Filtered by Topic: Monetary Policy Use setting Monetary Policy
While both the Riksbank and the Norges Bank kept monetary policy unchanged this week, they signalled in their policy statements that they intend to raise interest rates in the coming months. With inflationary pressures building, we expect the Riksbank to …
26th October 2018
As well as hiking interest rates to 1.75% this week, the Bank of Canada explicitly confirmed that it intends to raise the policy rate back to its estimate of the neutral rate. We doubt it will make it that far. … Bank aiming for at least three more …
The recent slump in stock markets is hard to square with the 3.5% annualised gain in third-quarter GDP that follows an even more impressive 4.2% rise in the second. Looking at the details of that economic growth, however, there are signs that higher …
At 3.5% annualised, GDP growth remained unusually strong in the third quarter, thanks partly to this year’s fiscal stimulus, but there are signs that higher interest rates are beginning to have a bigger restraining effect. Once the boost from fiscal …
We expect the Fed’s monetary policy tightening cycle, which is now well underway, to contribute to a slowdown in the US economy during 2019-2020. And tighter monetary policy may also trigger downturns in countries with high household debt burdens and in …
Credit growth in advanced economies is likely to maintain a healthy pace despite quantitative tightening. Meanwhile, the recent spike in Italian government bond yields may increase firms’ borrowing costs. … Monetary Indicators Monitor …
The Office for Budget Responsibility (OBR) will hand the Chancellor, Philip Hammond, a get-out-of-jail-free card by slashing its forecast for the deficit this year in Monday’s Budget. This will allow Hammond to deliver the pledged increase health spending …
Policymakers are worrying about the widespread use in China of shares as collateral for lending – for good reason. But the remedies announced this week are unlikely to make much of a difference as long as share prices continue to fall. Meanwhile Xi …
The Russian central bank’s statement accompanying today’s Board meeting reinforces our view that September’s interest rate hike was intended as a one-off. Whereas the financial markets are pricing in further tightening, we think it’s most likely that the …
South Africa’s new finance minister used this week’s budget statement to signal a shift away from further austerity, suggesting that Pretoria is prioritising support for the weak economy. Nigerian officials, by contrast, promised to tighten policy. Given …
The sharp rallies in the Argentine peso and Brazilian real reflect growing optimism that economic policymaking will improve in both countries, but markets seem to be looking through the political hurdles to reform that are building. While Argentina’s IMF …
25th October 2018
The ECB today reaffirmed its plans to normalise monetary policy gradually, expressing little concern about the recent run of weaker economic data or the clash between Italy and the European Commission. Risks to the outlook mean that the first interest …
After a strong Q2, growth in Emerging Europe as a whole slowed in Q3, from 3.5% y/y to around 2.8% y/y. In Russia and Poland, this slowdown has been relatively gradual and driven by weakness in manufacturing sectors. Turkey’s economy has, unsurprisingly, …
The Turkish central bank’s decision to leave interest rates unchanged today and the accompanying statement reinforce our view that last month’s aggressive rate hike didn’t represent a shift back to orthodoxy. Interest rates are unlikely to be raised …
The chances of an interest rate rise at the Monetary Policy Committee’s (MPC) meeting from 0.75% on 1st November are pretty slim. We doubt the MPC will move again until the Brexit fog has lifted. … MPC to wait for Brexit fog to …
Although it left its policy stance unchanged today, the Norges Bank struck a slightly more hawkish tone. We continue to think it will raise rates again next March. But even as the Bank tightens policy, we think that falling oil prices will cause the krone …
The recovery in the Middle East and North Africa will gather pace over the rest of this year and in early 2019, but growth will peak sooner than most expect. Egypt’s cyclical upturn should continue and we expect it to be a regional outperformer. In Saudi …
24th October 2018
By replacing its pledge to raise rates at a “gradual” pace with an indication that it intends to hike by at least as much as, if not more than, markets expect, the Bank of Canada today struck a decisively hawkish note. We think it will follow today’s …
Although narrow money growth rebounded in September, the Fed’s quantitative tightening will continue to exert downward pressure over the months ahead. Furthermore, signs are emerging that the Fed’s interest rate hikes are starting to weigh on demand for …
South African inflation stabilised in September remaining unchanged at 4.9% y/y. We think that inflation has peaked and expect that the SARB will keep its key rate on hold at next month’s policy meeting. … South Africa CPI …
Although the Riksbank left monetary policy unchanged today, it is still on track to begin raising interest rates in December. We think that the Bank will then tighten more quickly than investors expect, causing the krona to strengthen in 2019 and 2020. … …
The Bank of Japan will probably lower its growth and inflation forecasts further at next week’s policy meeting. And it should reiterate its pledge to keep interest rates at current extremely low levels for an extended period. … Sales tax hike is the nail …
India’s shadow banking sector has been thrust into the spotlight over the past few weeks, triggered by news that the Infrastructure Leasing & Financial Services (IL&FS) Group is likely to miss several debt repayments this year. Fears over contagion in the …
The latest data suggest that underlying inflation is picking up in Sweden, Norway and Iceland and we expect the central banks in all three countries to respond by tightening monetary policy. In Sweden, non-energy CPIF inflation rebounded in September and …
23rd October 2018
Price pressures have continued to strengthen in the emerging world. Our aggregate EM inflation measure jumped from 3.8% y/y in August to 4.2% y/y in September, its fastest pace since early 2016. The rise has occurred across all EM regions and the drivers …
