Filtered by Topic: Monetary Policy Use setting Monetary Policy
Poland’s economy is set to expand at a robust pace over the remainder of 2018, but rising inflation and tighter monetary policy will cause the economy to slow by more than is widely anticipated in 2019 and 2020. What’s more, the country’s longer-term …
25th July 2018
Widespread fears that Nigeria’s upcoming election will spur inflation are not supported by the available evidence. We think that price pressures will continue to ease over the rest of this year. … Nigeria: Pre-election inflation fears …
The very low level of long-term bond yields across the euro-zone suggests that there is no urgent need for the ECB to copy the US Fed’s “Operation Twist” by replacing short-dated securities with longer-dated ones. But this is a tool that it could deploy …
The statement accompanying the decision by Chile’s central bank to hold its policy interest rate at 2.50% provided the clearest sign yet that policymakers are moving towards tightening. This supports our view that interest rate hikes will come sooner, and …
The collective view of the Monetary Policy Committee (MPC) in June was that “an ongoing tightening of monetary policy over the forecast period” would be necessary if the economy evolves in line with its forecast. Since then, the hard and survey data have …
The improvement in Egypt’s balance of payments position over the past eighteen months should be sustained, providing some support to the pound. Accordingly, inflation should resume its downward trend later this year, allowing the central bank to resume …
24th July 2018
The recovery in Latin America stalled in Q2, but we expect regional growth to accelerate over the coming quarters and our GDP forecasts for 2018-19 are generally above consensus. The main exception is Argentina, where we remain more bearish than most …
Nigeria’s MPC left its key rate on hold at 14.00%, and hawkish language has led us to remove the rate cuts that we’d previously pencilled in for Q4. Confusingly, the governor also announced unorthodox policy tools to loosen credit conditions, which will …
The Hungarian MPC’s post-meeting communications reinforced the message that the MPC is inching towards a tightening cycle. For our part, we think inflation is likely to rise further than most think and, as a result, interest rates will ultimately be …
The Turkish central bank’s decision to leave its one-week repo rate unchanged at 17.75%, when most had expected at least a 100bp hike, suggests that President Erdogan is already using his strengthened position to influence monetary policy. The lira has …
The State Council has called for more proactive fiscal policy, including additional tax cuts. This follows further, large liquidity injections by the People’s Bank. While the direct impact of these moves will be small, they leave little doubt over the …
Inflation in Nigeria slowed in June, and we think that it will continue to ease over the coming months. While policymakers will keep their key rate on hold tomorrow, they will probably cut later this year. … Nigeria Consumer Prices …
23rd July 2018
Prime Minister Modi’s BJP comfortably defeated the vote of no-confidence initiated by opposition parties on Friday. The result isn’t a major surprise given that the BJP holds a majority in the Lok Sabha (lower house of parliament). In fact, the overall …
The BoJ has been able to drastically slow the pace of its acquisition of Japanese Government Bonds since it adopted a 0% yield target, which should quells doubts about the policy’s long-run viability. And while ultra-loose policy creates some challenges …
Central banks in Colombia and Chile are set to leave interest rates unchanged at their meetings next week, but we think rates are likely to rise sooner, and a little further, than the markets are currently pricing in. Meanwhile, there remains a long way …
20th July 2018
Recent euro-zone data releases have generally been encouraging, supporting our view that GDP growth picked up from 0.4% in Q1 to 0.5% in Q2. Meanwhile, the EU-Japan trade deal, signed this week, is unlikely to have a significant macroeconomic effect. Next …
The GDP data due next week are likely to show the economy expanding at a solid pace in the second quarter. Uncertainty over trade policy appears to be worrying some firms but, with little sign so far of any impact on activity, that won’t stop the Fed from …
The People’s Bank appears to be leaning against downward market pressure on the renminbi. But the depreciation it has allowed so far will already provide a cushion for China’s exporters as they face the prospect of further US tariffs – potentially on all …
Economic growth in Switzerland and across the Nordics looks set to remain pretty strong over the coming years. But inflationary pressures vary significantly between countries. We think that central banks in Sweden and Norway will start to raise interest …
The financial markets are probably right to assume that an interest rate rise in August is still more likely than not. Somewhat counterintuitively, lower inflation might make it easier for the MPC to raise rates, as it will relieve the pressure on …
Activity data released in Russia, Turkey and Poland suggest that regional GDP growth remained strong at around 4% y/y in Q2. Among a number of monetary policy decisions due next week, we expect Turkey’s central bank to hike interest rates by another …
The decision earlier this week to raise the hourly minimum wage by a further 11% next year will undermine President Moon Jae-in’s goal to reduce inequality and boost private consumption growth. … Korea’s minimum wage policy …
South African activity data out this week supported our view that the economy strengthened in the middle of Q2. Even so, growth will probably disappoint over 2018 as a whole. Elsewhere, Abuja’s efforts to re-launch Nigeria Air threaten to burden the …
The financial markets are probably right to assume that the release of June’s bumper labour market figures has increased the chances that the Reserve Bank of Australia will raise interest rates a bit earlier than otherwise. But there’s unlikely to be …
