing (QE) to boost demand rather than cut interest rates into negative territory as the market is suggesting. Over the past few days money markets in the UK …
The federal government’s spending measures are dwarfed by those in the US, and the Bank of Canada’s plans look underwhelming compared to those of the Federal Reserve. But the overall fiscal packages look similar once we incorporate likely provincial and …
13th May 2020
The Reserve Bank of New Zealand (RBNZ) massively expanded its annual target for asset purchases at its meeting today and we still think the Bank will cut rates into negative territory before long. The Bank’s decision to keep rates on hold at 0.25% was …
Vietnam’s central bank (SBV) today cut its main policy rate by 50bp to 4.5%, and further rate cuts are likely given the poor economic outlook. Although life in the country appears to be slowly returning to normal after the lockdown came to an end late …
12th May 2020
The Fed has developed a habit of caving in the face of market pressure in recent years, but we still think the chances of it pushing the fed funds rate into negative territory are low. Fed officials have been united and consistent in arguing that the …
11th May 2020
Numerous lending facilities have been either launched, revived, or expanded Many aim to provide liquidity to financial institutions and non-financial firms But the line between liquidity operations and monetary policy is sometimes blurred Traditionally, …
7th May 2020
The Czech central bank delivered a larger-than-expected interest rate cut at today’s MPC meeting but also disappointed those that had expected some unconventional measures to be announced to support the economy. Policymakers’ cautiousness and conservatism …
BoE scenario too optimistic There can be little doubt about how bad the recession will be now that the Bank of England has joined us and the Office for Budget Responsibility in forecasting that GDP will fall by 25-35%. Indeed, we will get the first glance …
German court won’t stop the ECB… yet Much ink has already been spilled this week on the German constitutional court, including by us. (See here .) So rather than go through it line by line, picking out the numerous unhelpful and at times bizarre claims …
This morning’s 25bp rate cut by the Norges Bank, to a fresh record low of zero, took the consensus by surprise, but was in line with our forecast. That said, the Bank gave a strong signal that it has now reached the end of string of rate cuts, and we now …
While the Monetary Policy Committee (MPC) left its interest rate and quantitative easing (QE) policies unchanged this morning, it implied that an expansion of QE is imminent. This leaves our existing call that the MPC would expand QE by around £100bn at …
The Brazilian central bank’s 75bp cut in the Selic rate last night and the dovish tone of the accompanying statement has prompted us to pencil in a further 50bp of cuts (to 2.50%) in the coming months. Elsewhere, the Chilean central bank gave little away …
The lockdown hit the New Zealand economy hard RBNZ is supporting the economy with QE and other measures but more is needed The RBNZ will cut the OCR into negative territory, perhaps in August The RBNZ will want to wait to assess the impact of the virus …
6th May 2020
Conditions in money markets have continued to ease gradually as central banks have expanded their backstop measures. In our view, extensive support from policymakers will remain a key factor underpinning the markets for both safe and risky assets for the …
A worrying divergence is emerging in the policy response across the region. Policymakers in Central Europe imposed lockdown measures early which have succeeded in containing the outbreak. And the scale of economic policy support will bolster recoveries as …
5th May 2020
The German constitutional court ruling today will not bring the ECB’s asset purchase programme to a sudden end. But it highlights that a successful legal challenge to the its policies in the future could contribute to increased tensions in the bond …
Bank Negara Malaysia (BNM) today cut its policy rate from 2.50% to 2.00%, and with the outlook for growth very poor, we think the central bank will ease policy again in the coming months. Of the 20 analysts polled by Bloomberg, 14, including ourselves, …
The Reserve Bank of Australia (RBA) today left its interest rate targets unchanged but an easing of collateral requirements should provide some support to corporate bond markets. While the financial markets expect the Bank to hike rates in about three …
The government confirmed this week that former Senior Deputy Governor Tiff Macklem will take the helm from Governor Stephen Poloz in June. (See here .) We doubt the change will materially affect the way the Bank approaches monetary policy, but it is clear …
1st May 2020
Tiff Macklem to take the wheel This Update was originally sent to clients as a Rapid Response immediately after the Bank of Canada’s announcement on 1 st May. The confirmation that Tiff Macklem will take over from Governor Stephen Poloz when he steps down …
KOF Barometer is feeling under the weather The unprecedented scale of the Covid-related economic carnage has seen previously reliable relationships between business surveys and output break down in many countries, and Switzerland is no exception. While …
The statement accompanying the Colombian central bank’s decision to cut the policy rate by 50bp to 3.25% left the door open for more easing. Given the scale of the economic hit that we expect, the policy rate will likely be lowered by at least an …
Given the toxic combination of Covid-related disruption and precipitous plunge in oil prices, we think that the Norges Bank’s easing cycle has further to run. Whereas financial markets are pricing in only a small chance of further loosening, we have …
MPC to signal it continues to stand behind gilt market There’s a chance it could extend QE But that’s probably more likely to happen in the coming months The Monetary Policy Committee (MPC) will probably use its policy announcement on Thursday 7 th May to …
30th April 2020
