Filtered by Topic: Monetary Policy Use setting Monetary Policy
Despite the further escalation in trade tensions between the US and China over the past week, there is little sign that policymakers are starting to panic. … Trade war risks rise, but no panic …
13th July 2018
Consumer price inflation rose to a five-month high in June and, with core inflation in particular set to remain elevated, we think the RBI will follow up last month’s hike in the repo rate with further modest policy tightening, perhaps even as soon as the …
12th July 2018
Reports that Saudi Arabia will scrap the Aramco IPO would, if confirmed, deal a symbolic blow to the Kingdom’s reform plans, but the economic impact should be limited. And the news flow on arguably more important (but lower-profile) reforms has been …
Economic growth in Sub-Saharan Africa will probably strengthen over the second half of 2018, but we think that the consensus view that this year’s performance will mark the start of a multi-year acceleration is overly optimistic. Although most EM central …
June’s rise in Swedish CPIF inflation entirely reflected higher energy inflation. But with domestic price pressures building, and the latest minutes showing that Riksbank officials are increasingly concerned about stronger inflation, we continue to think …
The Bank of Korea (BoK) kept its policy rate on hold at 1.50% today, and while there was a dissenter favouring a rate hike, rising downside growth risks, benign inflation and limited external vulnerabilities suggest imminent policy tightening is not on …
Global monetary and credit conditions should remain supportive of GDP growth in the near term, even though the stock of assets purchased under “global” QE programmes is close to peaking. … Monetary Indicators Monitor …
11th July 2018
Alongside its decision to raise the key policy rate from 1.25% to 1.50%, the Bank of Canada maintained a fairly hawkish tone in its policy statement. While this suggests that the Bank intends to raise interest rate further in 2018, we suspect that it will …
Poland’s MPC bucked the regional trend today by retaining its ultra-dovish stance. However, we think that Polish policymakers will soon start to follow their neighbours. Inflation is likely to rise above the central bank’s 2.5% target range by early-2019, …
US plans to impose tariffs on an additional $200bn of Chinese imports represent a marked escalation of the ongoing trade tensions between the US and China. The tariffs would have knock-on effects on the rest of the region, with Taiwan and Malaysia likely …
The US is moving ahead with plans to impose a 10% tariff on an additional $200bn of imports from China. This will add to existing headwinds on China’s growth and is likely to trigger further policy easing. … Expanded US tariffs strengthen case for policy …
In the event that rising trade tensions lead to a significant fall in US imports from China, it would have a sizeable impact, not just on China, but also on other countries such as Taiwan and Malaysia which export a lot of intermediate goods to China. …
Malaysia’s central bank (BNM) left interest rates unchanged at today’s scheduled monetary policy meeting, but it shifted to a more dovish tone under its new governor. While we are forecasting no change to policy this year or next, with inflation set to …
We expect GDP growth to be broadly in line with trend both this year and next. The labour market will remain very tight and wage growth may strengthen further. But sluggish demand after next year’s tax hike will keep 2% inflation out of reach. The Bank of …
The tariffs announced so far are unlikely to boost Canadian inflation by much more than 0.1% pt, while the effects on economic growth should also be small. We therefore doubt that they will have much bearing on tomorrow’s Bank of Canada monetary policy …
10th July 2018
The main impact for EMs so far from rising global trade tensions and risk aversion has been on financial markets rather than on economic growth. But the resulting tightening of financial conditions – along with the danger of an escalation towards a trade …
Although GDP came in a touch below the consensus expectation in May, it still looks likely that quarterly growth in Q2 will be in line with the Monetary Policy Committee’s (MPC’s) expectation. As a result, we continue to expect the Committee to raise …
Moves over the past 24 hours by Turkey’s President Erdogan to consolidate his power is likely to result in pressure for looser monetary and fiscal policy, but this will ultimately come at the cost of weaker (and more volatile) economic growth, higher …
June’s decline in core inflation won’t stop the Norges Bank from raising interest rates in September. But with price pressures building only slowly, the subsequent tightening cycle will be very slow. … Norwegian Consumer Prices …
Egyptian inflation jumped to 14.4% y/y last month on the back of recent administered price hikes, but we still think that the next move in interest rates will be down. … Egypt Consumer Prices …
Sentiment about China’s economic prospects has worsened recently as trade tensions have escalated. The tariffs announced so far won’t have a big impact though. Instead, we expect economic growth to slow in coming quarters due mainly to domestic headwinds. …
The Bank of Canada’s policy announcement will take the spotlight next week. Despite June’s Labour Force Survey being something of a mixed bag, the subsequent rise in the Canadian dollar suggests that markets share our view that the rebound in employment …
6th July 2018
The main event this week was the Riksbank meeting , at which the Bank reiterated that it expected to raise interest rates in December. And data released since the meeting support the case for the Riksbank to begin tightening policy soon. Elsewhere, data …
Mexican financial markets have rallied this week following some business-friendly noises from left-wing president-elect Andrés Manuel López Obrador (Amlo), but we’d be wary of reading too much into his comments. There’s still some time before he takes …
Immigration has remained very high up the political agenda this week, and while EU leaders reached a compromise on Monday, this is not a closed issue and tensions may well flare up again. Meanwhile, the news on the German economy has been much better this …
