Filtered by Topic: Monetary Policy Use setting Monetary Policy
The recent run of weak data suggests that a hike in Bank Rate, to 0.75% in May, is far from a done deal. But we don’t think that a May hike is now off the table. Some of the unexpected weakening in this week’s activity data reflects temporary factors. And …
13th April 2018
We expect that economic growth in Sub-Saharan Africa will continue to accelerate in 2018. This recovery will be driven largely by South Africa and Nigeria, where growth is set to pick up by more than most expect. Performances elsewhere in the region will …
Peru’s central bank left its policy interest rate unchanged at 2.75% last night and, while the statement gave little away regarding future moves, we think the easing cycle is probably over. … Peru rates on hold, easing cycle probably …
The Monetary Authority of Singapore (MAS) today moved to increase the slope of its nominal effective exchange rate policy band, a decision that amounts to a tightening of its policy stance. But with growth likely to slow in the coming quarters and …
The Bank of Canada is unlikely to hike interest rates again at its Governing Council meeting next Wednesday. Even with the risk of NAFTA’s demise fading and core inflation picking up, there is now a good chance that faltering economic growth and growing …
12th April 2018
Bank lending has continued to slow in recent months. However, banks’ willingness to provide credit has rarely been higher, and broader measures of credit that also include corporate bonds show that credit growth remains strong by past standards. The …
The Bank of Korea (BoK) unsurprisingly kept its policy rate on hold at 1.50% today, and the dovish tone of the governor’s press conference suggests that the BoK is likely to remain on the sidelines for a while. … Korea’s central bank in wait-and-see …
Governor Glapinski’s extremely dovish post-meeting press conference, coupled with the recent weak inflation data, has prompted us to take out the interest rate hikes from our forecast for this year. Even so, with price pressures likely to build over the …
11th April 2018
Mounting concerns about Turkey’s current account deficit as well as debt problems in the corporate sector are likely to keep the lira under pressure over the coming weeks. As a result, we now expect the central bank to respond by tightening monetary …
The sharp fall in the Russian ruble today has raised the risk that the central bank pauses its easing cycle when it meets later this month. The situation is in a state of flux and the outlook for interest rates will depend in part on whether US sanctions …
10th April 2018
Economic growth in Hong Kong has cooled in recent quarters, and we think this trend will continue over the coming months. Domestic monetary conditions are likely to tighten sharply this year, while exports look set to weaken even if trade tensions between …
9th April 2018
The recent rise in banks’ short-term funding costs would probably need to triple before banks could justify raising their mortgage rates by 0.25%, which would be equivalent to a hike in the official interest rate. In any case, the heat the biggest banks …
The escalating threats over tariffs between the US and China have dominated the headlines this week. But next week could bring the more positive news of a ‘preliminary’ deal on NAFTA. Reports suggest that any agreement would be limited to content …
6th April 2018
The US administration appears to be pushing hard to get a deal done on NAFTA, reigniting speculation of further interest rate increases from the Bank of Canada. Even if a trade deal is done, however, we doubt that the Bank would risk raising rates again …
As a small, open economy that releases GDP data much earlier than most other countries, Singapore is often billed as a bellwether for the global economy. In reality, Singapore’s GDP figures are far too volatile to give a reliable indication of how the …
Consumer price inflation is likely to have eased in February, due to a further drop in food inflation. But core price pressures are still building. We think this will ultimately prompt the Reserve Bank to begin tightening policy over the coming months, …
The National Accounts showed that the economy barely slowed at all in 2017. Annual growth, revised up from 1.7% to 1.8%, was only marginally lower than 2016’s 1.9% outturn. Since then, however, the heavy snowfall at the start of March appears to have …
5th April 2018
Euro-zone money and lending growth slowed in February, adding to the evidence from the official data and business surveys that economic growth has peaked. Growth in “narrow” money – which is the sum of currency in circulation and overnight deposits – fell …
The RBI’s decision to hold its repo rate at 6.00% today came as no surprise. But we think that elevated core inflation and looser fiscal policy will prompt the central bank to raise interest rates in the second half of the year, much sooner than the …
The growing threat of a US-China trade war is the key risk to the outlook. The tariff measures announced so far don’t amount to much, but any escalation in trade tensions that leads to a significant fall in US imports from China would have a sizeable …
Today’s Nigerian MPC press conference supported our view that policymakers will cut rates later this year. We think that the key rate will fall from 14.00% – at which it was left today – to 13.00% in June. … Nigeria: Rates on hold, but cuts likely later …
4th April 2018
A rise in interbank rates and weaker net wage growth appear to lie behind the Romanian MPC’s surprise decision to keep its policy interest rate on hold today. We still think that the tightening cycle will be resumed in May, but today’s decision raises the …
The central bank of Sri Lanka (CBSL) today cut its lending rate by 25bp. While further monetary policy loosening looks likely against a backdrop of weak growth and easing inflation, aggressive rate cuts are not on the cards. … Sri Lanka cuts rates, …
The Bank of Japan has become more vocal about its desire to exit the current ultra-loose policy settings. But with concerns about the impact of low policy rates on financial intermediation overblown and inflation set to remain well below its 2% target, …
The Reserve Bank of Australia has become more worried about trade tariffs and rising global bank funding costs. Coming on top of the weakness of the housing market and wage growth, it is becoming even more likely that the RBA will keep interest rates at …
