Filtered by Topic: Monetary Policy Use setting Monetary Policy
The minutes of the Reserve Bank’s August policy meeting – at which interest rates were hiked again – show that the MPC has placed great importance on preserving its recently-acquired credibility. With this in mind and given that core inflation is still …
17th August 2018
Commercial banks’ non-performing loans (NPL) rose by RMB183bn in Q2, the biggest increase in over a decade. On paper, bad loans now make up just under 2% of all loans, the highest ratio since the Global Financial Crisis. The official NPL ratio still looks …
16th August 2018
Credit has continued to expand steadily in most major advanced economies in recent months and is rising particularly strongly in the US. Meanwhile, the currency crisis in Turkey has so far had only a fairly small knock-on effect on financial conditions in …
Following his shock election victory at the start of May, 93-year-old Prime Minister Mahathir Mohamad has wasted no time in carrying out his main campaign promises. With his first 100 days in office now almost up, Mahathir has already scrapped an …
After leaving policy unchanged today, the Norges Bank looks almost certain to begin raising interest rates at its next meeting in September. But even as the central bank tightens monetary policy over the next few years, we think that falling oil prices …
Colombian GDP growth increased from 2.2% y/y in Q1 to 2.8% y/y in Q2, and we think the recovery will strengthen by more than the consensus expects over the coming quarters. … Colombia GDP (Q2 …
15th August 2018
The plunge in the Turkish lira is likely to push inflation above 20% and tip the economy into recession in the coming months. Our base case is that GDP growth will now average 3.0% over 2018 as a whole (thanks to a strong first half of the year) and be …
Today’s rate hike by Bank Indonesia (BI) comes against a backdrop of continued weak economic growth and subdued inflation, and demonstrates that BI’s main focus remains supporting the currency. With the rupiah likely to remain under downward pressure over …
The rand’s status as a liquid, easily traded currency makes it particularly vulnerable to shifts in EM sentiment. But these seldom last, and the SARB will not – as some expect – respond by hiking rates. … South African rand: Why always …
14th August 2018
Wholesale price inflation moderated in July after hitting a five-year high in June. But core inflation remained elevated, supporting our view that the RBI’s tightening cycle still has a little further to run. … Wholesale Prices …
Abolishing cash would allow the Bank of Japan to cut interest rates deeper into negative territory. But in a society where cash transactions are still widespread, such a move would prove deeply unpopular. And if policy rates become too negative, consumers …
EM currencies have come under pressure over the past few days as Turkey’s crisis has escalated, but history suggests that such sentiment-driven sell-offs tend to be short-lived. We wouldn’t expect the majority of EM central banks to react to the latest …
13th August 2018
Growth in bank lending picked up last month to the fastest pace this year. However, a further slowdown in other forms of credit, including shadow financing, mean that broad credit growth continued to weaken in July to a fresh multi-year low. … Bank …
The drop in Indian consumer price inflation in July was due in most part to a sharp fall in food inflation. Core inflation remained elevated. As such, we think that the Reserve Bank’s tightening cycle has a little further to run. … Consumer Prices …
Policymakers at the Bank of Uganda kept the policy rate unchanged at their meeting this morning and we don’t expect any rate cuts for the remainder of this year. … Uganda Interest …
The falling rand has, yet again, highlighted the currency’s vulnerability to EM risk sentiment. From an economic perspective, however, the country’s situation is very different from Turkey’s building crisis. … South Africa: Turkey …
There is a good chance that the recent volatility in financial markets triggered by the crisis in Turkey will prompt Bank Indonesia into hiking interest rates at its meeting on Wednesday. For most countries, however, the sharp falls in financial markets …
The collapse in the lira has raised concerns about the health of Turkey’s banking sector. Banks’ dollar bonds yields and interbank interest rates are already pointing towards some stress, and these will be key indicators to watch over the coming days and …
10th August 2018
The renewed appreciation of the Swiss franc this week as investors sought out safe haven assets will not have been welcomed by the SNB. But the franc is still weaker than it has been over the past few years so we do not expect the SNB to alter its stance. …
The Turkish lira may have surpassed the Argentine peso as the worst performing EM currency this year, but Argentine markets have still had a rough week. The lesson from other parts of Latin America is that, if Argentina’s escalating graft probe implicates …
Market interbank rates have now converged with those offered by the People’s Bank in its lending operations. We think the central bank will soon start cutting these official policy rates in order to sustain a further loosening of monetary conditions. … …
Hong Kong’s economy slowed last quarter in year-on-year terms after expanding in Q1 at the fastest pace since 2011. Looking ahead, with headwinds from tightening monetary conditions building and external risks increasing, we expect economic growth to cool …
Turkey seems to have been on the brink of a crisis several times this decade, only for the central bank to do just enough to steady the ship. But there are reasons to think that emergency interest rate hikes during the current currency crisis might only …
Joko Widodo (also known as Jokowi) confirmed earlier this week that he will be seeking a second term as president, setting the stage for a repeat of the 2014 election, which saw him narrowly edge past Prabowo Subianto, who leads Indonesia’s main …
The rescue of five small failing banks in Ghana should help to improve the (fragile) health of the sector and, in time, should help to support a recovery in credit growth. Elsewhere, the resumption of debt restructuring talks in Mozambique is likely to …
