Filtered by Topic: Monetary Policy Use setting Monetary Policy
The rise in wholesale price inflation in September was due in large part due to a significant rebound in food inflation. But core inflation also remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … …
15th October 2018
Japan’s economy was always likely to slow in the third quarter after the surge of output it generated in the second. But the latest data have still been rather disappointing. While investment remains strong, industrial output may have contracted, consumer …
Inflation data published this week showed that price pressures are building in Sweden and Norway. We expect the Riksbank to begin raising interest rates in December. But while the Norges Bank looks set to raise interest rates again in the first half of …
12th October 2018
It is hard to explain this week’s sharp drop in equity prices in terms of the incoming economic data. True, following the surge in the 10-year Treasury yield that began last week, the sell-off in equities could be due to fears that higher interest rates …
Consumer price inflation crept only a little higher last month. But with core inflation still well above the Reserve Bank’s target, we think that the tightening cycle has a little further to run. … Consumer Prices (Sep.) & Industrial Production …
Some of the recent weakness in euro-zone industry, particularly that in Germany, seems to have been caused by hold-ups relating to new emissions tests. While part of this delayed output will probably be made up later, overall industrial growth is unlikely …
September’s strong Hungarian inflation data – released on Tuesday – caused investors to raise their interest rate expectations, coming round to our more hawkish view. Meanwhile, a fall in inflation last month didn’t prevent policymakers at the Czech …
The Monetary Authority of Singapore (MAS) today increased the slope of its nominal effective exchange rate policy band, a decision that amounts to a tightening of its policy stance. But with growth likely to ease over the coming year and inflation set to …
The rebound in non-energy inflation in September will reassure the Riksbank that it is right to be planning to tighten monetary policy in the coming months. We expect underlying inflation to continue to pick up, allowing the Bank to start raising interest …
11th October 2018
GDP growth has surged in recent quarters and, while it has probably peaked, we expect it to remain strong ahead of the general election in the first half of 2019. Thereafter, a focus on fiscal tightening and the lagged impact of recent rates hikes means …
Policymakers have responded to growing signs of weakness in China’s domestic economy by ramping up policy support. But with momentum still slowing and trade tensions escalating, growth will not stabilise until the middle of 2019. … Growth to slow further …
10th October 2018
Based on our forecast for economic growth to slow, there is little prospect of the Bank of Canada raising interest rates by another 100bps over the next year. Even if the economy maintained its recent strong pace of growth, raising interest rates by that …
The Turkish government’s latest plan to tackle high and rising inflation will probably have a limited impact and it reinforces our view that last month’s aggressive interest rate hike did not herald a broader shift back to orthodox policymaking. … Turkey: …
The Romanian central bank’s FX intervention this year has kept the leu artificially strong, causing economic imbalances to build. Unless policymakers change course soon and loosen their grip on the currency, a messy economic adjustment lies in store. … …
The rise in Egyptian inflation to 16.0% y/y last month was driven almost entirely by higher food inflation but, even so, it probably means that the central bank’s easing cycle will be paused for a little longer. … Egypt Consumer Prices …
Even if the current drift towards an all-out trade war between the US and China is halted (which we doubt), weaker global demand will drag on regional exports. With domestic demand also likely to struggle in many places, we think GDP growth across the …
9th October 2018
The further rise in Mexican inflation in September will provide yet more ammunition to the hawks within Banxico. But with inflation now likely to have peaked, we still expect the next move in interest rates to be down – although this is unlikely to come …
Economic growth has held up far better than financial markets in the emerging world over the past few months. But while some countries will continue to do well, EM growth in aggregate is now slowing and will continue to decelerate over the coming year. … …
As the price for a deal with Pakistan, the IMF is likely to demand a further sharp tightening in fiscal and monetary policy as well as structural reforms aimed at raising more revenue and improving the business environment. Although growth is likely to …
Domestic demand will pick up speed ahead of next year’s sales tax hike, extending one of Japan’s strongest runs of growth since the 1980s, and price pressures will strengthen. But weaker domestic demand after the tax hike means that GDP growth will slow …
The sizeable rise in Chilean inflation to 3.1% y/y in September, taken together with hawkish comments from policymakers, supports our view that rates will begin to rise at the central bank’s meeting next Thursday. We’ve pencilled in a 25bp rise in the …
8th October 2018
Consumer price inflation is likely to have risen in September, in large part because the recent sharp fall in food inflation appears to have reversed. More important from the policy perspective, core inflation is likely to have remained elevated. The …
We think the upcoming reduction in banks’ required reserve ratio will be followed by cuts to the policy rate to ensure that interbank rates fall far enough to boost lending. But despite its growing efforts to prop up economic activity, the People’s Bank …
The fall in Swiss inflation in September is a sign of things to come. Indeed, exchange rate effects and weak wage growth are set to ensure that price pressures remain very weak, keeping the SNB on hold until 2020. Meanwhile, although private sector …
5th October 2018
The sharp rally in Brazilian asset prices this week appears to reflect growing expectations that right-wing candidate Jair Bolsonaro will win the presidential election, the first round of which is on Sunday, but we think the markets are getting ahead of …
