Filtered by Topic: Monetary Policy Use setting Monetary Policy
Investors have slashed their expectations for interest rate hikes in Sweden over the coming years and are now broadly in line with our previously well below consensus view. But while we now forecast the ECB to lower rates a little further into negative …
19th June 2019
Hopes that much looser monetary policy, particularly in the US, will prevent more weakness in the global economy have supported emerging market (EM) assets recently, but we doubt that this will last. … Monetary easing unlikely to drive a sustained …
Mr Draghi’s speech at the ECB’s conference this morning is the clearest indication yet that the Bank will cut interest rates and relaunch its asset purchase programme in the coming months if, as we expect, measures of inflation and inflation expectations …
18th June 2019
Wage growth has strengthened in several advanced economies despite the global economic slowdown. But, outside the UK, we do not expect this to prevent monetary policy loosening. Strong productivity growth has stopped higher wages stoking inflation in the …
The small interest rate cut that we now forecast by the ECB in December is unlikely to be matched immediately by Denmark’s Nationalbank (DNB). But given that upward pressure on the krone is now likely to build sooner than we previously thought, we expect …
Expectations that the US will soon start to cut interest rates have provided a boost to Asian currencies in recent weeks. But if we are right that slowing growth in the US and the escalating trade war will cause investors to become more risk averse, Asian …
The weakness of the Brazilian economy and rapidly falling inflation mean we now expect an interest rate cut, and we think there is a window of opportunity for Copom to act at next week’s meeting. Elsewhere, the outcome of this week’s political jostling in …
14th June 2019
The Central Bank of Russia’s dovish communications accompanying today’s decision to cut the key rate support our view that more monetary loosening lies in store over the coming quarters. We expect that the one-week repo rate will be lowered to 6.75% by …
The Swiss National Bank’s decision to leave its monetary policy settings unchanged on Thursday was something of a formality. But whereas some commentators have suggested that the Bank is out of ammunition, we think it is on course to cut interest rates …
The wholesale price index is not the preferred measure of inflation for India’s policymakers but, even so, the drop in the headline rate in May will be used by the MPC as further justification of its shift to a more dovish policy stance. … Wholesale …
The RBA has moved closer to our view that the natural unemployment may be as low as 4.0%. That means unemployment would need to fall considerably before wage pressures begin to emerge. And we think the unemployment rate is more likely to rise this year …
There isn’t much chance that the Monetary Policy Committee (MPC) will raise interest rates from 0.75% at its meeting on Thursday 20th June, but we expect the MPC will use the opportunity to repeat their warning from May that the markets are significantly …
13th June 2019
As expected, Swiss policymakers maintained their expansionary monetary policy at their June policy meeting. But the recent shift to a looser bias in the US and the euro-zone only strengthens our view that Swiss rates will be cut further into negative …
The past month has seen a significant change in tone from the world’s major central banks and in expectations of their policies. As fears over trade tensions have mounted and economic data have brought little evidence of the rebound in growth that many …
We expect a further slowdown in economic growth to eventually prompt the Fed to cut interest rates, particularly with underlying inflation muted. But it is hard to see that happening before the September FOMC meeting, even though markets have begun to …
12th June 2019
A looming slowdown in GDP growth and the prospect of rate cuts by the US Federal Reserve has prompted speculation that the BoJ will have to ease policy by the end of this year. However, the Bank remains concerned about the impact of low interest rates on …
The Turkish central bank provided further hints at today’s meeting that it is moving towards monetary easing. But policy moves will hinge on the lira and, with a number of flashpoints on the horizon, we think that the scope for rate cuts is limited. … …
Mr Draghi’s comments at the ECB’s press conference last week suggest that the Governing Council is gearing up to loosen monetary policy a bit earlier than we had anticipated. We now think it will shave the deposit rate from -0.4% to -0.5% by year-end, and …
The risk of a recession is arguably higher in Canada than elsewhere and the low level of interest rates limits the ability of the Bank of Canada to respond. Even if the Bank utilises unconventional policy tools, any subsequent recovery would be slow if it …
10th June 2019
We think that the surprise decision by Chilean policymakers to cut the policy interest rate by 50bp on Friday night to 2.50% will prove to be a one off. Interest rates are likely to remain unchanged at their current level until the end of next year. … …
The rise in Russian inflation in late-2018 and early-2019 was driven largely by higher food prices and a VAT hike. To overcome these distortions, we’ve created a measure of ‘underlying’ inflation, which is currently in line with the central bank’s 4% …
Mexico has yet to strike a deal with the US to prevent tariffs being imposed on Monday, but one crumb of comfort is that (so far at least) financial conditions haven’t tightened significantly. Elsewhere, Brazil’s pension reform is nearing the next stage – …
7th June 2019
President Draghi’s comments at this week’s press conference were consistent with our view that the ECB will eventually re-start its QE programme. Meanwhile, Italy looks set for another collision with the EU, which we expect to push bond yields higher. … …
Headline CPI inflation is likely to have remained below the RBI’s 4.0% target in May, which will be used by the central bank as vindication of its change to a more dovish policy stance in yesterday’s policy announcement. But with policy now being loosened …
Our forecast that the housing downturn would weigh on economic activity and force the RBA to cut rates was proven right this week. And given recent data suggest there is considerable spare capacity in the economy, we believe the RBA will have to reduce …