Media reports suggest that the Bank of Japan was close to hiking rates twice this year. But the decision to allow ten-year yields to rise a bit further above the 0% target placated the hawks on the Board. And the introduction of forward guidance suggests …
The chances that interest rates in Australia will rise a bit earlier than we expect have grown this week while it has become more likely that interest rates in New Zealand will be unchanged for longer than we expect. That divergence gives us more …
The Reserve Bank of Australia’s new projections that the economy will be in an almost perfect state in 2020 suggest that the Bank is edging ever so slowly towards raising interest rates. Our view that GDP growth will be weaker than the RBA expects and …
The second consecutive monthly rise in Mexican inflation was driven largely by higher energy inflation, and is unlikely to spook Banxico. There’s a long way to go until the next policy meeting, but assuming the peso holds up well, the central bank is …
9th August 2018
The diplomatic spat that erupted between Saudi Arabia and Canada this week should have little economic impact, but it does risk undermining investor confidence in Saudi Arabia at a time when the government is already wavering on its reform agenda. …
The central bank in the Philippines (BSP) today increased its policy rate for the third meeting in a row, and left the door open to further rate hikes. We think at least one further increase in rates is likely, but with inflation likely to start falling …
While leaving interest rates at the record low of 1.75% at today’s policy meeting, the Reserve Bank of New Zealand strongly suggested that the first interest rate hike is further away than it previously thought. That supports the more dovish rate forecast …
Argentina’s central bank announced a tweak to its monetary policy framework last night which, in time, should help it to gain better control over monetary conditions. It also appears to have stopped monetising the government’s budget deficit, and has …
8th August 2018
The lesson from other countries that have suffered from currency crises is that fiscal and monetary policy will need to tighten, preferably under the auspices of an IMF deal, to stabilise the economy. However, it’s unclear that this is politically …
Non-energy inflation in Sweden has been unexpectedly weak in recent months, prompting investors to push back their expectations of the first rate rise into 2019. But there is evidence of rising cost pressures, which we think will give the Riksbank …
Brazilian inflation rose to a higher-than-expected 4.5% y/y last month, but this reflects higher food and energy inflation which the central bank has made clear it will look through. Underlying price pressures still look weak. Elsewhere, the rise in …
The Bank of Thailand left its policy rate at 1.50% today, but the hawkish shift in the central bank’s tone means a rate hike is now likely before the end of the year. We are revising our end-2018 policy rate forecast to 1.75%, from 1.50% previously. … …
Headline consumer price inflation is likely to have dropped in July, in large part due to a fall in food inflation. But core inflation is likely to have remained elevated by the standards of the recent past, underlining why the Reserve Bank felt it needed …
Q2’s slowdown in GDP growth to just 0.3% q/q dealt a blow to hopes that the softness of growth in the first quarter would be a one-off. While no breakdown is available yet, timely data from France and Spain suggest that the weakness reflected a drag from …
7th August 2018
A rise in China’s foreign exchange reserves in July suggests that the People’s Bank did not deploy them to defend the renminbi last month. It may do so soon, however, given growing concerns over outflows. … FX Reserves …
The Turkish lira has recovered some of its losses in the past few hours, but the plunge in the currency over the past few weeks is now on a scale which has, in the past, prompted the central bank to hike interest rates aggressively. We were expecting …
The Reserve Bank of Australia appeared a bit more upbeat on the outlook for the domestic economy while leaving interest rates at 1.5% for the 24 th month today, but it continued to hint that interest rates won’t rise for a while yet. We’re expecting the …
The small rise in Russian headline inflation, to 2.5% y/y, was driven by higher food inflation, while underlying price pressures still look very soft. We still think the central bank will lower interest rates over the next 12-18 months or so, whereas the …
6th August 2018
A new offer to restructure Mozambique’s debt hints at the shape that an eventual deal may take. An agreement would provide a boost to confidence in an economy that is already starting to recover. … Mozambique: Debt offer suggests a deal is …
The housing market enjoyed a little respite in June. The decline in buyer enquiries paused, new sales instructions rose and mortgage approvals recovered from their recent slide. But with house prices very high, and interest rates having risen, neither …
The MPC has estimated that the long-term equilibrium interest rate for the UK economy lies between 2% and 3%. Such estimates are uncertain, but they do tend to reinforce the idea that, barring a significant economic or financial market shock, the …
The world economy has rebounded after a sluggish first quarter, with global growth rising to around 4% annualised in Q2. But we doubt that this will last long because it has largely resulted from a fiscal-stimulus-induced surge in the US economy. What’s …
3rd August 2018
Inflationary pressures now seem to be building in many EMs. As a result, we think that the interest rate hikes seen in a few countries this week and that are likely next week will be followed by monetary tightening across a large part of the emerging …
Although May’s strong GDP growth partly reflected a rebound from earlier weakness, it was nevertheless encouraging and June’s trade data suggest that the economy ended the second quarter on a high note. With July’s Markit manufacturing PMI also suggesting …
Mexico’s central bank struck a hawkish tone in the statement accompanying this week’s monetary policy decision, and the markets are pricing in a good chance of another interest rate hike in the near term. But we still think that interest rates will be cut …