3rd April 2018
Brazil’s central bank appears to have been spooked by the weakness of the recent inflation data, but we think that the conduct of fiscal policy will ultimately have a much greater bearing on how interest rates are set over the next 12-18 months. … Fiscal …
29th March 2018
The recently announced US tariffs should have a limited direct effect on the UK economy. Admittedly, falls in equity prices – on the back of concerns over a full-blown trade war – could clearly have bigger knock-on effects on consumer spending and GDP …
The Reserve Bank of India (RBI) looks set to keep its policy rates on hold at the meeting that ends on Thursday 5th April. But we think that elevated core inflation and looser fiscal policy will prompt the central bank to raise interest rates before too …
We expect the Fed to raise interest rates three more times this year, and twice in 2019, but we think it will then begin to loosen policy in 2020. Other than the Bank of England, most major central banks will lag a long way behind the Fed in raising rates …
28th March 2018
Today’s 25bp interest rate cut does not signal the start of a new easing cycle. We think that policymakers were attempting to seize the opportunity for a quick cut before inflation picks up later this year. … South Africa: Rate cut will be a …
With the economy in good shape and inflationary pressures subdued, the Bank of Thailand unsurprisingly decided to keep its policy rate on hold today at 1.5%. The accompany statement reiterated that monetary policy will remain accommodative and we are …
Both the Australian and New Zealand economies failed to regain any momentum at the end of 2017 with GDP rising by a slower than expected 0.6% q/q in New Zealand and just 0.4% q/q in Australia. Admittedly, some of this weakness can be explained by …
The statement accompanying today’s MPC meeting in Hungary continued to strike a dovish tone which, given the recent run of weak inflation data, isn’t a surprise. But the softness of inflation has been due to transitory factors that will unwind over the …
27th March 2018
Five years after Governor Kuroda embarked on aggressive policy easing, core inflation in Japan is still barely positive and the Bank of Japan seems to have run out of ideas on how to push it higher. There is an argument that the Bank should acknowledge …
An analysis of all the recessions which have occurred in G7 economies since 1960 throws up two main conclusions. First, while most had multiple triggers, monetary policy tightening was usually one of them. And second, the most common underlying causes of …
February’s euro-zone money and lending data add to the evidence from the activity surveys that economic growth has topped out. But with interest rates likely to rise only slowly as the ECB normalises policy, bank lending looks set to continue supporting …
The Reserve Bank of Australia will almost certainly leave interest rates on hold at 1.5% at its policy meeting on Tuesday 3rd April and it’s likely to reiterate that rate hikes remain some way off by once again saying that progress in returning inflation …
Today’s unexpectedly aggressive interest rate cut – which took the key rate to 18.00% – suggest that the current loosening cycle has further to run. We expect that the rate will fall to 16.00% by year end. … Ghana: Easing cycle …
26th March 2018
Incoming RBNZ Governor Adrian Orr today signed a Policy Targets Agreement that included a new reference to employment. Admittedly, this probably won’t significantly alter the outlook for monetary policy. But the bigger risk is that the new Governor …
25th March 2018
During his first post-meeting press conference, Fed Chair Jerome Powell managed to signal faster rate hikes over the coming years while simultaneously calming the bond market by playing down the risks of a pick-up in inflation. The problem is that the Fed …
23rd March 2018
With another hike in interest rates in May now largely priced into markets (and supported by this week’s Monetary Policy Committee (MPC) Minutes), the bigger question is just how “limited and gradual” the rise in interest rates will be thereafter. Markets …
Russian central bank governor Elvira Nabiullina gave little away at today’s post-meeting press conference about the future path for interest rates, but her overall tone suggests that there’s scope for significant further easing. We remain confident in our …
The Swiss National Bank is likely to reduce its currency interventions further over the next couple of years as other central banks start to normalise policy and the Swiss economy is better able to withstand a franc appreciation. But an outright reduction …
22nd March 2018
Somewhat counterintuitively, the price of gold gained 1.4% following the Fed’s decision to hike US interest rates for the sixth time in this tightening cycle. However, we think that the recent rally will not last as the Fed will tighten rates more …
The US Fed’s decision to increase rates by 25bp yesterday and to raise its projection of future rate hikes has limited implications for the rest of the world. Other than the Bank of England, most major central banks will be well behind the Fed in raising …
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to another interest rate hike in May, the Minutes of March’s meeting suggest that it is highly likely. … MPC still on track for a May …
Bank Indonesia (BI) left interest rates unchanged today, while also appearing to rule out further interest rate cuts. But with growth set to underperform and inflationary pressures under control, we are maintaining our view that rates will be cut later …
Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375% against a backdrop of decent economic growth and subdued inflationary pressures. The familiar and dovish tone of the CBC’s accompanying statement reaffirms our view that …
The Philippines central bank (BSP) decision to leave rates on hold today, despite this year’s jump in inflation, adds weight to our view that policy will remain on hold throughout 2018. This stands in contrast to the consensus, which is expecting at least …
For the second time since December, the People’s Bank has responded to a Fed rate hike by raising the rates it charges when providing funds in China’s interbank market. But contrary to perceptions, it is actually loosening monetary conditions at the same …
