Filtered by Topic: Monetary Policy Use setting Monetary Policy
The RBI has emphatically stepped up its response to the economic and financial market fallout from the coronavirus outbreak with another emergency announcement today. It has also left the door wide open for further monetary loosening. A similarly-bold …
27th March 2020
New Zealand in Lockdown, Australia on the brink This week New Zealand entered a near-total lockdown in an effort to contain the spread of the coronavirus. The restrictions are more draconian than in most other countries that have imposed lockdowns. …
Activity across both industry and services is recovering as measures to contain the coronavirus have been eased. But the recovery is likely to run into the constraint of weak demand before long. The labour market is the biggest domestic concern. The …
The Czech central bank followed up last week’s emergency interest rate cut with further easing today and opened the door to use other measures to support the economy and stabilise the financial system. With the economic damage from the coronavirus …
26th March 2020
The Bank of Canada announced further credit easing measures this week and the government’s will expand its fiscal package to $109 bn, from $82 bn, but there are still widespread signs of stress in funding markets and there have been few direct measures to …
If the Bank of England is going to build on the unprecedented policy support it has unleashed in recent weeks to counteract the economic effects of the coronavirus, it won’t be because of concerns over how far inflation or GDP will fall. Instead, it would …
RBI’s response to coronavirus has so far been limited But outbreak and containment measures should prompt aggressive loosening Repo, reverse repo and cash reserve ratios all likely to be trimmed by 50bp The RBI has so far taken only piecemeal steps in its …
It now seems likely that euro-zone policymakers will exploit the European Stability Mechanism’s lending capacity to offer financial help to all member states to tackle the hit from the coronavirus. This should be fairly easy to do, but on its own it is …
25th March 2020
The measures to contain the spread of the coronavirus announced by PM Modi last night will be hard to fully implement but will still have severe economic repercussions. We now expect the economy to grow by just 1% this year, the weakest pace of annual …
Hungary’s central bank announced a range of measures to increase liquidity in the banking system at today’s MPC meeting. But the economic effects of the coronavirus are likely to be much more damaging than policymakers currently think, suggesting that …
24th March 2020
This Update was originally sent to clients as a Rapid Response immediately after the Fed’s policy statement on 23 rd March. The Fed’s expansion of its open-ended QE, together with new measures to lend directly to firms shows the Fed is moving beyond …
Central banks are already facilitating fiscal packages in various ways. But with the fiscal costs of the coronavirus likely to rise much further, policymakers might consider explicitly financing them with a permanent expansion of central bank money – the …
New Zealand is set to enter a near-total lockdown this week which will cause economic activity to all but stop. The RBNZ launched quantitative easing today, but we think that more monetary stimulus will be needed. We expect the Bank to cut the OCR into …
23rd March 2020
While the ECB’s extra €750bn in bond purchases has reduced financial market stress, governments also need to deliver a large fiscal response without triggering a fresh sovereign debt crisis. In our view, a good way to do so would be to adapt the ESM to …
20th March 2020
With the growth outlook deteriorating rapidly, the Bank of Thailand today became the sixth central bank in the region to cut interest rates this week. The 25bp emergency rate cut takes the policy rate to a new all-time low of just 0.75%. The decision to …
Big stimulus package from BoE has succeeded so far in easing some financial market stresses But with financial conditions still unusually tight, the Bank may need to do more The Bank may need to test out some new, extreme, tools The decisive action taken …
Norges Bank opens door to further rate cuts Harold Wilson famously said that a week is a long time in politics, and this week demonstrated that the same can be true for central banks. While policymakers everywhere have not exactly been sitting on their …
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
It’s been a long week. Rather than recount every twist and turn, we will highlight a few points that seem particularly worth making. First, the decline in GDP looks set to be even bigger than we had assumed. We now think that economy will shrink by about …
PM Modi, Governor Das take measured steps Both Prime Minister Modi and RBI Governor Das took cautious steps in their responses to the coronavirus outbreak this week. In his address to the nation last night, PM Modi announced a 14-hour self-curfew to take …
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
The big package of measures announced by the Bank of England today in its second emergency meeting in just over a week is designed to ease the stress in the financial markets and to support the recovery once the full economic hit from the coronavirus has …
19th March 2020
The Fed’s revival of financial crisis-era programs and a huge ramp-up in the pace of its open-ended Treasury purchases in recent days could help to stem some of the bleeding in financial markets. But with broader financial conditions still tightening, …
South African policymakers appear to have decided that the current grave economic situation requires a bold response, and have moved away from their traditional hawkishness. We expect that they will follow today’s 100bp cut with another 75bp of loosening …
