Filtered by Topic: Monetary Policy Use setting Monetary Policy
Next week’s FOMC meeting is likely to be a low-key affair, with the resilience of the recent economic data and the Phase One trade deal justifying the Fed’s decision to bring its recent rate cutting cycle to a halt last October. This week brought …
24th January 2020
There’s been a few U-turns this week with the most striking happening in the markets expectations for interest rates. In early January, the markets were pricing in just a 5% chance of interest rates being cut from 0.75% to 0.50% at next Thursday’s …
The show must go on If it weren’t for constitutional limits on holding snap elections, Norway would be heading to the polls this year after a rift over policy led the far-right Progress Party (PP) to pull out of the current four-party coalition government …
January’s decision whether to cut rates is very close We think that the MPC will keep rates on hold as the economy appears to have turned a corner We expect the next move in interest rates to be up rather than down, albeit not until 2021 January’s …
New coronavirus a threat to tourism The Wuhan coronavirus has now spread across China and to most neighbouring countries, including Japan. China has been much more proactive in trying to contain the disease than it was with SARS. But China is also much …
Upbeat labour market may delay rate cut The labour market has remained solid despite subdued economic activity. Employment rose by 28,900 in December, far exceeding analysts’ expectation of a mere 10,000 pick-up. The unemployment rate fell for the second …
Strong inflation should mark the end of the RBNZ’s easing cycle The strong rise in headline inflation from 1.5% in Q3 to 1.9% in Q4 should be enough to prevent the RBNZ cutting rates in February. And given that we now expect a strengthening in economic …
23rd January 2020
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
If President Donald Trump were to win a second term, we’d expect both fiscal and monetary policy to remain loose, amid a push to install a more dovish Fed Chair in 2022. There would also be an upside risk of a second, smaller round of deficit-financed tax …
The ECB left its policy settings unchanged today, made little change to its assessment of the economic outlook and said nothing new about the strategy review. While the markets are pricing in no policy changes this year, we still suspect that the Bank …
This morning’s decision by the Norges Bank to leave its key policy rate on hold at 1.50% was widely expected. We suspect that the Bank will leave rates on hold until 2022 though, if anything, our forecast for oil prices to rise suggests that the balance …
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but kept the door open to further cuts. With the economy struggling, inflationary pressures low and the rupiah continuing to appreciate against the US dollar, we think further easing is …
Fall in unemployment gives RBA breathing space The fall in the unemployment rate to a nine-month low shows that monetary and fiscal stimulus is starting to work and reduces the pressure on the RBA to cut interest rates. The 28,900 rise in employment was …
We are not convinced the Bank of Canada made a sharp dovish turn today as many suggest. As the data are likely to surprise the Bank to the upside before its next meeting, we continue to see it on hold in 2020. The initial reactions to the policy statement …
22nd January 2020
The Fed’s recent asset purchases and repo auctions have reversed more than half of the earlier quantitative tightening. Even so, it is the Fed’s interest rate cuts that have been the far more important factor driving money & credit aggregates . (See Chart …
Improving data, fading trade and global risks remove need for further rate cuts Policy unlikely to be tightened again for foreseeable future Shelton, Waller nominations a sign of things to come if Trump wins second term Signs of improvement in the …
We think growth and inflation will be below consensus in Switzerland and the Nordics this year. Switzerland is most exposed to the prolonged manufacturing recession in Germany and inflation there is likely to be close to zero. Meanwhile, we think the …
Bank Negara Malaysia (BNM) today cut its policy rate from 3.00% to 2.75%, and with growth set to slow further over the next couple of quarters, we think the central bank will ease policy again later this year. Only two of the 26 analysts polled by …
Gradual recovery to follow rebound in Q4 GDP growth rebounded more strongly than expected at the end of last year, and the economy should continue to stage a recovery over the coming quarters. The strong outturn in Q4 means we no longer think that the …
We suspect that interest rates will neither go up nor down this year! But the markets may be caught out further ahead if, as we expect, a fiscal stimulus and easing in Brexit uncertainty results in interest rates rising above their current rate of 0.75% …
21st January 2020
While we have altered our forecasts for ECB policy this year, we are still more dovish than investors about the outlook for interest rates in the euro-zone. As such, we continue to think that government bond yields in the region will fall back and that …
Survey points to continued sluggish GDP growth The latest ECB Bank Lending Survey suggests that while consumer spending growth will maintain a steady pace, investment growth will weaken. It also implies that future TLTRO-III operations will be a little …
The Bank of Japan shocked no one in leaving its major policy settings unchanged today. And with obstacles to further easing high, the slight fall in capacity shortages we are expecting this year won’t be enough to push the Bank into cutting its policy …
PBOC on hold, for now The Loan Prime Rate (LPR) was unchanged in January. The one-year rate remained at 4.15% (both the Bloomberg consensus and our forecast was 4.10%), and the five-year rate stayed at 4.80%. The LPR replaced the PBOC’s traditional …
20th January 2020
2019 was truly an annus horribilis for India’s economy but there are green shoots of a recovery in the data from the very end of the year. Industrial production growth jumped in November. (See Chart 1.) Meanwhile, growth in new passenger vehicle sales is …