The changes to Canada’s trading relationship with the US and Mexico do not, on their own, have big implications for the economy. By removing uncertainty, the agreement will help to keep economic growth at a healthy clip for the next couple of quarters. …
The recent strength of the economy appears to be pushing Fed officials in an increasingly hawkish direction. But the corresponding surge in market interest rates this week only reinforces our own view that economic growth will slow sharply next year. … …
The further rise in Russian inflation, to 3.4% y/y, last month was driven mainly by a pick-up in food inflation, but core price pressures stayed soft. That, coming alongside the recent stabilisation of the ruble and fall in inflation expectations, …
The rise in Brazilian inflation, to 4.5% y/y in September, has already exceeded the BCB’s newly-published forecasts. And, taken together with comments from policymakers that hint at the start of a tightening cycle, it’s looking most likely that the first …
Inflation in the Philippines rose to a fresh nine-year high in September, but even if it starts to drop back over the coming months, pressure is likely to remain on the central bank (BSP) to tighten policy further. Elsewhere, the central banks of …
The Reserve Bank of India (RBI) unexpectedly kept rates on hold today, but flagged several upside risks to the inflation outlook in its accompanying statement and explicitly shifted to a more hawkish formal description of its policy stance. As such, we …
New GDP figures have presented a more flattering picture of Ghana’s economy, though obviously actual output remains unchanged. The Bank of Uganda hiked its key interest rate this week, adding to signs that Africa’s wave of policy loosening is over. …
We doubt that the gap between the Reserve Bank of Australia’s relatively upbeat tone and the downbeat feel of the recent economic news will be sustained for long. We suspect the RBA may become a little more concerned about how credit conditions and the …
Business and consumer surveys suggest that growth in the euro-zone as a whole will continue at a fairly healthy pace of around 0.4% per quarter in the near term. But there is a growing divergence by country. The German survey indicators have stabilised at …
4th October 2018
Poland’s MPC maintained a dovish stance today. On the face of it, low inflation suggests that this position is justified, but we think that policymakers are too sanguine on the outlook for consumer prices. Inflation is likely to rise by more than the MPC …
3rd October 2018
A year after the Fed began shrinking its balance sheet, global central banks’ net asset purchases have slowed sharply, and they are set to turn negative in January. However, we doubt that this will cause a sharp sell-off in global bond markets or that it …
The timing of the Brazilian central bank’s first interest rate hike is likely to be determined by politics as much as economics. There’s a lot of uncertainty related to the outcome of the Presidential election. But, as things stand, it seems most likely …
Although the Central Bank of Iceland left monetary policy unchanged today, it reiterated that it was prepared to take action if inflation expectations rise further. We think that this is likely and continue to expect the Bank to raise interest rates by …
The larger-than-expected rise in Turkish inflation to 24.5% y/y in September increases the chances of another interest rate hike at this month’s MPC meeting. But given the scale of last month’s rate hike and continued bellicose comments from President …
The Reserve Bank of Australia (RBA) sounded a bit more confident in its economic outlook when it decided to leave interest rates unchanged at 1.5% for the 26th month today. But we still think that GDP growth will fall short of the Bank’s optimistic …
2nd October 2018
August’s further fall in euro-zone unemployment adds to evidence that wage growth is likely to rise further in the coming months, supporting the case for gradual ECB policy normalisation. But there are still dramatic differences by country. … Euro-zone …
1st October 2018
The State Bank of Pakistan (SBP) hiked interest rates by a further 100bp on Saturday and made clear in its policy statement that tackling the country’s mounting external imbalances remain its priority. We think further rate hikes are likely before the end …
The Italian and French governments’ fiscal plans, announced this week, suggest that the headline budget deficit will be similar in both countries over the next few years. But we suspect that the deficit in Italy will be bigger than the official target. …
28th September 2018
Comments from US President Donald Trump this week gave little indication that he is about to trigger the six-month NAFTA withdrawal period, but there is a rising risk of the US imposing auto tariffs on Canada, which could turn out to be more damaging than …
There are still no signs that domestic political uncertainty is weighing on the Swedish economy, so we continue to expect the Riksbank to raise rates in December. Meanwhile, rising inflation expectations mean that Iceland’s central bank is likely to …
Japan’s government this week caved to US pressure to start discussions on a bilateral trade deal. But it appears to have won some valuable concessions in return. Meanwhile, we learnt more about what the Bank of Japan was thinking with its recent …
EM inflation increased to its highest level in more than a year and a half in August, and we think that this has further to run over the coming months. One consequence is that the monetary policy in much of the emerging world is likely to tighten. … EM …
The Philippines and Indonesia hiked interest rates on Thursday, and it is only likely to be a matter of time before other central banks in the region follow them. Pakistan’s central bank is likely to raise interest rates over the weekend, while the …
Turkish financial markets rallied this week amid signs of improving foreign relations and easing strains in the banking sector, but the latest data releases add to the evidence that the economy is entering a severe recession. Meanwhile, the continued …
The further decline in core inflation in September was a little disappointing and, against a backdrop of slower economic growth, will ensure that the ECB remains very cautious in its approach to normalising policy. We think that the first hike will come …
