Filtered by Topic: Monetary Policy Use setting Monetary Policy
Although investors have become more dovish about the outlook for US monetary policy in the wake of this week’s FOMC meeting, we think that they are underestimating future rate cuts given the grim outlook for the US economy. So in our view, there is more …
21st March 2019
How Brexit pans out will dictate the direction and timing of the next move in interest rates, so it was unsurprising that the Monetary Policy Committee kept a low profile today by voting unanimously to keep rates on hold at 0.75%. But if there is a Brexit …
Bank Indonesia (BI) left rates unchanged at 6.0% at its meeting today, and there was little indication in the statement that it is likely to adjust monetary policy anytime soon. We expect rates to remain on hold throughout this year. … Indonesia: no more …
Today’s decision by the Norges Bank, to raise its policy rate from 0.75% to 1.00%, came as no surprise, but policymakers struck a more hawkish tone than expected. While the Bank is now likely to continue its tightening cycle in the second half of this …
Taiwan’s central bank (CBC) decided to keep its policy rate unchanged today at 1.375% against a backdrop of weak economic growth and low inflation, and gave no indication in its statement that it will adjust policy any time soon. With monetary policy …
The central bank of the Philippines (BSP) left rates unchanged today at Governor Diokno’s first meeting, but also sounded more hawkish than we had anticipated. Nevertheless, with inflation set to fall back further over the next couple of months, we are …
The wording of last night’s Brazilian monetary policy statement provides further evidence that the appointment of new governor Roberto Campos Neto won’t cause much of a change to monetary policy. With this in mind, we think the financial market’s current …
The Reserve Bank of New Zealand (RBNZ) will retain its neutral stance when it keeps rates on hold at its meeting on Wednesday the 27th March 2019. The softening in GDP growth in the second half of 2019 will have come as a disappointment to the Bank. But …
The Fed’s revised economic projections, which now imply no rate hikes this year, together with the announcement that it will halt its balance sheet run-down in September, came as a positive surprise for the markets. But we think the Fed’s forecasts are …
20th March 2019
We expect bonds in the euro-zone’s “periphery”, particularly in Italy, to come under renewed pressure in the rest of 2019 as growth remains weak and political risks creep up. However, we think that credit spreads will tighten again in 2020, as central …
We expect headline inflation to fall further below 2% in the coming months, largely due to a renewed decline in oil prices and an associated fall in energy inflation. The previous strength of economic activity has caused some price pressures to emerge, …
As we expected, weak economic data and a recent pick-up in the króna contributed to the Central Bank of Iceland leaving interest rates on hold today. While it maintained a hawkish bias in its statement accompanying the decision, we now just expect one …
The incoming monthly activity data suggest that GDP growth has slowed from 2.6% annualised in the fourth quarter to only around 1.5% in the first. At the same time, however, the business surveys have remained relatively upbeat, with a weighted average of …
The modest increase in spending detailed in Canada’s 2019 federal budget does little to alter the economic outlook. The onus therefore remains on the Bank of Canada to support the economy. … Budget 2019 won’t drive pick-up in …
With inflation on the up and signs of increasing inflationary pressures in the labour market, we doubt the Monetary Policy Committee (MPC) will sit on its hands for long after tomorrow’s meeting. If there is a Brexit deal or a short delay, we think that …
The Bank of Thailand (BoT) left interest rates on hold today but sounded decidedly more dovish than at its previous meeting. While weak growth and low inflation will take hikes off the table, the BoT’s continued concern over risks in the financial sector …
We believe that the downturn in the housing market will have a larger negative impact on the economy than most believe and have lowered our GDP forecast for 2019 to 1.5%. The upshot is that the labour market should start to slacken soon, forcing the RBA …
The 3% rise in the rupee against the US dollar so far in March has left it at its strongest rate since August, and means it has outperformed all other major EM currencies this month. This is related in part to recent opinion polls showing that the ruling …
Brazil’s new central bank governor, Roberto Campos Neto, inherits a benign inflation environment and we now think the Selic rate will be left unchanged at its current historic low of 6.5% until at least end-2020. In contrast, the markets are pricing in …
19th March 2019
A decline in mortgage interest rates from the start of 2012 was an important factor behind the rise in house prices in recent years. But we don’t think the upcoming drop in interest rates will have the same impact. Rates are being cut because economic …
