Filtered by Topic: Monetary Policy Use setting Monetary Policy
Central banks across Africa held their rates unchanged this week, strengthening our view that the region’s long loosening cycle has now come to an end. Nigeria’s election cycle will get into gear next week, as the opposition PDP selects its candidate for …
28th September 2018
August’s rise in inflation and signs of weaker capital inflows swayed Egypt’s central bank to leave interest rates on hold last night but, if we are right in expecting inflation to drop back over the coming months, the easing cycle is likely to resume. We …
The People’s Bank clearly doesn’t feel under great pressure to “follow the Fed”. It left its policy rates on hold this week after the US Fed raised rates and we expect it to cut rates in the coming months. Meanwhile, after a recent surge in special bond …
Boosted by the fiscal stimulus, GDP growth is still on track to be a solid 2.8% this year but, as that stimulus fades and the Fed continues to tighten monetary policy, we expect growth to slow to 2.2% in 2019 and only 1.5% in 2020. Our baseline forecast …
27th September 2018
We think the Fed is likely to raise interest rates three more times by the middle of next year. By 2020, however, we suspect that Fed officials will reverse course and cut interest rates in response to a slowdown in the economy. Other major central banks …
The larger-than-expected increase in the size of Argentina’s revamped IMF credit line reduces debt rollover risks and is likely to lead to a rally in local markets when they open later today. The central bank’s revamp of its monetary and currency policy …
JP Morgan’s announcement that it will include five GCC economies in its EMBI dollar bond indices should provide a further fillip to foreign investment in the region’s financial markets. Even so, we expect dollar bond spreads in the Gulf to widen over the …
Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375% against a backdrop of strong economic growth and low inflationary pressures. The fairly dovish tone of the CBC’s accompanying statement, which highlighted increasing …
Today’s 50bp rate hike in the Philippines comes in response to a further rise in inflation and is unlikely to be the last in the current cycle. We are expecting rates to rise by at least a further 50bp before the end of the year. … More rate hikes likely …
Figures released over the past month showed that the South African and Angolan economies both contracted in the first half of the year, with South Africa entering a technical recession in Q2. Policymakers across the region held rates in September, but …
Today’s 25 basis point rate hike by Bank Indonesia is unlikely to be the last in the current cycle. With the rupiah set to remain under downward pressure over the coming months, we expect at least two more rate hikes before the end of the year. … Further …
Ever since starting its rate-hiking cycle in June, the RBI made clear that the future path of monetary policy will be determined by incoming data. With GDP growth surging to a two-year high in Q2 and core inflation remaining elevated, there are good …
The Reserve Bank of New Zealand kept the faith in its relatively optimistic forecasts for the economy while leaving interest rates at 1.75% for the 22 nd month today, but you could argue that the policy statement sounded a bit more dovish. Our view that …
The Fed stuck to the script today, pushing ahead with another rate hike and signalling through the accompanying statement and economic projections that it will raise interest rates four times between now and the end of next year. We expect the Fed to …
26th September 2018
A combination of the Fed’s balance sheet rundown and rising interest rates have pushed narrow money growth down to an eight-year low, but growth in the broader money and credit aggregates have held up much better, suggesting that slowdown is not affecting …
The Japanese yen is the only “major” currency to have fared worse than the US dollar since the middle of August. Nonetheless, we think that its fortunes will improve against the greenback. Our forecast is that the exchange rate will drop back from around …
Economic growth looks set to remain healthy in the near term, which will prompt the Bank of Canada to raise interest rates twice more. But the Bank is underestimating both the extent to which construction activity will contract and the negative effects …
The ECB’s loose monetary stance isn’t compatible with Slovakia’s advanced stage of the business cycle and it looks like the government will respond by tightening fiscal policy to prevent the economy from overheating. This, coupled with household …
The surprising strength of economic growth in the second quarter has led us to revise up our forecasts for GDP growth in the 2018 calendar year from 2.5% to 3.2% for Australia and from 2.5% to 2.7% for New Zealand. But an easing in investment growth and …
Nigerian policymakers struck a hawkish tone today, but we doubt that rate hikes are on the cards. Inflationary pressures are probably not as worrying as Governor Emefiele seems to believe. Kenyan policymakers left their key policy rate on hold again, and …
25th September 2018
Today’s ouster of Swedish Prime Minister Stefan Löfven might seem to justify yet another delay to the Riskbank’s policy normalisation plans. But the economy should continue to perform well and might even fare better under a new government. And since price …
Today’s softer-than-expected inflation data from Mexico, which showed that price pressures were unchanged in the first half of this month, supports our view that the headline rate will resume its downwards trend in Q4. In contrast to the market, we expect …
24th September 2018
Central banks in Emerging Europe shifted into tightening mode this month as policymakers in Turkey, Russia and Ukraine hiked interest rates in response to pressure on their currencies. The Czech MPC is likely to raise rates later this month, although in …
Campaigning ahead of next April’s presidential election in Indonesia officially got underway at the weekend, with President Joko Widodo (also known as Jokowi) set to take on former general, Prabowo Subianto, in a repeat of the 2014 election. In order to …
The Norges Bank’s “dovish hike” this week caused the krone to weaken, and we think that this is a sign of things to come. Meanwhile, the Swiss National Bank left policy unchanged, and we suspect that it will keep interest rates at record lows for longer …
