Filtered by Topic: Monetary Policy Use setting Monetary Policy
The more dovish stance adopted by the ECB at its monetary policy meeting this week suggests that the upside risks to Nordic and Swiss currencies – particularly the franc – will intensify. Indeed, if Thursday’s announcement turns out to mark the start of …
8th March 2019
We remain more dovish than investors about the outlook for interest rates in the euro-zone. But we still think that “risky” assets there will perform badly this year, as slowing global growth takes its toll. … Market implications of the outlook for ECB …
The RBA appears to be confident that the labour market will continue to support growth. But this week’s disappointing GDP data suggests that the economic outlook will remain subdued for some time. If we are right, conditions in the labour market may soon …
Upcoming regulatory changes reported this week should help support an increase in bank profits and thereby neutralise one of the key arguments for why the Bank of Japan should reverse its ultra-loose policy stance. … Bank mergers to lift profits, trade …
There is a tension between the policy stimulus announced this week at the National People’s Congress and the government’s goal of keeping the debt ratio stable. Ultimately, we expect officials to err on the side of supporting growth. … On contradictions …
The more dovish than expected stance adopted by the ECB at today’s monetary policy meeting supports our view that the SNB will also keep rates lower for longer. And if the euro-zone economy disappoints as we expect, the SNB may find itself having to get …
7th March 2019
The ECB did more than expected today, announcing another round of TLTROs and pledging to leave policy rates on hold at least until next year. But with economic growth and inflation likely to remain lower than even its new forecasts there is a growing …
We are more dovish than investors about the outlook for monetary policy in most developed markets. If we are right, “core” government bond yields are likely to fall, or remain very low, this year. … Monetary policy likely to keep “core” bond yields …
6th March 2019
The Bank of Canada has finally pulled its head out of the sand and acknowledged that the deteriorating economy no longer justifies higher interest rates in the near term. Although the Bank still expects its next move to be a rate rise, we think that it …
World GDP growth was little changed at 3.1% annualised in Q4 as the euro-zone posted another modest expansion, US growth slowed from a strong pace and a pick-up in Japanese GDP offset part of Q3’s decline. But hard data for January have been disappointing …
The hawkish tone of the Turkish central bank’s recent communications meant that a rate cut was never likely at today’s meeting. But with inflation set to fall further in the coming months and the economy in dire straits, we suspect that an easing cycle …
Headline CPI inflation will have remained low in February even if, as we suspect, it rose a touch due to higher food inflation. As such, the RBI will almost certainly cut policy rates again, perhaps as soon as at its next meeting in April. But with core …
Subdued GDP growth in final quarter of 2018 sets the tone for softer growth this year. And given that the RBA has already adopted a neutral stance, we now suspect it may cut rates as soon as August. … GDP …
While there are mounting signs that a global downturn is underway, concerns about the impact of low policy rates on the health of the banking sector will probably prevent the BoJ from cutting its policy rates any further. Instead, the Bank’s response will …
5th March 2019
Bank Negara Malaysia (BNM) today left interest rates unchanged, but with price pressures very weak and growth set to slow, we think that rate cuts will soon come onto the agenda. … Rates on hold in Malaysia, but cuts are likely this …
The key takeaway from today’s policy announcements at the opening of the National People’s Congress is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate policy …
February’s drop in inflation to within the target range, and the appointment of a dovish new central bank (BSP) governor, increases the chance of a rate cut next quarter. But the surprise pick of Benjamin Diokno as governor may raise questions about the …
The RBA remained fairly confident when it left rates on hold today at 1.50% but we expect that as the data deteriorate this year the Bank will take a more dovish view. And before the end of the year the RBA will have to cut rates to stimulate the economy. …
One reason why we think the Monetary Policy Committee will raise interest rates further than most forecasters expect – assuming a Brexit resolution is reached – is decent pay growth. We think it will stay around 3.5% this year whereas the consensus and …
4th March 2019
EM inflation slowed to its weakest pace since the Global Financial Crisis in January and it will remain lower over the course of the year in most countries. This is likely to prompt policymakers to loosen monetary conditions. … EM inflation at …
Central bank independence seems to be increasingly under attack, raising fears that the success of central banks in anchoring inflation and inflation expectations in recent years could be reversed. We think that these fears are misplaced for developed …
The weaker-than-expected Turkey inflation data for February are unlikely to be enough to persuade the central bank to lower interest rates at its monetary policy meeting later this week. We expect the one-week repo rate to be left on hold at 24.00%. … …
House prices in the eight capital cities have now fallen 8.9% from their peak making the current downturn the largest in Australia’s modern history, and we expect prices to fall by at least another 6%. … CoreLogic House Prices …
1st March 2019
The ECB is likely to reduce its forecasts for economic growth at its meeting next week and to again stress that it has the necessary tools to respond if the recent slowdown worsens. But we think it will stop short of making any changes to its forward …
28th February 2019
The latest communications from advanced economy central banks imply that they have shifted away from a normalisation path towards closely monitoring incoming data to ascertain whether additional policy stimulus might be needed. Here, we outline the data …
