Filtered by Topic: Monetary Policy Use setting Monetary Policy
There have been clearer signs recently that China’s economy is slowing. We expect headwinds to economic growth to continue to build over the coming months and that this will prompt the People’s Bank to loosen policy in the second half of the year. … …
14th June 2018
The ECB announced today that its asset purchase programme will end in December. But its other communications reinforced our long-held view that interest rates will not rise until at least September 2019. And the Bank kept the door open to renewed asset …
An interest rate rise on 21st June looks unlikely. The Monetary Policy Committee (MPC) will probably want to wait at least a few more months for news on the economy’s health before hiking rates. But provided that the economy holds up well, then we expect …
Households are back to their free spending ways, with the strength of May’s retail sales figures implying that second-quarter real consumption growth (and GDP growth for that matter) will now be more than 4% annualised. With the benefit of the tax cuts, …
Somewhat counterintuitively, the price of gold edged higher following the Federal Reserve’s decision to hike US interest rates for the second time this year. But we don’t think this is the start of a rally. In contrast, we are more positive on the …
The statement accompanying the decision by Chile’s central bank to hold its policy interest rate at 2.50% was slightly less dovish than its last, supporting our view that the central bank will shift into tightening mode over the next 6-9 months. … Chile …
Policymakers don’t put much weight on the wholesale price measure of inflation, but the fact that it accelerated in May and looks set to remain elevated suggests that the RBI will follow up this month’s rate hike with further tightening over the coming …
While the unemployment rate edged down in May, the underutilisation rate held steady suggesting that there is still plenty of slack in the labour market. And in his speech yesterday, Governor Philip Lowe suggested the RBA is increasingly focusing on …
The Fed delivered another 25bp hike in its fed funds target range to between 1.75% and 2.00% today and the updated interest rate projections show that officials now anticipate an additional two 25bp hikes this year (up from one hike in the March …
13th June 2018
Inflation figures released today by Nigeria, Ghana, and Angola were all weak by recent standards. We think that policymakers will continue their easing cycles in late 2018 and early 2019. … West Africa: Easing cycles will …
The Central Bank of Iceland left policy unchanged today and reiterated that a tight monetary policy stance is still needed, given the strong economy and pressures in the labour market. We think that the Bank is underestimating the latter and expect it to …
The most likely consequence of the rapid build-up of household debt over the past decade is a number of years of softer GDP growth and lower interest rates than widely expected. But the risk of a more painful consequence, namely a recession or a financial …
We expect rising interest rates to cause economic growth to slow sharply next year, especially as the boost from fiscal stimulus fades. Our best judgement is that there’s a 30% chance of a mild recession before the end of the decade, but the risks would …
12th June 2018
Despite the recent sell-off in peripheral European bond markets, we still expect the Fed to raise rates again tomorrow and the ECB to announce at its meeting on Thursday its plans to bring its asset purchases to a close by the end of the year. With the …
Romania’s economy is overheating and, unless monetary policy is tightened markedly in the months ahead, a nastier adjustment and more abrupt slowdown in GDP growth lies in wait.Romania’s economy is overheating and, unless monetary policy is tightened …
Growth in the narrow monetary aggregates slowed further in April, but there is still little to suggest that this is having much of an impact on the wider economy. Our measure of M3 growth has held up well, while bank lending growth has continued to …
11th June 2018
Concerns about financial stability seem to have become more widespread on the Policy Board. But inflation remains far below the 2% target and the prospect of a renewed slowdown in domestic demand after next year’s sales tax hike will prevent policymakers …
Economic growth of 0.4% or so in Q2 – as suggested by the latest business surveys – would normally be pretty respectable. But coming after Q1’s snow-related slowdown, it looks a little soft. What’s more, if growth has been boosted by some “catch-up” after …
8th June 2018
Brazilian inflation ticked up from 2.8% y/y in April to 2.9% in May, due in part to the recent truck drivers’ strike, which has led to supply disruptions. And while the markets have responded to the recent drop in the real against the dollar by pricing in …
Although there are early signs that the finances of US households are coming under a bit of pressure as interest rates rise, the near-term outlook for household consumption in advanced economies remains fairly bright. By past standards, debt burdens and …
After a difficult period, recent data show that Ghana’s balance sheet problems are now behind us. While problems in the banking sector have emerged, policymakers are taking the right steps to tackle them. … Ghana: Balance sheet weaknesses …
We expect economic growth to slow to 1.7% this year and only 1.3% in 2019, as the housing downturn continues to weigh on consumption and residential investment. That weakness will eventually force the Bank of Canada to begin cutting interest rates again …
7th June 2018
Despite worries about Italy’s new Government, we suspect that the ECB will announce after its meeting on 14th June that it will end its asset purchases this year. It might also strengthen its guidance on interest rates to prevent speculation that it will …
Politics have captured the limelight over the past month. Bond yields in Italy have risen sharply over the past few weeks as concerns about debt sustainability and the new government’s commitment to the euro have mounted. Italian 10-year bond yields are …
