Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Riksbank delivered a slightly more hawkish message than anticipated at its meeting this week, but we still think that the chance of an interest rate hike this year is falling. Meanwhile, despite Denmark and Finland both performing very well in Q4, we …
15th February 2019
Data released this week showing a pick-up in core inflation in Hungary and the Czech Republic support our view that, unless the activity figures take a sharp turn for the worse, central banks in both countries are likely to tighten monetary policy. …
With Germany having narrowly avoided recession and Italy’s downturn dragging on, policymakers at the ECB will soon have to provide more clarity about which tools they are willing to use if the economic data don’t improve. … China and Germany, another …
Concerns that policymakers in developed countries do not have the tools to fight the next downturn are generally misplaced. There is plenty more they could do. The constraints will instead be reluctance to prolong the adverse side-effects from the use of …
Weak business sentiment in Australia is likely to be another drag on private investment in 2019. And given the role the housing downturn is playing in sentiment, we expect things to get worse before they get better. In New Zealand, the RBNZ has followed …
Comments from Saudi Arabia’s Oil Minister that oil production will be reduced to well below its OPEC quota suggests that the authorities are focused on driving oil prices higher in order to prevent a return to growth-sapping austerity. Meanwhile, …
14th February 2019
The drop in headline wholesale price inflation in January was broad based, but underlying inflation is likely to rise again before long. This underlines why we think the RBI’s recent rate cut, as well as others that look set to follow, will prove to be a …
The Riksbank seems to be in denial about the weakening of Sweden’s economy. While it reiterated today that it expects to raise interest rates in the second half of this year, with the economy performing poorly and core inflation showing little sign of …
13th February 2019
We think the explicit neutral stance adopted by the RBNZ in today’s policy meeting is appropriate as we suspect that the economy will not gain enough momentum to support interest rate hikes until 2021. … New Zealand - RBNZ gets more realistic by taking a …
Should a Brexit deal be reached within the next few months, the UK’s financial markets will probably buck the global trend with money market rates, Gilt yields and the pound all rising by more than is widely expected. The FTSE 100, however, probably won’t …
12th February 2019
The next euro-zone recession is likely to begin before the ECB has raised interest rates from the “zero lower bound”. When it happens, we think the Bank will resume its asset purchase programme – but it will probably do so half-heartedly, which could …
11th February 2019
The People’s Bank (PBOC) appears to have intervened little in FX markets last month, suggesting that the renminbi is not facing much downward pressure at present. However, with the economy likely to slow and interest rates likely to fall further over …
Details of Brazilian Finance Minister Paulo Guedes’ pension reform unveiled this week are impressive, but political realities could yet scupper these plans. Elsewhere, despite the hawkish statement accompanying this week’s interest rate decision by …
8th February 2019
This week’s “shunto” spring wage negotiations got underway against an inauspicious backdrop, with corrected official data showing that real wages didn’t rise at all last year. Next week, Japan’s zero interest rate policy, which was conceived as a last …
The fall in oil prices and shift in interest rate expectations in the US and Europe seem to have brought EM monetary tightening to an end. While most central banks aren’t in a rush to loosen policy, the focus over the coming year is likely to be on …
The Bank of England drove a bulldozer through its near-term projections this week as it ratcheted up the severity of Brexit uncertainty and the corresponding impact on the economy in its forecast. We have some sympathy with the Bank’s change of heart. The …
The nomination of Princess Ubolratana Rajakanya Sirivadhana Varnavadi (sister of the current king) as a prime ministerial candidate in Thailand’s upcoming general election, has completely changed the political landscape of the country. There is clearly a …
At its meeting next week, the Riksbank is likely to deliver a dovish message, perhaps hinting that even the single rate hike that it has pencilled in for this year is now in doubt. … Riksbank to strike a dovish note next …
The less hawkish nature of the Russian central bank’s statement means that we no longer expect an interest rate hike in the coming months. Instead, with inflation likely to return to target in 2020, we think that interest rate cuts will come back onto the …
The RBA changed tact this week and shifted away from its long-held tightening bias to a neutral stance on interest rates. This move was accompanied by a new set of downgraded economic forecasts, which project that headline inflation will not return to …
The RBI was able to point to a fall in inflation to justify its rate cut this week. But it also took a more sanguine line on the risks posed by still-high core inflation. We believe this will prove to have been a mistake. … RBI changes …
The Danish krone is now close to the centre of the central bank’s exchange rate band – a level at which it has in the past unilaterally raised interest rates. However, we think it is likely to leave rates on hold throughout this year and 2020, not least …
7th February 2019
The Czech National Bank’s post-meeting communications made clear that concerns about the external environment resulted in interest rates being left on hold – rather than hiked – today. Given the Bank Board’s focus on wages and inflation, additional …
The Bank of England today emulated the Fed by leaving interest rates on hold, sounding more dovish and hinting that fewer rate hikes are in the pipeline. But if we are right in thinking that GDP growth will be stronger than the Bank believes, then it may …