Having announced last month that asset purchases will end in December, the ECB is unlikely to make any policy changes at its July meeting. We doubt that President Draghi will offer more explicit forward guidance than to reiterate that interest rates will …
19th July 2018
The raft of quarterly GDP data released over the past month confirmed that the MENA region rebounded at the start of this year and more timely figures suggest that the recovery is gathering momentum. Saudi Arabia pulled out of recession and Egypt’s …
South African policymakers adopted even more hawkish language at today’s MPC meeting, but we still doubt that they will hike rates in 2019. The risks to our non-consensus view are, admittedly, growing. … SA: SARB talks tough, but rate hikes still …
There is growing evidence that, despite Banxico’s best efforts, inflation expectations in Mexico are becoming unanchored. One consequence is that the monetary policy debate over the coming months will focus on the need for more rate hikes. However, we …
The Ministry of Finance is pushing back against calls to loosen policy. It may have little choice but to oblige, however, if headwinds to growth intensify in the coming quarters as we expect. … A shift in fiscal policy is …
Bank Indonesia (BI) left interest rates on hold today, but the hawkish tone of Governor Perry Warjiyo’s press conference and the accompanying policy statement reaffirm our view that further monetary policy tightening is likely later in the year. … …
Corporate bond defaults in China have jumped recently, adding to worries about the economic outlook. July is on track to more than double the previous monthly record for the scale of onshore bonds entering default. The economic slowdown that we are …
Most European economies have experienced a slowdown since last year, but growth is still strong by historic standards and prospects are fairly bright. Admittedly, trade protection poses a serious threat, particularly to the most open economies like …
Our calculations suggest that second-quarter GDP growth was as strong as 4.5% annualised, driven by a rebound in consumption growth and a big export-fuelled contribution from net external trade. It should be all downhill from here, however. The dollar’s …
18th July 2018
The lower-than-expected rate of CPI inflation means that a hike in interest rates in August is less clear cut. However, we still think that it remains more likely than not. … Consumer Prices & Producer Prices …
June’s softer-than-expected inflation print supports our view that fears of a rate hike are misplaced. We think that the SARB will keep policy on hold this year, before cutting its key interest rate in 2019. … South Africa CPI …
The recovery in the MENA region will be stronger than most anticipate over the coming quarters. The Gulf economies are set to benefit from rising oil output and fiscal stimulus, while Egypt’s cyclical upturn also has further to run. Fragile balance sheets …
17th July 2018
The Bank of Japan’s admission that inflation won’t reach its 2% target anytime soon has generated speculation that the target will be lowered at the meeting later this month. By contrast, we believe that the target is here to stay. … Will the BoJ lower …
The stronger-than-expected Turkish industrial production data for May, at first sight, suggest that the economy has weathered the recent financial market turmoil, but we doubt that this resilience will last. Indeed, there are signs that underlying …
The State Bank of Pakistan’s (SBP) 100bp hike to its policy rate on Saturday, along with today’s devaluation of the rupee, underlines growing concerns about the country’s precarious external position. Further rate hikes are likely over the coming months …
16th July 2018
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it surged to its highest rate in almost five years in June and looks set to remain elevated suggests that the RBI will follow up its recent rate hike with …
The 2019 budget guidelines approved by Brazil’s Congress this week diluted measures to contain spending and reinforce our view that appetite for economic reform in the legislature is waning. Even if an investor-friendly candidate wins October’s …
13th July 2018
The Bank of Canada appears increasingly confident in the economic outlook, but we think that its forecasts for GDP growth will prove to be too optimistic. Following this week’s increase in the policy rate to 1.50%, from 1.25%, the Bank believes that …
The release of disappointing credit data a month ago catalysed a deterioration in sentiment about China’s economy. Today’s even weaker figures will only add to those concerns, with the early signs suggesting that domestic activity also slowed in June. … …
According to the minutes of the Riksbank’s July meeting, Sweden’s monetary policymakers were particularly worried about the weakness of non-energy inflation. And with some justification. Data published this week showed that in June the CPIF excluding …
The financial markets will have one eye on President Donald Trump’s summit with Russian President Vladimir Putin next week, but Fed Chair Jerome Powell’s semi-annual congressional testimony is likely to take centre stage. Powell, who has been a revelation …
May’s GDP figures this week confirmed that the economy is starting to regain some momentum. That said, growth was still pretty anaemic, raising the possibility that the Monetary Policy Committee could back away from raising interest rates in August. But …
In an otherwise quiet week, the main economic news was the publication of the minutes of June’s ECB meeting. They showed that members of the Governing Council “widely agreed” to update their forward guidance, which now states that interest rates will be …
Turkish President Erdogan’s decisions this week to exclude investor-friendly members from his new cabinet and renew his calls for lower interest rates have rattled local financial markets and, ironically, strengthened the case for further rate hikes . …
A further slowdown in lending in June adds downside risks to economic growth and is likely to trigger a policy response. … Bank Lending & Broad Credit …
Survey and output figures released this week suggested that conditions in Nigeria and South Africa improved in Q2. South African retail sales figures out next week will probably provide more evidence of a modest recovery. We think that the SARB will keep …