21st September 2018
The latest data add to the evidence that the slowdown in the euro-zone economy this year has not just been down to a series of “one-offs”. We expect growth to slow further over the next couple of years. Meanwhile, a speech by a member of the ECB’s …
Global money and credit conditions remain accommodative. Broad money has been expanding at a decent pace and the latest lending data are encouraging. There are, however, some signs that higher interest rates in the US are beginning to weigh on household …
The New Economy Program presented by Turkey’s finance minister on Thursday included more realistic economic forecasts, but it failed to build on the central bank’s interest rate hike last week and indicate a broader improvement in domestic policymaking. …
Rising inflationary pressures in the Philippines mean the country’s central bank is likely to raise interest rates by 50bp at its meeting next week. Bank Indonesia is also likely to raise rates, but probably by just 25bp. Meanwhile, the region’s financial …
Zambia’s debt worries escalated this week, and it’s increasingly difficult to see how the country can avoid a full-blown crisis. Elsewhere, yesterday’s MPC vote in South Africa was closer than we’d expected, but we still think that the SARB will keep …
Recent comments by Prime Minister Abe suggest that he is no longer obsessed with overcoming deflation and would like the Bank of Japan to focus more on the financial stability part of its mandate. However, credit growth remains strong, price pressures …
Even though emerging market (EM) assets generally weakened again over the past month, and some have now fallen a very long way, we still forecast that there is considerably more pain to come. … Trouble for EM assets probably far from …
20th September 2018
Today’s split MPC decision in South Africa shows significant minority support for tighter policy. But if the hawks couldn’t swing today’s vote, it’s unlikely that they will succeed in pushing for a rate hike over the next six months or so – with the rand …
The sharp widening in Lebanese dollar bond spreads this week suggests that investors are increasingly fearful that the country is lurching towards an economic crisis and, in the event of a fresh escalation of tensions with the Gulf, we think that a …
The Norges Bank has announced its first interest rate hike in seven years, but we suspect that the tightening process will be over much sooner than policymakers or investors envisage. … Norges Bank tightening to end sooner than most …
The Swiss National Bank stuck firmly to its ultra-accommodative policy stance today and sounded more downbeat about the outlook, revising down its medium-term inflation forecasts in light of the recent appreciation of the franc. With inflation set to …
The statement that accompanied the Brazilian Central Bank’s meeting last night provided the first clear sign that it is preparing to tighten monetary conditions, with the first rate hike likely to come before the end of 2018. But the tightening cycle is …
Mr Abe will remain Prime Minister for another three years. That means fiscal policy will probably be tightened further, monetary policy will remain loose and policymakers may take some further steps to address the country’s demographic headwinds. … What …
The Reserve Bank of New Zealand will keep interest rates unchanged at 1.75% at the policy meeting on Thursday 27th September and will probably acknowledge that GDP growth in Q2 was stronger than it had anticipated. But we still think that economic …
We have revised up our forecast for the price of Brent crude, but still expect it to fall in the coming year or so, helping to reduce headline inflation. However, we don’t expect this to have much impact on monetary policy, because central bankers in …
19th September 2018
Last week’s aggressive interest rate hike in Turkey has reduced the risk of a more acute balance of payments crisis and helped to restore some of the central bank’s (CBRT) damaged credibility. But the CBRT would need to shrug off pressure from President …
The continued strength of economic growth in the third quarter together with signs that wage growth and underlying inflation are accelerating will maintain pressure on the Fed to keep raising interest rates once a quarter, including at next week’s …
Judging by what has happened in recent months, President Trump’s attitude to global trade could remain a more important driver of the US dollar than the prospects for monetary policy in the US and elsewhere. With this in mind, we might need to revise our …
The Bank of Thailand (BoT) left its policy rate unchanged at 1.50% today, but the hawkish tone of accompanying statement suggests that rate hikes are in the pipeline. With inflationary pressures very low, worries over the strength of the currency mounting …
South African inflation slowed to 4.9% in August, which supports our view that policymakers at the SARB will leave their key rate on hold at 6.50% at their meeting tomorrow. … South Africa CPI …
The Bank of Japan today reiterated its pledge to keep rates low for a prolonged period. With the sales tax hike looming and inflation set to remain below target for longer, we think that the Bank will keep rates unchanged beyond 2020. … Mounting risks …
The National Bank of Hungary’s revamp of its monetary policy framework announced today was characteristically complex. But the key point is that the Bank is paving the way for policy tightening and we expect interbank interest rates to increase over the …
18th September 2018
The latest comments from the ECB’s Benoît Coeuré suggest that future guidance about the pace of policy tightening might hinge on developments in wage growth. In our view, this would be a positive development, reducing the risk that the historically …
The US appears to be on the verge of expanding its tariffs to cover a total of $250bn of Chinese goods, the production of which generates 1.3% of China’s GDP. The proposed $200bn tariff list includes some consumer goods, though most have still been …
17th September 2018
Our new forecast that the Reserve Bank of Australia won’t raise interest rates from the record low of 1.5% until late in 2020 compares to the consensus view that lift-off will take place late next year. That partly explains why we now expect the …