The modest decline in Russian inflation in June, to 2.3% y/y, was mainly a result of a sharp fall in fruit and vegetable inflation. And while headline inflation is still weak, there were some tentative signs in the data that broader price pressures may be …
An encouraging set of Markit/CIPS surveys provided further evidence that the economy has rebounded in Q2. Meanwhile, in a speech this week, Bank of England Governor, Mark Carney, appeared to reinforce market expectations that an interest rate rise in …
The infringement procedure launched this week by the European Commission against Poland – in response to controversial legal reforms and the associated worries about the erosion of judicial independence – has put the country in the headlines this week. We …
BoJ Board member Harada this week refuted criticism that the Bank’s prolonged monetary easing poses a major threat to financial stability. We share his view that those concerns are overdone, which is one reason why we expect policymakers to keep policy …
Recently-released figures have supported our view that Kenya’s economy will strengthen this year. Conditions elsewhere, however, seem to have deteriorated. And we think that next week’s data will throw cold water on hopes that South Africa’s economy …
The Malaysian government’s decision earlier this week to suspend work on the US$20bn East Coast Railway Link points to a bleak future for Chinese investment in the country. Halting work on these projects is likely to lead to a slowdown in investment …
With the US and China poised to impose tariffs on each other in the coming days trade tensions look set to ratchet up further. But the world economy is still doing well. We estimate that global economic growth picked up a bit in the second quarter and …
5th July 2018
Economic growth has surged in recent quarters and we expect it to remain strong over the next year or so, supported by buoyant private and government consumption ahead of the general election that is due in mid-2019. Core inflation is also set to stay …
Hard data relating to euro-zone activity in Q2 have been a little disappointing so far, denting hopes that GDP growth would rebound strongly after Q1’s 0.4% quarterly expansion. Industrial production declined by 0.9% m/m in April, while retail sales fell …
The monetary data reveal a sharp slowdown in M1 growth in May, to its weakest pace since early 2016. But this isn’t a serious concern. Our measure of M3 broad money continued to expand at a decent rate, while bank lending growth looks set to accelerate …
The recent spate of rate hikes in the emerging world probably marks the start of a sustained tightening cycle over the next 18 months – the first such cycle since 2011. This has more to do with domestic economic conditions than recent currency weakness. …
The improvement in all three Markit/CIPS PMI surveys in June provided further signs that the economy has rebounded after the weak start to the year. Indeed, the all-sector PMI rose from 54.3 in May to 55.0, suggesting that quarterly GDP growth has …
Headline consumer price inflation is likely to have stayed well above target in June, due in large part to core inflation remaining elevated by the standards of the recent past. We think that this will ultimately prompt the Reserve Bank to follow up …
Despite a host of negative developments since the Bank of Canada signalled in May that an interest rate rise was imminent, policymakers still seem eager to raise rates. While we now expect the Bank to hike next week, we think that its optimism is …
4th July 2018
Although the National Bank of Romania left its key policy rate unchanged today, the Bank is using open market operations to tighten monetary conditions. We think that policymakers will return to conventional interest rate hikes to tighten policy in the …
The sharp rise in the Egyptian government’s foreign currency debt over the past few years is not yet a major cause for concern – the risk of a destabilising fall in the pound appears to be low and the authorities are making progress with fiscal …
Emerging market (EM) currencies have mostly recovered a little ground against the dollar today. But the bigger picture is that they have generally been weakening for some time now, and in our view further falls are likely in most cases even if fears of a …
3rd July 2018
The recent plunge in Japan’s jobless rate suggests that wage growth will pick up faster than we had been anticipating. But we suspect that unemployment is now close to a floor so wage growth may never reach the rates necessary to meet the BoJ’s 2% …
The Riksbank looks very likely to raise interest rates in December. We think that the Bank will then raise interest rates more quickly in 2019 and 2020 than investors expect, causing the krona to strengthen. … Tighter monetary policy on the way in …
The much stronger-than-expected rise in Turkish inflation in June, to 15.4% y/y, is likely to prompt the central bank to hike interest rates, perhaps by 100bp, at its meeting later this month. … Turkey CPI …
Growing concerns about the global trade dispute and the deepening domestic housing downturn mean that the Reserve Bank of Australia will probably leave interest rates at 1.5%, as it did at today’s meeting for the 23rd month, until late next year. While a …
The increase in the ISM manufacturing index in June is a clear sign that, for now at least, the strength of the domestic economy is more than offsetting any increased uncertainty on trade policy . However, with the dollar appreciating by 6% since April, …
2nd July 2018
June’s manufacturing PMI suggests that the sector has rebounded from a disappointing Q1. And the forward-looking balances provided some encouragement that the outlook for the sector has improved. … UK Markit/CIPS Manufacturing PMI …
A victory for left-wing populist Andres Manuel Lopez Obrador (Amlo) in Mexico’s presidential vote this weekend looks priced in. The market reaction is likely to take its cue from the performance of his Morena coalition in the legislative elections taking …
29th June 2018
There was nothing in the comments made by MPC members this week, nor in the latest data releases, to make us alter our view that the MPC will raise interest rates on August 2 nd . Admittedly, Jonathan Haskel’s testimony in front of the Treasury Committee …