Bank Indonesia cut interest rates today, but the slump in the rupiah in recent days means policymakers in the country will need to act more cautiously than other central banks in the region over the coming weeks and months. Today’s 25bp rate cut takes the …
In response to the rapidly worsening outlook for the economy, Taiwan’s central bank (CBC) today cut its key policy rate today by 25bps to 1.125% and announced other measures to support the economy. However, with growth slowing sharply, further rate cuts …
While the Swiss National Bank left its key policy rate on hold at -0.75% this morning, it made all the right noises by making its exemptions to the banking sector from negative interest rates even more generous, and pledging to provide liquidity to the …
The Brazilian central bank’s (BCB’s) statement accompanying last night’s decision to cut the Selic rate by 50bp was surprisingly cautious and suggested that further easing isn’t on the cards. With the effects of the coronavirus on Brazil’s economy likely …
The ECB announced late yesterday evening a new €750bn programme of bond purchases which is intended to contain borrowing costs for southern economies. This gives it a lot more firepower which should help to contain financial stress in the near term, but …
The central bank in the Philippines is likely to ease further in the months ahead after opting to cut its main policy rate by 50bps today. The BSP has not yet introduced loan programmes or targeted support for financial institutions and businesses …
It has been a dreadful few weeks for India’s economy. This started with the release of GDP data showing that growth in Q4 slowed to its weakest pace since 2013. (See Chart 1.) And hopes of a near-term recovery have been well and truly snuffed out since …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
Activity data from January suggest that the economy was already contracting before the coronavirus reached South Africa. The outbreak will add to economic headwinds. Policymakers are likely to spring into action by cutting their key rate on Thursday, but …
18th March 2020
The turmoil in financial markets caused by the global spread of COVID-19 shows little sign of abating, despite policymakers’ efforts to contain the fallout. Our view remains that until evidence emerges that the spread of the virus is slowing down, risky …
17th March 2020
In response to the rapidly worsening outlook for the economy, Pakistan’s central bank (SBP) today slashed its key policy rate by 75bp to 12.5%. With growth likely to slow sharply this year and inflation set to fall back further, more rate cuts are likely. …
The Bank of England can’t prevent the economy from falling into recession. But like the Fed, we think it will soon throw everything in its policy arsenal at the coronavirus crisis to try to prevent the markets from seizing up and to reduce the risk of a …
While the New Zealand government’s large stimulus package will soften the blow from the coronavirus outbreak, it will not prevent a recession. As such, we still expect the RBNZ to launch quantitative easing in the coming weeks. The government today …
Last week’s ECB decision gave it more ammunition to combat the fallout from the coronavirus, but it will not be enough. We now think the Bank will soon make an explicit commitment to keep sovereign bond yields low for all governments at least for the …
16th March 2020
The RBI announced some measures to boost bank liquidity in a hastily-arranged press conference today but disappointed the bond market by not lowering policy rates. With the coronavirus a growing threat to domestic activity, we think rates will be trimmed …
The Fed’s decision to slash interest rates to near-zero won’t stop the economy falling into a recession, but the package of liquidity-boosting measures will help prevent credit markets seizing up, reducing the risks a deeper downturn. We expect the Fed to …
The Bank of Korea today finally responded to the coronavirus outbreak by cutting the policy rate by 50bp and introducing a number of other measures to ease financing constraints. Further measures, including the adoption of quantitative easing, are now …
Drop in WPI inflation increases rate cut chances amid virus threat The drop in wholesale price inflation in February is an added source of comfort for the RBI following the fall in CPI inflation last month. We think it will follow its global peers by …
The measures announced by the Bank of Japan today lack teeth and we still expect policymakers to cut the short-term policy rate over the coming weeks. The Bank of Japan brought forward the meeting scheduled to end on Thursday to today but decided not to …
New comprehensive restrictions on travel mean that both Australia and New Zealand are headed for recession. We expect the Reserve Bank of New Zealand to follow up today’s emergency 75bp rate cut with quantitative easing before long. And the Reserve Bank …
Norges Bank and Riksbank are ruling nothing out After a bruising week for equities and the Norwegian krone, it is half-encouraging that the Nordic authorities are all singing off the same hymn sheet. Nonetheless, policymakers will not be able to prevent …
13th March 2020
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
The Fed has already slashed interest rates and flooded the markets with liquidity, but it will have to go further in the coming weeks, with a return to near-zero interest rates and a resumption of large-scale quantitative easing now likely . Following the …
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
The measures unveiled by the ECB today were as substantial as expected. But, along with Ms Lagarde’s comments, they underlined that the ECB has little firepower left, that there has been no coordinated fiscal response, and that the Bank is reluctant to …
12th March 2020
Fed to follow last week’s emergency cut with another 50bp reduction next week Fed funds rate likely to return to near-zero bound at April policy meeting Plans to slow pace of balance sheet expansion to be abandoned We expect the Fed to cut interest rates …
11th March 2020