The third-quarter Business Outlook Survey revealed a rebound in firms’ investment intentions, which is consistent with machinery and equipment investment growth remaining close to 10% y/y. Moreover, the survey was carried out before the US and Canada …
Today’s decision by Bank Indonesia (BI) to leave interest rates on hold is unlikely to mark the end of the current tightening cycle. With the rupiah likely to remain under downward pressure over the coming months, we still expect two more rate hikes …
Growth in Latin America as a whole is likely to strengthen over the coming quarters, but with monetary and fiscal policy tightening in most countries, it will be weaker than most expect. We’re relatively upbeat on the near-term outlook for Mexico, the one …
22nd October 2018
Global growth is likely to ease over the next two years, led by slowdowns in the US and China. Although headline inflation should drop back in many advanced economies next year, core inflation will continue to rise. Against this backdrop we expect the Fed …
The announcement on Friday that Ukraine has come to an agreement with the IMF to replace its current bailout package should reduce risks posed by the government’s large upcoming FX debt repayments. But compliance will remain a major hurdle and problems …
The minutes of the Reserve Bank’s October policy meeting show that, despite keeping rates on hold, the MPC continues to place great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
After the legalisation of cannabis this week, next week the spotlight turns to the Bank of Canada’s policy rate announcement. The Bank looks set to raise interest rates for the third time this year, to 1.75%. As that hike is widely expected, the key event …
19th October 2018
The plans outlined by Brazil’s likely next president, Jair Bolsonaro, to tackle some of the causes of Brazil’s productivity problem should be welcomed. But his apparent waning commitment to fiscal and welfare reforms suggests that the chances of a …
Safe-haven demand for the Swiss franc increased this week as the Italian Government clashed with the EU over its 2019 Budget. With worries about Italy set to persist, we think that the franc will weaken only slightly against the euro as the SNB lags …
The PBOC has been hiding its efforts to support the renminbi over recent months. But a release this week showed the clear hand of the central bank: the PBOC’s balance sheet for September reveals the first sizeable sales of foreign exchange since the start …
US insistence that provisions against currency manipulation be a part of any future trade deal with Japan has raised suggestions this week that Japanese policymakers, particularly those at the Bank of Japan, could find their hands tied in future. We …
The recent rallies in the Russian ruble and the Turkish lira have added weight to our view that central banks in both countries will refrain from tightening policy further when they meet next week. Meanwhile, data that slipped under the radar this week …
The statement accompanying the Chilean central bank’s decision to increase its policy rate by 25bp last night to 2.75%, suggested that a gradual tightening cycle would lie in store over the next 12-18 months. But we think that tightening will come more …
While the Riksbank, the Norges Bank and the ECB are likely to keep interest rates unchanged next week, we expect them all to signal tighter policy ahead. The recent rebound in underlying inflation will have made the Riksbank more confident in its plans to …
Official GDP growth slowed last quarter consistent with broader evidence that the economy is cooling. There are some early signs in the September data that policy support is starting to gain traction but we think more easing will still be needed in order …
The ECB has certainly given some mixed messages over recent weeks, with some Council members judging that the first rate hike should come during next summer while others assert that Q4 2019 is more likely. We doubt that it will change its forward guidance …
18th October 2018
The era of record-low interest rates is nearly over in Sweden, but it is a long way from finished in Switzerland. The Swedish economy is powering ahead, generating inflationary pressure that the Riksbank will soon need to rein in. We expect it to begin …
While a disorderly no deal Brexit might, depending on its nature, deliver a significant short-term blow to the UK economy and financial markets, any global fallout would probably be small. … Global fallout from a no deal Brexit would be …
The Bank of Korea (BoK) left interest rates unchanged today, but appeared to leave the door open to a rate hike soon. However, with growth set to slow, trade tensions building and inflation likely to drop back, we are sticking with our view that interest …
Prospects for Europe have deteriorated somewhat as slowing global demand has begun to affect exports and a sharp rise in bond yields has darkened the outlook for Italy. Some of the major players should continue to perform very well. The German labour …
17th October 2018
The markets are convinced that the Bank of Canada will hike its overnight rate by another 25bp to 1.75% at next week’s policy meeting and it isn’t hard to see why. Economic growth has been solid this year and probably a touch stronger than the Bank’s …
Economic growth in Sub-Saharan Africa will probably strengthen a touch in 2019, but growth across the region will remain weaker than consensus expectations. We think that growth in Nigeria will slow as oil prices fall and output stabilises. Meanwhile, the …
16th October 2018
Nigerian inflation remained essentially unchanged in September, which supports our view that – despite recent hawkish language – policymakers will leave their key rate on hold over the coming months. … Nigeria Consumer Prices …
The Bank of Canada’s latest Business Outlook Survey shows that growing capacity constraints are boosting investment intentions, which will reinforce expectations that the Bank will raise interest rates again at next week’s policy meeting. … Business …
15th October 2018
There are good reasons for the Bank of Thailand not to hike interest rates at its next meeting, as it currently appears determined to do. But currency strength is not one of them. … Thailand: strong baht will not stop rate …
