Filtered by Topic: Monetary Policy Use setting Monetary Policy
Given the huge and growing uncertainty surrounding Brexit, we are now placing much more emphasis on three forecasts for the economy that are based on different Brexit outcomes. The key point, though, is that in each scenario we are a bit more optimistic …
10th January 2019
The account of the ECB’s last meeting confirms that the Governing Council was less confident about the economic outlook, even in mid-December. While policy loosening is very unlikely for now, the account implies that if further support were needed, the …
We are revising our forecasts for economic growth in the euro-zone and now expect GDP to increase by only 1% this year and a bit less in 2020. Core inflation is also likely to be around 1% this year and, as a result, the ECB will probably leave rates on …
9th January 2019
There is a clear possibility that, as in early 2016, slowing global growth and further weakness in financial markets will prompt the Fed to abandon its plans to continue hiking interest rates. With the latest data suggesting that the domestic economy is …
Despite slashing its economic growth forecast to below potential, the Bank of Canada reiterated today that it judges that more rate hikes will be needed to ensure that inflation remains in line with target. But if we’re right that even the Bank’s new …
The drop in headline inflation in Switzerland in December is a sign of things to come, as inflation is set to fall to just above zero in the coming months. Meanwhile, the minutes of the Riksbank’s December meeting suggest that it is likely to hike at most …
The sales tax hike is likely to trigger a fall in output in Japan later this year but, thanks to counter-measures from the government, the downturn will be much less sharp than after similar tax increases in the past. Even so, price pressures will remain …
Firing Fed Chair Jerome Powell, even if President Donald Trump actually had the power to do so, would do little in practical terms to change the future course of monetary policy. Arguably the bigger risk is that Trump’s frustrations with Powell could lead …
8th January 2019
It’s well known that the uncertainty caused by the Brexit bedlam probably contributed to GDP growth easing from 0.6% q/q in Q3 of last year to 0.3% or less in Q4. But it’s less appreciated that should a way out of the Brexit quagmire be found in the next …
7th January 2019
The People’s Bank (PBOC) appears to have sold only a small amount of foreign exchange last month, suggesting that the renminbi has faced little downward pressure recently. … FX Reserves …
Today’s cut to the required reserve ratio is partly about managing liquidity ahead of Chinese New Year. But it is also intended to provide support to the economy and will be reinforced with further easing soon. Given the pressures the economy is facing …
4th January 2019
Brazilian markets have performed strongly this week as hopes for business-friendly reforms under President Jair Bolsonaro have continued to build, but we think that the rally may run out of steam before long. Elsewhere, the minutes to the Mexican central …
In keeping with its usual practice of making policy moves late on Fridays, the PBOC today announced a 100bp cut to the required reserve ratio aimed at supporting the economy and managing liquidity ahead of Chinese New Year. With economic activity likely …
Investors pared back their expectations for interest rate hikes in Central Europe this week, but we still think that a fresh pick-up in inflation will prompt more monetary tightening than most anticipate over the course of 2019. As a result, the recent …
Data published over the past week show that Emerging Asia ended 2018 on a soft note, a trend we expect to continue into 2019. Meanwhile, a further sharp drop in inflation in the Philippines in December supports our view that the central bank (BSP) will …
The drumbeat of pre-election giveaways continues at the state level in the form of loan waivers and from the national government. These steps may be effective politically but they risk eroding policymakers’ credibility as guardians of fiscal and financial …
The raft of GDP figures released over the past week showed that, in aggregate, the MENA economies strengthened in Q3 of last year. But we think that a fresh slowdown is on the cards in 2019. Meanwhile, t he Egyptian central bank left interest rates on …
3rd January 2019
GDP growth will probably weaken in both Australia and New Zealand in 2019. And even though the labour market may tighten a little further, inflation is unlikely to rise much. The upshot is that monetary policy will have to remain loose for longer than …
With the sudden slump in oil prices over the last three months likely to weigh heavily on economic growth, and fears of a global downturn building, we expect the Bank to keep rates unchanged and strike a dovish tone at its policy meeting next week. … …
2nd January 2019
Two of the Bank of Canada’s three measures of core inflation, CPI-trim and CPI-median, declined in November. As a result, an average of the three measures fell to 1.9%, the lowest in five months. Base effects mean that core inflation will probably decline …
21st December 2018
The slump in the Business Outlook Survey future sales balance looks consistent with GDP growth falling towards zero and is another reason to doubt that the Bank of Canada will raise interest rates further. … Business Outlook Survey …
The Riksbank’s decision to hike interest rates this week supported our long-held view that it would tighten policy more aggressively than investors anticipate. But the risks from high household debt and weak construction output are mounting. Meanwhile, …
In an interview this week, Bank of Canada Governor Stephen Poloz seemed fairly relaxed about the economic outlook. But with inflationary pressures fading, oil prices falling again and exporters becoming less confident about the outlook, there is little …
The clear view in financial markets in the wake of the December FOMC meeting is that any further rate hikes over the coming months are likely to be reversed in 2020. Our long-held forecast is that a sharp slowdown in economic growth next year will prompt …
