Filtered by Topic: Monetary Policy Use setting Monetary Policy
At the start of the year, we were a lone voice forecasting that the Australian dollar would decline to US$0.65 by year-end. The Australian dollar has come under increasing pressure this month on a number of fronts. Trade tensions have continued to ramp up …
2nd September 2019
More mixed signals A few less-closely followed data releases this week presented mixed messages for the Bank of Canada ahead of its meeting next week. The first was new home sales data for Toronto and Vancouver. In Toronto, sales were up by a substantial …
30th August 2019
Dire Swedish data run goes On and On and On The fourth consecutive fall in the Swedish Economic Tendency Indicator continued the recent run of poor data releases. The indicator fell in August to its lowest level since June 2013 and the broad-based …
Bond market rally complicates life for ECB More policy loosening is on the way in the euro-zone, but it will not be supported by all of the ECB Governing Council. After holding his tongue for several months, Bundesbank boss, Jens Weidmann, said this week …
Mozambique: Debt deal is only the first step Even if bondholders agree to the government’s bond restructuring deal – as recent signs suggest they will – Mozambique’s debt problems will be far from over For one thing, the deal only covers the US$727mn …
RBI capital transfer will strengthen fiscal position… The RBI’s announcement this week that it would transfer a record dividend to the finance ministry in the current fiscal year on the recommendation of a panel study has a number of important …
Korea 2020 budget boost Korea’s proposed budget for 2020 includes a large fiscal boost, which should partially offset the external headwinds facing the economy. The draft budget will be submitted to the National Assembly next week and envisages an …
The Bank of Korea sounded more bearish on the outlook for the economy even as it left rates on hold today. As such, we continue to expect more easing this year, with another 25bps cut in October. Today’s decision followed the first rate cut in three years …
Healthy Q2 GDP growth and at-target inflation to keep Bank on hold next week Downside risks to the outlook have increased Bank to cut interest rates in October We expect the Bank of Canada to present a more dovish policy statement next week, setting the …
28th August 2019
Given the deep downturn in the tourism sector, this morning’s decision by the Central Bank of Iceland (CBI) to cut interest rates by a further 25bps came as no surprise to us. We think that policymakers will continue the easing cycle at the next meeting, …
Kenya’s drought will probably push inflation above the CBK’s target range in Q4. But bank will likely look through this spike, as it did in 2017. We think the next rate move will be a 50bp cut in Q4 2020. Inflation picked up again in July, rising from …
RBA to leave rates unchanged in September But renewed increase in unemployment should prompt the Bank to cut in November Conditions need to deteriorate much further for RBA to launch QE The Reserve Bank of Australia hasn’t learned much on the state of the …
27th August 2019
Despite the poor global outlook, GDP growth across Emerging Asia actually picked up slightly in the second quarter, and our forecast is for a further gradual recovery over the remainder of the year and into 2020. (See here .) One of the key risks facing …
26th August 2019
Philippines budget: three key takeaways Earlier this week the government in the Philippines unveiled its budget plans for next year. There are three key points worth highlighting. First, while the government has been touting the boost to economic growth …
23rd August 2019
The Egyptian central bank cut its overnight deposit rate by a larger-than-expected 150bp last night (to 14.25%) and with inflation likely to fall further in the coming months, much more easing lies in store. We have revised down our year-end forecast to …
The Central Bank of Sri Lanka (CBSL) cut rates today, but given our view that the rupee will come under pressure again this year, we think this will probably mark the last cut in 2019. Today’s decision by the CBSL to cut both its deposit and lending rate …
The account of the Governing Council’s July meeting shows that there was broad support for further policy easing in September and perhaps for a change to the inflation target fairly soon. It leaves us comfortable with our forecast for a 10bp deposit rate …
22nd August 2019
Despite the recent weakness of the rupiah, Bank Indonesia (BI) today cut its benchmark interest rate for the second consecutive month to 5.50% and hinted that further easing is on the horizon. But the uncertain outlook for the currency means any further …
The minutes of the Reserve Bank’s August policy meeting suggest that the MPC’s larger-than-expected rate cut was intended in part to send a dovish signal rather than simply being a case of “front-loading” loosening. This supports our view that further …
While the Swedish krona and the Norwegian krone are now near the record lows they reached against the euro in 2008-09, we think that monetary policy and rising risk aversion will push them down further. The Swedish and Norwegian currencies have …
21st August 2019
Quasi-rate cut still leaves the PBOC with work to do The newly revamped Loan Prime Rate (LPR), intended to replace the traditional benchmark lending rate as the reference point against which banks price loans, was launched today. The one-year LPR was set …
20th August 2019
A long-awaited shake-up of how China’s banks price loans should in time give policymakers much finer control of bank lending rates and could open the door to a quasi-rate cut as soon as tomorrow. But it won’t immediately clear the roadblocks that have …
19th August 2019
While the imminent change in leadership at the Central Bank of Iceland (CBI) is unlikely to affect its current easing bias, the new Governor will have a bigger role in shaping policy than his predecessors. Having been named as the new Governor of the …
Argentine debt default becoming inevitable The Argentine peso has stabilised over the past few trading days but the collapse earlier this week has made a sovereign debt default highly likely. At the risk of blowing our own trumpet, recent events have left …
16th August 2019
Whereas an inverted yield curve has been a good indicator of US recessions, the UK yield curve is less reliable. The US treasury yield curve has inverted before all five US recessions in the past five decades, with only one false positive. Over the same …