The measures announced by the ECB today were underwhelming, but policymakers have been considering how to respond to any further economic weakness. All the signs are that they would favour more QE. This is consistent with our view that they will re-launch …
6th June 2019
The RBI cut interest rates at a third consecutive meeting today. Arguably more important, it laid the groundwork for continued loosening in the second half of the year. If soft surveys are correct in suggesting that there is limited slack in the economy, …
Some of Australia’s banks have lowered mortgage rates by less than the reduction in the RBA’s cash rate. That’s hard to justify in light of the recent fall in funding costs. We think that mortgage rates will fall by 80bp if the RBA cuts rates to 0.75% as …
5th June 2019
The Fed’s conference this week on monetary policy strategy has put central banks’ frameworks back in the spotlight. But even the more radical options being discussed, such as price level targets, are essentially just tweaks to the existing framework. In …
4th June 2019
We think that today’s 25bp rate cut may be followed by two additional rate cuts before the year is out. Combined with renewed falls in iron ore prices, that suggests that the Australian dollar may weaken again before long. … RBA may have to cut rates to …
Dovish comments from the South African Reserve Bank this week support our view that an interest rate cut is likely to come as soon as July. Elsewhere, the drop in Kenyan inflation in May backed up the Central Bank of Kenya’s earlier decision to look …
31st May 2019
The Central Bank of Sri Lanka (CBSL) was able to cut rates today as a result of the resilience of the currency, but we doubt this will last. We think that the rupee will come under pressure again this year, limiting the scope for further loosening. … Sri …
Signs that Philippines inflation continued to tumble in May suggest that the easing cycle there has further to run. Meanwhile, easing is also likely in Malaysia, Korea and Singapore in the second half of this year, despite all three countries recently …
The Bank of Korea (BoK) kept its main policy rate on hold today in the face of a clear cut case for looser policy, but we think it will eventually change its stance. With the Bank likely to be looking back at a second quarter of disappointing growth at …
Policymakers are likely to make two significant changes at their meeting next Thursday. They will probably announce that they expect to leave rates at present levels until at least mid-2020, rather than just to the end of this year as per current …
30th May 2019
The MPC is likely to use the current low rate of headline inflation as justification for a third consecutive rate cut at the conclusion of its policy meeting on Thursday 6th June. But with a growing perception that the central bank is allowing its control …
The raft of GDP data released this month showed that regional growth slowed to just 0.3% y/y in Q1 (from 1.0% y/y in Q4), the weakest pace in two years. While it doesn’t look like sluggish growth will prompt an immediate shift towards interest rate cuts, …
29th May 2019
The Bank of Canada today argued that the recent economic slowdown has been largely due to temporary factors, but that growing global trade tensions mean that “the degree of accommodation being provided by the current policy interest rate remains …
Emerging Europe has been one of the few parts of the emerging world where attention has centred on monetary tightening (rather than loosening) in the past month. A rise in core inflation to multi-year highs has prompted talk of rate hikes in Poland, …
With the trade war between the US and China continuing to escalate, a clear winner is starting to emerge: Vietnam. Since around the middle of last year, Vietnam’s exports to the US have shot up by around 50% in seasonally-adjusted terms, as US demand has …
We expect the current housing downturn to end around the turn of the year. We think that house prices may rise by 3% from their trough in 2020 and by 5% in 2021. While rising house prices should boost consumption growth, the drag on dwellings investment …
The Reserve Bank of Australia (RBA) has telegraphed that it will cut interest rates to 1.25% in June and we think it will follow up with another 25bp cut in August. But we suspect that further easing will be needed to lift GDP growth towards potential and …
28th May 2019
Growth slowed sharply in Emerging Asia last quarter, and is likely to remain fairly weak over the coming year, with looser fiscal and monetary policy unlikely to offset the drag from weaker global demand. … Weakest growth in a decade, further weakness …
27th May 2019
The domestic headwinds that have caused China’s economy to slow over the past year are abating thanks to the policy support that has put a floor under credit growth and fuelled local government spending. But policymakers are still concerned about credit …
24th May 2019
The slump in the US activity surveys in May and the big drop in oil prices this week add to the reasons to expect the Bank of Canada to maintain a cautious tone at its meeting next week. … More reasons for the Bank to remain …
Central banks in South Africa and Nigeria left policy settings unchanged at their meetings this week but the accompanying communications supported our long-held view that interest rates will be cut later this year. In fact, we have brought forward our …
Steps taken this week by Turkish officials to shore up the lira could be the first move towards the imposition of capital controls, but if anything these are likely to store up larger falls in the currency. Elsewhere, comments this week from the Russian …
While the trade war has dominated the headlines, the People’s Bank has been getting on with the unglamorous work of financial reform. It is moving closer to phasing out benchmark lending rates. That probably won’t be enough to lower bank lending rates, as …
Proposed changes by Australia’s bank regulator will increase the maximum loan size for some borrowers. While that is unlikely to bolster housing demand much at this stage, as the RBA lowers interest rates the effect should become more pronounced and …
The Colombian peso has been the worst performing EM currency so far this month and we expect it to fall by another 8% or so against the dollar by year-end. The resulting rise in inflation is likely to prompt more interest rate hikes than most currently …
23rd May 2019