Interest rate moves in Egypt and Tunisia this month highlighted the important role that balance of payments positions are playing in monetary policy decisions. In Egypt, tighter fiscal policy and the devaluation of the pound in late-2016 have contributed …
The Bank of Korea (BoK) left interest rates unchanged today at 1.75%, but sounded a little more worried than previously about the outlook for the economy. We are sticking with our view that interest rates will remain on hold for this year, but the risks …
Inflation has fallen across the region at the start of this year, and is likely to stay relatively soft in the coming months. One common driver of weaker inflation has been lower fuel inflation. But core inflation has also edged down in Mexico, Chile and …
27th February 2019
Given the weakness of the latest economic data, the Bank of Canada is set to remain on the side-line next week. It will probably reiterate that further interest rate hikes will eventually be needed, but we suspect that the Bank’s next move will be to cut …
The lesson from Turkey over the last few years is that it takes time for political pressure on the central bank to have negative macroeconomic consequences. With this in mind, while recent developments in India are worrying, we are more concerned about …
Fed Chair Jerome Powell reiterated the FOMC’s “patient” mantra in his testimony to Congress today, but we think the Fed is already done hiking interest rates. With GDP growth slowing below potential, we expect the Fed to end its balance sheet run-down …
26th February 2019
The weak incoming data mean that economic growth is on track to slow below its 2% potential pace this quarter. That kills off any remaining prospect of further Fed rate hikes and, with economic growth set to slow further later this year, we think the …
We have removed the single 25bp interest rate hike that we had pencilled in for Sweden this year, and forecast rates to remain unchanged at their current level into 2021. In fact, with risks to activity skewed to the downside, it is even plausible that …
The Reserve Bank of Australia (RBA) will almost certainly leave interest rates unchanged at 1.50% at its policy meeting on Tuesday 5th March. While the Bank should reiterate its view that inflationary pressures will continue to strengthen, our view is …
Next week is shaping up to be a busy one, when congressional testimony by the Fed’s Chair, the delayed publication of fourth-quarter GDP and the second Trump-Kim summit could all be eclipsed by the long-awaited delivery of the Mueller report into links …
22nd February 2019
Indonesia’s current account deficit should narrow this year, but not by enough to persuade the central bank to lower interest rates, as some analysts are now predicting. … Where next for Indonesia’s current …
The larger-than-expected fall in Mexican inflation in the first half of February, to 3.9% y/y, brings the headline rate back into the central bank’s 2-4% target range for the first time in almost two-and-a-half years and strengthens the case for interest …
The improvement in annual Swiss industrial production growth in Q4 suggests that the wider economy returned to positive quarterly growth at the end of last year. Nonetheless, while the data appear solid enough, they only add to the evidence that activity …
Data published over the past week provided further evidence that the region’s economies slowed at the start of this year. This, coming alongside lower inflation, has resulted in a dovish shift by central banks in parts of the region: Turkey’s central bank …
The minutes of the Reserve Bank’s 7 th February policy meeting – in which rates were cut – reveal a significant difference of opinion between MPC members on the outlook for core inflation. We share the view of the committee’s two dissenters that elevated …
The latest data paint a mixed picture of the performance of the Swiss and Nordic economies at the end of 2018, with signs of weakness in Switzerland and Sweden offset in part by robust quarterly GDP growth in Norway and Denmark. However, we think that GDP …
21st February 2019
The continued softness of Brazilian inflation up to mid-February, combined with the ambitious pension reform presented to Congress yesterday, will keep interest rate hikes off the table in the coming months. … Brazil IPCA-15 …
The Tunisian central bank hiked its key policy rate aggressively this week and we think that further steps will be needed to correct the country’s large economic imbalances. Meanwhile, the UAE has denied reports that ships will now be allowed to travel to …
Bank Indonesia (BI) left interest rates unchanged at its meeting today, and given the improved performance of the rupiah as well as the less hawkish tone of the central bank’s press conference, we are taking out the two rate hikes that we previously had …
The weakness of the latest inflation and economic activity data in many emerging markets, combined with growing expectations for looser monetary policy in the developed world, has prompted a dovish shift by many EM central banks. Policymakers in India and …
20th February 2019
Measures to loosen both fiscal and monetary policy announced this month could provide a small boost to demand in the near-term. The finance ministry made a clear bid in the interim budget to shore up support ahead of the general election with plans to …
The weaker-than-expected outturn for Swedish inflation in January underlines our view that the Riksbank will be in no rush to raise interest rates again. Indeed, with core inflation remaining stubbornly subdued, and increasing downside risks to economic …
19th February 2019
The weakness of the latest inflation and economic activity data in Chile means we now think that the central bank will pause its tightening cycle until next year (previously we expected 50bp of hikes this year). But, we still expect interest rate hikes in …
18th February 2019
As demand and supply would both drop after a no deal Brexit, it’s not obvious how policy should respond. But our view that the drop in demand would last longer than any fall in supply suggests the focus should be on stimulating demand. And even in the …
The Fed’s “patient” stance was originally a response to the deteriorating global economic and financial market backdrop, but the dreadful activity data and subdued inflation figures out this week provided further domestic evidence to justify that dovish …
15th February 2019