Further loosening still likely in near term In a wide-ranging interview with the Economic Times published this week, Prime Minister Modi commented on several economic issues. Plenty of emphasis was placed on the measures taken to revive economic growth …
Reiwa celebrations or pre-tax spending rush? The preliminary estimate of Q2 GDP showed a strong 0.4% q/q increase in output. One of the drivers was a 0.6% q/q jump in private consumption. Much of the media coverage has attributed this to consumers …
While this morning’s decision by the Norges Bank to leave its key policy rate unchanged at 1.25% was in line with expectations, the dovish shift in its tone suggests that the last bastion of hawkishness among advanced economies has fallen. In contrast to …
15th August 2019
Having seen investors move in line with our previously uber-dovish view on Swedish interest rates in recent months, we now expect the Riksbank to cut the repo rate to -0.50% by the end of the year. With news on the economic front going from bad to worse, …
14th August 2019
Rebound in WPI inflation still on the cards Wholesale price inflation is not the preferred measure of inflation for India’s policymakers but even so, the weakness in the headline rate in July increases the likelihood of another rate cut at the RBI’s next …
An official from the Monetary Authority of Singapore (MAS) today confirmed that it is not considering an unscheduled policy adjustment, but given the poor outlook for the economy loosening in October is still very likely. Singapore’s Ministry of Trade and …
13th August 2019
Argentina elections: your primer on the primaries Argentine markets are likely to take their cue from the outcome of Sunday’s primary election when they open next week, but the vote doesn’t always foreshadow the presidential election outcome. Argentina’s …
9th August 2019
No end in sight to the downturn in Sweden The latest data releases for June from Sweden show that the flash estimate of a contraction in the economy in Q2 was no rogue reading. We learned on Tuesday morning that private sector production fell for the …
The statement accompanying the decision by Peru’s central bank to cut interest rates left the door open for further easing. And with the incoming growth and inflation data still weak, there is a window for further rate reductions. We’ve pencilled in 50bp …
Norges Bank to raise rates in September, but this will be the end of the tightening cycle. It is now a question of when, not if, the SNB cuts rates further into negative territory. Expected dovish shift by the Riksbank will ensure that the krona stays the …
8th August 2019
Today’s 25bp cut from the central bank in the Philippines (BSP) came as no surprise, and with inflation set to fall back further and growth only likely to stage a moderate recovery over the coming months, we expect another 25bp cut before the year is …
Escalation of crisis would have limited impact The Indian government this week revoked a long-standing constitutional provision that granted special autonomy to the state of Jammu & Kashmir. The measures will split the state into two separate “union …
RBNZ cuts while RBA holds In Australia, the RBA kept rates on hold at 1.0% this week, as widely expected. But the Bank acknowledged that the uncertainty generated by the trade war had increased and noted that it would “ease monetary policy further if …
Headline inflation is likely to have remained below the RBI’s 4.0% target in July and will be used by the central bank as vindication of its decision to reduce interest rates for the fourth consecutive meeting yesterday. But with policy now being loosened …
Yen climbs to 17-month high against dollar Two months ago we predicted that the US would eventually impose tariffs on all imports from China. (See here .) Indeed, President Trump announced last week that he will impose an additional 10% on the remainder …
The Reserve Bank delivered a (slightly) larger-than-expected rate cut today and has left the door open for further easing. If soft surveys are correct in suggesting that there is limited slack in the economy, further policy loosening could lead to higher …
7th August 2019
The Reserve Bank of New Zealand cut rates dramatically to 1.0% at today’s monetary policy meeting. But given our more pessimistic forecasts of the New Zealand economy, we don’t think that the Bank is done easing and now expect it will cut rates again in …
While Japan’s government will almost certainly refrain from direct intervention on the foreign exchange markets to stem the recent appreciation of the yen, we can’t rule out that the government’s pension fund will buy more foreign assets. The key point …
6th August 2019
The RBA adopted an easing bias when it left interest rates unchanged today. With the labour market set to loosen further, we expect the Bank to slash rates to 0.5% by early-2020. The RBA’s decision to leave interest rates unchanged at 1.0% was correctly …
Strength in the labour market won’t last long The sharp fall in the unemployment rate is unlikely to prevent the RBNZ from cutting rates tomorrow given that labour market data are volatile and often prone to revision. What’s more, we expect the …
Investment growth collapsed to a near four-year low in Q1. While a spectacular rebound will remain elusive, investment should recover gradually over the coming quarters as election-related uncertainty clears and funding costs drop following the RBI’s cuts …
5th August 2019
Despite cutting rates by 25bp this week, the Fed gave no indication that it is lining up another cut soon or that this will mark the start of the extended easing cycle investors are hoping for. But with President Donald Trump’s subsequent move to …
2nd August 2019
Swedish economy to flirt with recession… The 0.1% q/q fall in Swedish GDP in Q2 is unlikely to be the final word on the matter given that the data are almost certain to be revised in September. (See here .) Nonetheless, the release adds to signs that the …
MPC living in an alternative reality In our latest UK Economic Outlook , “ An economic multiverse ” (16 th July) , we set out the different paths politics could send the economy down. The MPC took a different approach this week, forecasting an alternative …
Hopes of strong rebound dashed Data released this week provide further evidence that the economy is performing below capacity. Admittedly, house prices appear to be bottoming out. Average house prices in the eight capital cities edged up in July. What’s …