The wisdom of the Bank of Japan sticking with an inflation target it can’t reach is being questioned again, including by Japan’s finance minister this week. But all alternatives would be worse. And this would, in any case, be an inopportune time to signal …
15th March 2019
The deluge of data this week provided some mixed signs on economic activity, but one clear theme from the producer and consumer price releases was that what little inflationary pressure there is in the economy already appears to be fading. … Muted …
Pro-IMF comments this week from the front-runner in Ukraine’s presidential election race (and comedian), Volodymyr Zelenskiy, reduce the risk that this month’s vote could trigger an adverse reaction in the currency and bond markets. Meanwhile, Russian …
Data published this week showed continued weakness in South Africa’s economy at the start of the year which, coming alongside soft inflation, may bring interest rate cuts onto the table sooner than we currently anticipate. Elsewhere, the lack of public …
As the Brexit circus rumbles on the Monetary Policy Committee’s interest rate announcement on Thursday 21st March will not receive the usual attention. After all, the Committee will keep a low profile by keeping interest rates at 0.75%. But depending on …
Premier Li spoke to the press at the close of the National People’s Congress (NPC) today. He offered further details on the timing and scale of policy support – smaller than in previous cycles but probably enough to stabilise growth later this year. …
Just over two decades after it first cut rates to zero, the Bank of Japan today left its policy settings unchanged and reiterated that the ultra-loose stance will be maintained for the foreseeable future. While Governor Kuroda sounded relaxed about the …
The rally in EM assets of the past few months has started to falter in recent days on the back of some poor economic data around the world, and signs that a US-China trade deal may be further away than previously thought. We forecast that EM assets will …
14th March 2019
The Norges Bank is all but certain to increase interest rates to 1.0% at its policy meeting next week. In contrast, we expect policymakers in Switzerland and Iceland to leave rates unchanged at their March meetings (also scheduled for next week). The next …
The slight rebound in February’s wholesale price inflation is unlikely to prevent the RBI from cutting rates again next month. However, there is good reason to think that underlying inflation will rise over the coming months, which would raise concerns …
The ECB’s new “TLTRO-III” programme should help to prevent credit conditions from tightening next year. But any boost to lending growth is likely to be small. … TLTRO-III to support bank funding, but not …
13th March 2019
With interest rates on hold, the focus at next week’s FOMC meeting will be on officials’ updated economic projections, which are likely to show a lower expected path for GDP growth and the fed funds rate. The Fed may also use the meeting to announce an …
We now think that a combination of sluggish economic growth, low inflation, and monetary policy loosening in the US is likely to prompt the ECB to re-launch its net asset purchases next year. … ECB likely to be forced into more QE in …
12th March 2019
The fall in Swedish inflation in February lends further support to our view that the Riksbank will keep interest rates on hold at least into 2021. In fact, with core price pressures subdued, and a rising chance of additional stimulus from the ECB, the …
The jump in Egyptian inflation in February has reduced the chances that the central bank will loosen policy at this month’s MPC meeting, but subdued core price pressures and strong capital inflows mean we think that an interest rate cut is still more …
11th March 2019
Talk of “nationalising” the South African Reserve Bank (SARB) put pressure on the rand last week. The move – which would bring the Bank in line with global norms – would have no effect on the bank’s independence. But it would still probably lead to a …
The sharp drop in lending last month reversed much of the jump in January. With the trajectory of credit growth still pointing to further economic weakness, we think the People’s Bank will need to roll out additional policy support. … Bank Lending & Broad …
The Bank of Canada admitted this week that it had been caught out by the broad-based nature of the recent economic slowdown. But its forecasts continue to envisage a strong rebound in growth, which we think is too optimistic. … Bank rows back from further …
8th March 2019
The slump in payroll employment growth in February reinforces the message from the incoming activity data that economic growth is slowing below its 2% potential pace in the first quarter. That makes us more confident in our view that the Fed will remain …
The ECB’s decision to launch more TLTROs and strengthen its interest rate guidance means that it is, at least for now, ahead of the curve. But we think the Bank is still too optimistic about economic prospects for the euro-zone next year. Policymakers may …
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 …
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 …