The central bank in the Philippines (BSP) left interest rates unchanged today, but with inflation set to continue falling back over the coming months, we think that the BSP will soon start to unwind some of last year’s monetary tightening. … Philippines: …
The RBI’s new governor Shaktikanta Das has delivered what the Modi government was hoping for. The “calibrated tightening” stance was jettisoned at his first policy meeting today in favour of a rate cut. A low level of headline inflation provided …
The Bank will be weighing up the impact of a tighter labour market but weaker GDP growth when it leaves interest rates at 1.75% on Wednesday. It’s unlikely that any of the recent data will cause the RBNZ to change their forecasts for interest rate hike in …
Economic activity finished last year on a weak note and most business surveys suggest that things did not improve in January. Italy went back into recession in the second half of 2018 and the evidence suggests that economic activity there has continued to …
6th February 2019
We expect EM risk premia to rise this year as global growth slows, something which has often been associated with EM central banks raising interest rates. But big currency falls and surges in inflation this year look unlikely. In fact, lower inflation …
Even if the Fed has stopped hiking interest rates sooner than we originally envisaged, we doubt that will prevent a marked economic slowdown this year. After all, that dovishness was partly prompted by the more severe than expected downturn in global …
The Central Bank of Iceland had hinted only a few weeks ago that interest rate hikes were likely at the start of this year, but the recent economic data have been weak enough for it to hold fire today. It maintained a hawkish bias in its statement, but …
The Bank of Thailand (BoT) left interest rates on hold today, but sounded surprisingly upbeat on the outlook for the economy. While this suggests that a further rate hike cannot be entirely ruled out, we are sticking with our view that interest rates will …
5th February 2019
Brexit is a political crisis, not an economic one. While the extra uncertainty caused by Brexit has clearly hampered investment and consumption, the economy is fundamentally sound. There are still many different ways Brexit could play out and this …
Faced with a severe downturn, developed economies would exhaust their conventional monetary policy tools quickly. At first sight, Japan’s experience suggests that even the bold use of unconventional tools might not work. However, there are reasons why …
Although the RBA took a more dovish tone when it left rates on hold today we think it will need to consider cutting rates before long as the economic outlook deteriorates. While the RBA still sees growth in 2019 of around 3% we are much less optimistic …
In a remarkable U-turn, the Fed appears to have abandoned plans to continue gradually raising interest rates it set out only six weeks ago. The markets unsurprisingly welcomed this dovish shift, but we don’t think it will prevent economic growth slowing …
1st February 2019
Manufacturing PMIs for Switzerland, Sweden and Denmark, released on Friday, dropped sharply in January, suggesting that the recent weakness in the euro-zone is spilling over to its neighbours. Next week, we expect rising inflation and inflation …
Parliament hit the Brexit ball back into May’s court this week, leaving us with no clearer picture of how Brexit might unfold than we had this time last week. But beneath the bouncing Brexit headlines, the economy seems to be holding up well … Parliament …
The budget surplus recorded in Russia in 2018 has put the spotlight on austerity measures, but it actually looks like fiscal policy will provide more support to the economy this year than it did in 2018. Meanwhile, the Turkish central bank’s latest …
Senior Deputy Governor Carolyn Wilkins this week outlined the Bank of Canada’s thinking on wage growth. But by failing to repeat the Bank’s normal mantra about raising interest rates further, what Wilkins didn’t say is perhaps more significant than what …
Kenyan policymakers left their key policy rate unchanged this week, and we think that they will hold rates over the remainder of the year. Peers in Angola and Ghana – who cut this week – will probably continue to loosen policy over the coming months. Next …
In advanced economies, monetary and credit conditions remain supportive. But bond issuance has been declining sharply in recent months, and credit growth in China is still slowing. … Monetary Indicators Monitor …
The RBA will probably continue to signal that the next move in rates is up at Tuesday’s meeting. But with mounting signs that the housing downturn is spreading to other parts of the economy and price pressures abating, we think the Bank will have to cut …
While it is guaranteed that the Monetary Policy Committee will leave interest rates at 0.75% at the policy meeting on Thursday 7th February, the accompanying Inflation Report may provide some crucial clues to how keen the MPC is to change rates once …
31st January 2019
Although we expect the US federal funds rate to end 2020 lower than it is now, we don’t think that the dollar will decline this year. The reason is our bearish view of the global economy. … A dovish Fed won’t keep the US$ down if the S&P …
Signs of weakness in the global economy seem to have prompted a significant change of tack from central banks. Even in the US, where growth has so far held up well, the Federal Reserve appears reluctant to raise interest rates again and we are …
The statement accompanying the Chilean central bank’s decision to hike its policy rate by 25bp to 3.00% last night was slightly less hawkish than the previous one, and supports our view for fewer rate hikes than the markets are pricing in. We expect rates …
A new strand of economics called “Modern Monetary Theory” (MMT) is seen by its advocates as a solution to the flawed economic thinking that contributed to the financial crisis. The ideas behind it could be a useful addition to the possible toolkit if …
The dovish tone of the policy statement and press conference following today’s FOMC decision will reinforce expectations that the Fed is almost done raising interest rates. We think a sharp economic slowdown over the course of this year means the Fed will …
30th January 2019
