Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Egyptian central bank’s decision today to keep interest rates on hold (rather than cut them) reflected policymakers’ concerns about the inflationary impact of upcoming subsidy cuts. But with inflation likely to drop back, we think that the easing …
23rd May 2019
Today’s MPC statement strengthened our view that policymakers at the SARB will cut rates soon. Indeed, a shift in opinion on the council has led us to move our forecast of a 25bp cut forward to July’s meeting. … South Africa: Rates on hold, but cuts …
The account of the ECB’s latest monetary policy meeting confirms that policymakers were concerned about downside risks to economic activity and, particularly, inflation. This reinforces our view that the Bank is likely to seek ways to provide more policy …
The economy is performing better than the Bank of Canada previously expected, but the outlook remains challenging. We expect the Bank to keep policy unchanged next week and anticipate another fairly dovish policy statement. … Bank to remain cautious …
The outlook for Lebanon’s economy is going from bad to worse. The most immediate threat is that the country could find itself caught in the crosshairs amid escalating tensions between the Gulf countries and Iran. One possible outcome is that Lebanon faces …
22nd May 2019
The reaction to Theresa May’s “new” Brexit deal suggests that the chances of a deal have fallen and the chances of another delay, a no deal, no Brexit and/or a general election have all risen. It’s hard to build this into our forecasts, but the risk is …
The recent fall in financial market measures of inflation expectations may be a bit misleading, and is not matched by a comparable fall in households’ inflation expectations. But it is nonetheless another reason for the ECB to keep policy ultra-loose, or …
The Central Bank of Iceland’s decision to cut interest rates by 50bp to 4.00% came as a surprise. While it was prompted by a deterioration in the economic outlook, inflation expectations remain high and wage growth is strong. Given that the economic …
Nigerian policymakers voted to hold their key rate at 13.50% today, but the governor’s suggests that they will continue to loosen policy later this year. The governor frequently stressed the need for stimulus, and we think that economic growth will remain …
21st May 2019
A policy rule suggests that for the time being the financial markets may be justified in taking a relatively sanguine approach towards the risk of rising interest rates. But should a Brexit deal be reached and the political uncertainty diminish, this …
Exit polls signal that Prime Minister Modi’s BJP and its coalition partners in the National Democratic Alliance have won India’s election. Admittedly, exit polls have been wrong in the past, not least in underestimating the strength of the BJP’s victory …
The RBA has made it clear that quantitative easing is its preferred tool once interest rates reach the effective lower bound. But we suspect that the Bank would first cut interest rates from their current level of 1.5% to 0.5% or lower before QE is …
Concerns about high inflation and the country’s large current account deficit mean today’s 150bp rate hike by Pakistan central bank (SBP) is unlikely to be the last in the current tightening cycle. … Pakistan hikes rates again, further tightening to …
20th May 2019
President Donald Trump clearly isn’t the only one hoping that the Fed will ride to the rescue amid the escalating trade dispute with China, with the markets now convinced that interest rates will be cut before the end of this year. We agree that the Fed …
17th May 2019
We suspect that the weather-related weak patch in Norwegian activity in Q1 will prove temporary. Meanwhile, following the recent flare-up in trade tensions and the Swedish Riksbank’s dovish shift, we have revised down our forecast for the krona. And as …
The recently announced cut to the reserve requirement ratio in the Philippines should provide a boost to economic growth and suggests that further cuts to the policy rate are likely soon. Meanwhile, the rupee came under pressure this week after Pakistan …
Employment growth has picked up over the last couple of months, but with the labour force expanding even faster the unemployment rate has started to rise. With GDP growth below potential and underlying inflation well below target, we suspect that will be …
This month’s escalation of US-China trade tensions and renewed concerns about Argentina and Turkey’s economic vulnerabilities have clear parallels with 2018, when these same factors triggered a sell-off in most EM assets. But there are important …
16th May 2019
Bank Indonesia (BI) left rates unchanged at 6.0% at its meeting today and hinted that it may consider loosening policy over the coming months. However, with the rupiah likely to lose more ground against the US dollar this year, we continue to expect …
President Trump’s claim that the PBOC will loosen policy in the months ahead may prove accurate, but this will be a justified response to a weaker economy and not a direct retort to tariffs. And while the Fed is likely to deliver rate cuts in time, this …
15th May 2019
Brazilian inflation has probably now reached a peak and the headline rate should fall below the central bank’s target in the coming months. With core inflation still extremely soft, the central bank is likely to keep the Selic rate unchanged at its …
14th May 2019
If the next downturn is a mild, cyclical one we would expect the Bank of Japan to cut its short-term policy rate but leave its 10-year yield target unchanged. Fiscal stimulus would probably have to do the heavy lifting. In the event of a severe downturn, …
The Turkish central bank (CBRT) seems to have become more inclined to use its foreign exchange reserves to support the lira, despite growing scrutiny about the level of reserves. Growing question marks about reserve coverage are likely to damage the …
13th May 2019
This Briefing is a reference guide with our latest views and forecasts for Saudi Arabia’s economy, including the prospects for key macroeconomic and financial market variables such as gross domestic product, wages, the exchange rate and interest rates. …
The Norges Bank held interest rates on hold at 1.00% at its meeting on Thursday but signalled that it will “most likely” resume its tightening cycle at the next meeting, in June. Meanwhile, the minutes from the Riksbank’s April policy meeting further …