The Turkish central bank’s decision to hike its one-week repo rate by 125bp, to 17.75%, is a tentative sign that it is shifting its focus away from simply shoring up the lira and towards tackling high and rising inflation. The key now is whether more …
Consumer price inflation is likely to have accelerated in May, due in large part to a rise in fuel inflation. Core inflation will also have remained elevated, and this is likely to be the case for some time. We think that this will ultimately prompt the …
The resignation of Malaysia’s central bank governor amid accusations of corruption at the Bank is an encouraging sign that the new government’s anti-corruption drive is gathering pace. The new governor, who has not yet been announced, will take over …
6th June 2018
Despite political tensions in Europe and the uncertainty over trade policy, we expect the Fed to press ahead and raise interest rates at next week’s FOMC meeting. With second quarter GDP growth tracking at between 3.5% and 4.0% annualised and signs that …
The Central Bank of Iceland is likely to leave policy unchanged next week. But with imported inflation rising and domestic price pressures set to grow, we see the Bank raising interest rates later this year. … Inflationary pressures in Iceland set to …
The Reserve Bank of India’s (RBI’s) decision to hike its repo rate today surprised the consensus, but not us. We think that elevated core inflation will prompt the central bank to raise interest rates further over the coming months. … RBI pulls the …
Australia stands out as one of the few advanced economies that strengthened at the start of the year. But with households struggling even before the Royal Commission has prompted tighter credit conditions, the first quarter might be as good as it gets. So …
The slowdown in wage growth in April was driven by volatile bonus payments, whereas base pay kept growing at the strongest pace in two decades. But wages would still have to grow much faster to meet the Bank of Japan’s 2% inflation target. … Labour Cash …
The risk of a global trade war has risen in the past few weeks. President Trump has gone ahead with plans to levy tariffs on steel and aluminium imports, which is likely to provoke retaliation. In fact, just today Mexico announced plans to impose tariffs …
5th June 2018
Political turmoil in Italy has rocked Swiss and Nordic financial markets over the past few weeks, but the economic fallout is likely to remain limited. That said, if the situation in Italy worsens, the Swiss economy looks more vulnerable than the Nordics. …
While leaving interest rates at the record low of 1.5% again today, the Reserve Bank of Australia hinted that it is not too worried about the economic implications of the Royal Commission investigation into the banks. We are more concerned and believe …
Despite the sharp rebound in core inflation this year, there seems to be a growing belief in the markets that the Fed is now prepared to allow inflation to rise above the 2% target without stepping up the pace of rate hikes. After all, the FOMC has …
1st June 2018
The Bank of Canada issued a relatively hawkish policy statement on Wednesday this week, which increased speculation that another interest rate hike was coming, possibly as soon as July. But within only 24 hours, the reported weakness in first-quarter GDP …
While the fall in gilt yields over the past fortnight partly reflects an increase in safe haven demand, expectations for future interest rates have also slipped back. It seems unlikely, though, that an increase in euro-zone tensions will alter the …
For now, we don’t expect the geopolitical developments to alter the behaviour of the major central banks. Provided that the political crisis in Italy does not flare up again, we think the ECB is likely to unveil its timetable for winding down QE at its …
The Bank of Japan seems to be getting more concerned about the impact of low policy rates on financial stability. However, the financial system is neither unwilling to provide credit nor is credit growing at an unsustainable pace. And with inflation …
While the outlook for non-mining business investment in Australia is fairly encouraging, we aren’t expecting an appreciable pick-up in total private investment growth. That’s largely because the slowing housing market means that dwellings investment is …
The consensus is expecting the Reserve Bank of India (RBI) to keep rates on hold at the upcoming meeting that concludes on Wednesday 6th June. But the hawkish tone of the previous meeting’s policy minutes, and the deterioration in the inflation picture …
31st May 2018
Inflation in Kenya and Uganda will pick up over the coming months. The shift will be mostly due to base effects, and with inflation within target, policymakers in both countries will cut rates by 50bp in Q3. … E. African inflation: Still on track for rate …
The Bank of Canada left its key policy rate unchanged at 1.25% today but issued a slightly more hawkish statement, which will raise expectations of a rate hike later this year. … Bank takes a more hawkish …
30th May 2018
Bank Indonesia (BI) hiked rates by 25bp today (its second increase in two weeks). We expect further hikes later this year, but we doubt that a repeat of the aggressive tightening cycle seen in 2013 is on the cards. … New Bank Indonesia governor …
If sentiment towards Italy deteriorates as a result of the current political situation, we could see renewed capital flight and a further worsening of Italy’s already-high TARGET2 liabilities. But other euro-zone countries may refuse to tolerate any …
29th May 2018
The decision by Turkey’s central bank to begin using the one-week repo rate as its key policy tool looks less like an effort to simplify its monetary policy framework (as has been suggested by some), and more like a way to create room to raise market …
April’s euro-zone money and lending data provide further evidence that economic growth has peaked. While households’ and firms’ demand for loans is still fairly strong, the deteriorating situation in Italy is a key risk to the outlook. … Euro-zone …