A flurry of weak data this week has sent money markets into a tailspin. But we suspect that the MPC will just about look past the Brexit and election related distortions and will probably hold off cutting interest rates. At the start of the year the …
17th January 2020
No easy choices for Swiss policymakers The re-inclusion of Switzerland on the US Treasury’s Monitoring List of potential currency manipulators this week did not come entirely out of the blue. Having only been taken off the list in May 2019, we predicted …
Russia: the taxman cometh (but may giveth) Russia has been gripped by political turbulence this week after President Putin announced a series of proposed constitutional amendments, which are expected to allow him to wield power once his presidential term …
In a surprise move, the Central Bank of Egypt (CBE) left interest rates on hold yesterday even though policymakers don’t seem to be worried by the recent rise in inflation. We think that the easing cycle will be resumed in the coming months and forecast …
FSA seeks to change behaviour of regional banks The Financial Services Agency’s (FSA) plans to allow regional banks to diversify into a wide range of business areas is another step in the right direction by Japan’s financial regular. FSA chief Endo …
Trade deal not great news for Australia Phase one of the US-China trade deal was signed this week which marks an end to the first phase of the trade war. (See here for detailed coverage.) It removes the downside risk of imminent further escalation which …
The Bank of Korea (BoK) left policy unchanged today, but with the economy struggling for momentum and price pressures set to remain weak, we expect the Bank to resume its easing cycle later this year. Today’s decision marks the second consecutive meeting …
There is no prospect of any change in policy at next week’s meeting… …but we are still forecasting more policy loosening later this year. Details of the scope and timetable of the strategy review may be revealed. At Christine Lagarde’s second meeting as …
16th January 2020
South African policymakers surprised the markets by cutting the repo rate, but with inflation set to rise there is limited room for further easing. We expect just one further 25bp cut. Policymakers at the South African Reserve Bank unanimously voted to …
The account of December’s ECB meeting confirmed that the Governing Council is content to leave monetary policy unchanged for some time. But it left the option of further easing on the table – an option that we think it will take up in the second half of …
The Turkish central bank (CBRT) cut interest rates by another 75bp today as policymakers bowed to pressure from President Erdogan for looser policy. More rate cuts are likely in the next few months. But the strong economic recovery will cause inflation to …
The Monetary Policy Committee’s decision on whether to cut rates in January rests on a knife edge and could go either way. The MPC must weigh up the weakness of the economy and low inflation in Q4 with the prospect that the election result, a Brexit …
The decision by the SNB to scrap its currency ceiling five years ago coincided with it slashing interest rates to a record low to reduce the attractiveness of holding Swiss francs. Alas, this ‘deterrence effect’ is not what it used to be: whereas the gap …
Overview – Australia’s house prices may rise by 8% this year but consumers are still reeling under high debt loads. With growth set to fall short of potential, we still expect unemployment to rise further which should weigh on wage growth and underlying …
We have argued for some time that a near-term interest rate cut is a strong possibility. The market has now come around to this view. While the decision is a toss-up, at least until we see the next batch of data, our hunch remains that interest rates will …
15th January 2020
Fourth-quarter GDP probably unchanged – vs Bank’s forecast of 1.3% gain But temporary factors largely to blame and business surveys point to rebound Bank to remain on hold throughout 2020 Next week the Bank of Canada is likely to once again trim its …
The prevailing view that this will be the year when Brazil’s recovery finally shifts up a gear looks overly optimistic. We expect that GDP growth will come in at just 1.5% over 2020, which leaves us close to the bottom of the consensus range. ‘This year …
14th January 2020
Headline WPI jumps to highest in seven months The RBI doesn’t put much weight on the wholesale price measure of inflation, but the fact that it accelerated to a seven-month high in December nevertheless supports our view that the rate-cutting cycle is now …
Consumption hasn’t fallen too much after tax hike and labour market remains tight We still expect GDP growth to fall short of expectations this year But lingering capacity shortages will probably convince Bank to remain on hold The Bank of Japan will …
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
13th January 2020
Five years after the so-called Frankenshock, the SNB is near the end of the road for conventional monetary easing. Accordingly, the Bank may be forced to make another radical policy choice if there is a substantial appreciation in the franc in the coming …
We expect most of the 2020s to be characterised by slow growth and very low inflation as persistently weak productivity growth leaves the developed world looking distinctly Japanese. But technological developments should ultimately bear fruit and we …
10th January 2020
Capacity remained tight in Q3 The Bank of Japan has signalled that it would not loosen policy in response to a temporary slowdown in demand as long as capacity shortages remained pronounced. Data released this week show that this was indeed the case on …
The recent rise in inflation to multi-year highs across most of Central Europe has only a little further to run, but it will stay above central banks’ targets across the region this year. Policymakers will probably look through this and keep interest …
9th January 2020
Overview – After a year to forget in 2019, a combination of policy loosening and more effective measures to deal with the malaise in the shadow banking sector will push economic growth in India back up to a healthier pace in 2020. And with core inflation …