10th May 2019
While the major advanced economy central banks have made no significant policy changes in recent weeks, a key theme has been a continued shift in their forward guidance to imply that interest rates will stay lower for longer. … Tweaks to forward guidance …
The RBA left rates on hold this week while the RBNZ cut. That’s odd as the case for a rate cut looks much stronger in Australia. In any case, we think that rates will need to fall in Australia as well, not least because fiscal policy may soon become …
The Reserve Bank of Australia’s (RBA) Statement on Monetary Policy (SMP) sounded a little more upbeat than the statement issued after the Bank kept rates on hold on Tuesday. We still think that the Bank is too optimistic about the outlook and that rates …
Euro-zone GDP growth was stronger than expected in Q1, at 0.4% q/q, but we suspect that it will slow again in the coming quarters. Activity was flattered by the comparison with a weak end to 2018 and construction was boosted by unusually good weather. …
9th May 2019
The central bank in the Philippines (BSP) cut interest rates by 25bp today, and further interest rate cuts seem only a matter of time. Given the subdued outlook for inflation and the dovish nature of today’s comments from the BSP, policy easing this year …
Today’s decision by the Norges Bank to leave its policy rate on hold at 1.00% is just a brief pause in its tightening cycle, with another hike now almost certain in June. With core inflation set to remain above target this year, we have a further rate …
Copom’s statement from last night’s meeting highlighted that policymakers are not troubled at all by the recent jump in inflation and, rightly in our view, see it as temporary. If anything, they are more concerned about the weakness of the activity data. …
The slowdown in credit growth last month underlines the need for further monetary policy easing in order to keep credit expanding fast enough to provide a floor to economic growth. … Bank Lending & Broad Credit …
If the ECB re-starts QE next year, as we think is likely, the resulting upward pressure on the Swiss franc would stoke deflationary fears at the Swiss National Bank (SNB) and prompt a policy response. We expect the SNB to step up its currency …
8th May 2019
Despite the downbeat outlook for Thailand’s economy, the central bank (BoT) left interest rates unchanged at its meeting today. Continued concerns over risks in the financial sector mean that it is unlikely to join other central banks from the region in …
We expect policymakers in Norway, Switzerland, Iceland, and Sweden to all leave interest rates unchanged at their next policy meetings over the coming weeks and months. In the case of the Norges Bank, we suspect that this will just be a pause in its …
Subdued economic growth and a softening labour market mean that today’s interest rate cut by the Reserve Bank of New Zealand will be repeated before the year is out. … New Zealand - RBNZ will cut again before the year is …
This Briefing is a reference guide with our latest views and forecasts for the Euro-zone economy, including the prospects for key macroeconomic and financial market variables such as gross domestic product, wages, the exchange rate and interest rates. … …
7th May 2019
This Briefing is a reference guide with our latest views and forecasts for the UK economy, including the prospects for key macroeconomic and financial market variables such as gross domestic product, wages, the exchange rate and interest rates. … United …
With economic growth likely to remain weak throughout 2019, today’s 25bps rate cut by the central bank in Malaysia (BNM) is likely to be followed by further easing later in the year. … Another cut likely in Malaysia before …
The Reserve Bank of Australia made only the slightest downward revisions to its forecasts when it left interest rates unchanged at 1.50% today. But it noted that further improvements in the labour market will be needed for meeting its inflation target, …
Headline consumer price inflation is likely to have risen in April due to another pick up in food inflation. However, it will have remained below the RBI’s 4.0% target. That will be enough to prompt the central bank to cut policy rates again, perhaps as …
President Trump has threatened an imminent expansion of tariffs against China. We expect this to result in stronger headwinds to growth, more policy easing, a weaker renminbi and a stock market rout. … Four implications of the re-escalation in trade …
6th May 2019
Bank lending to small firms should receive a sizeable boost from the planned reduction in the required reserve ratio for many rural banks, pushing up overall bank loan growth in the process. While this won’t provide an immediate prop to growth, it should …
President Donald Trump was at his trolling best earlier in the week when he tweeted shortly before the FOMC meeting that the Fed should cut interest rates by 1% point and restart quantitative easing. But the incoming data suggest he might just have a …
3rd May 2019
This Briefing is a reference guide with our latest views and forecasts for Turkey’s economy, including the prospects for key macroeconomic and financial market variables such as gross domestic product, wages, the exchange rate and interest rates. … …
The most surprising news from the Bank of England’s Inflation Report this week was not the suggestion that interest rates need to rise more quickly than the markets currently anticipate, but the strength of the message. Governor Carney was unusually …
The Turkish central bank’s messaging to investors has become even more confused over the past week and the institution’s damaged credibility means that it will be even more difficult for policymakers to make the case for interest rate cuts in the future. …
Negative interest rates in Denmark, Switzerland, and Sweden impose costs on their respective banking sectors, but the overall burdens are very small – well below 0.1% of bank assets in all cases. Accordingly, concerns about these costs will not prevent …
2nd May 2019
The interest rate hike at today’s monetary policy meeting probably marks the end of the Czech National Bank’s tightening cycle. While we think that the currency will fail to appreciate by as much as the central bank anticipates, weakness in the euro-zone …