We doubt that the phasing-out of caps on interest-only loans will provide much support to the housing market as there’s still a large imbalance between supply and demand. And the government won’t provide much support either as it has pledged to tighten …
Xi Jinping used the 40 th anniversary of the start of China’s economic reforms to set out a narrative which placed state and, in particular, Party control at the heart of China’s subsequent economic successes. A stronger argument, in our view, is that …
The thickening Brexit fog meant that the Monetary Policy Committee was always going to leave interest rates at 0.75% today and it looks as though that fog won’t fade for a few months. But should a Brexit deal be agreed, which we still think is just about …
20th December 2018
Taiwan’s central bank (CBC) today left its policy rate on hold at 1.375% and gave little indication in its accompanying statement that it is in any hurry to adjust its policy setting anytime soon. We think interest rates will be left unchanged throughout …
The Riksbank’s surprise decision to hike interest rates today supported our long-held call that it would tighten policy more aggressively than investors anticipate. But there is a clear risk that a housing-related economic slowdown could leave the Bank …
Today’s decision by Bank Indonesia (BI) to leave interest rates unchanged at 6.0% is unlikely to mark the end of the tightening cycle given the likelihood of further falls in the rupiah over the coming year. … Bank Indonesia set to raise interest rates …
Figures released this month showed that Sub-Saharan Africa’s largest two economies remained weak in late 2018, but that activity picked up faster elsewhere in the region. These readings strengthen our view that Africa’s smaller economies will continue to …
The Bank of Japan left interest rates unchanged today and Governor Kuroda’s dovish comments suggest that policy tightening remains a long way off. … Bank of Japan Meeting …
2018 has been a mixed bag for India’s financial markets. The bond market has seen significant gyrations, only for yields to end the year virtually flat from 12 months ago. Meanwhile, the 7% rise in the Sensex means it has outperformed most other major EM …
The Fed hiked the fed funds target range by 25bp today, to between 2.25% and 2.50%, as most still expected, but tempered the move by slightly revising down Fed officials' projections for additional rate increases in 2019 and beyond. Still, with the vote …
19th December 2018
We expect Emerging Asia to grow at its weakest rate in 2019 since the 2008-09 global financial crisis. With inflation also set to drop back, the regional tightening cycle is likely to come to an end. We expect a few countries to start cutting rates by the …
Thanks to the recent sharp drop in oil prices, the fall in inflation in November is likely to be the precursor to a larger fall in December. Inflation could even reach the 2% target, bringing some Christmas cheer both to the Bank of England and seasonal …
The fall in inflation across much of Emerging Europe last month was surprisingly sharp, which in part was due to lower oil prices but also (and more unexpectedly) a dip in food inflation. One consequence is that the Turkish central bank is likely to cut …
Today’s rate hike by the Bank of Thailand (BoT) is unlikely to mark the start of a prolonged tightening cycle. In fact, with growth likely to slow in 2019 and inflation set to remain very weak, we think today’s hike could be a case of “one and done”. In …
As oil prices have fallen over the past few months, investors’ expectations for interest rates in Norway have fallen roughly into line with our own. Rate expectations in Switzerland have edged down too, reflecting the weakness of the latest economic data. …
18th December 2018
The statement accompanying today’s Hungarian MPC meeting provided the clearest sign yet that policymakers are shifting towards the start of a tightening cycle. For our part, we think that interest rates will rise further next year than financial markets …
The past month has brought signs that Egyptian policymakers are trying to simplify the country’s exchange rate setup, which is ultimately likely to result in a weaker pound. Over the past six months or so, Egypt’s government appears to have leaned on …
17th December 2018
The boost to purchasing power from the recent plunge in gasoline prices has already fed through to stronger real consumption growth. Even assuming a more modest rise in December, control group retail sales are on track for a 5% annualised gain in the …
EM growth has slowed over the course of 2018 and our GDP Tracker suggests that aggregate growth fell to its weakest pace in two years in Q4, at around 4.0%. 2019 is unlikely to be better. We expect slower growth across large parts of the emerging world …
14th December 2018
Following this week’s ECB meeting, and the latest data on economic growth in the currency union, the chance that the Bank raises interest rates next year has fallen. … ECB dovish as PMI confirms growth …
In normal times, the MPC would be preparing the ground for another interest rate hike. After all, pay growth has picked up far more sharply than the Bank of England had anticipated. But as it is still unclear how Brexit will pan out, the Committee seems …
Central bank meetings in Norway and Iceland this week suggested that interest rate hikes are on the horizon in both economies. By contrast, the Swiss National Bank again signalled that it won’t raise rates anytime soon. Next week we expect the Riksbank to …
Russian central bank governor Elvira Nabiullina’s hawkish post-meeting press conference reinforced our impression that another hike in interest rates is likely over the next few months. We now expect a 25bp hike to 8.00% early next year. We have revised …
With growth in the euro-zone slowing faster than expected and the chances of the ECB delaying its first interest rate hike increasing, property yields are now more likely to plateau next year, than rise. … Property yields to …
The Bank of Thailand (BoT) is likely to raise its policy rate for the first time since 2011 at its meeting on Wednesday due to concerns about accelerating credit growth. Meanwhile, having widened to a record US$4.2bn in October, we think the trade deficit …
