Filtered by Topic: Monetary Policy Use setting Monetary Policy
Reserve Bank of New Zealand Governor Grant Spencer finished his six-month term without any fireworks by leaving interest rates at 1.75% for the 16 th month and reiterating that rates are unlikely to rise until the second half of 20 The new Governor Adrian …
21st March 2018
The Fed’s decision to raise interest rates by 25bp today was widely expected but some investors may have been caught off-guard by the degree to which Fed officials increased their projections for future interest rate hikes. The median forecast for the fed …
Colombia’s central bank left its policy rate unchanged at 4.50% last night, but the accompanying statement left the door open for further easing in the near term. Meanwhile, Chile’s central bank kept rates on hold at 2.50% and we expect them to remain …
We believe the probable rise in US rates on Wednesday will mark the start of the first prolonged period since the late 1990s where interest rates in America are higher than in Australia and New Zealand. This will cap the rise in bond yields in Australia …
Japanese households and firms now both receive more in interest income than they pay out on their debt. That is making life difficult for banks. The main factor keeping them afloat is their sizeable activity overseas. … Monetary Indicators Monitor …
20th March 2018
Today’s rate cut will be followed by another cut later this year. The pace of further easing will depend on when the government amends or abandons its controversial cap on lending rates. … Kenya: Easing cycle restarts, CBK mute on lending …
19th March 2018
The latest inflation data in the Nordic countries and Switzerland have generally been quite weak. Indeed, inflation in Switzerland slowed to a five-month low of 0.6% in February. The core rate was unchanged from the previous month at 0.5%, while the rate …
16th March 2018
The surge in job growth in February, which was fuelled by a rise in new entrants to the labour force, supports the doves’ view that there is still hidden slack in the labour market. But the story isn’t quite that straightforward. Almost all of the …
This week has featured a raft of speeches from the ECB’s Governing Council on the outlook for monetary policy, displaying a range of views among its members. Several would clearly prefer to end asset purchases in September, while others favour a much more …
While the Bank of England’s Financial Policy Committee (FPC) left its annual stress test scenario unchanged, the test will still be a bit more stringent this year for some major UK banks. Nonetheless, it seems unlikely that these banks will be required to …
Central banks across Emerging Asia typically do a poor job at flagging up their decisions in advance, which often leads to investors being wrong-footed. Since the start of 2010, under half of interest rate changes (either hikes or cuts) in Emerging Asia …
We wouldn’t read too much into the early results of this year’s spring wage negotiations, which showed that the large carmakers and electronic firms lifted base pay by less than in 2014 and 2015. But the bigger picture is that wage growth will remain well …
With no Monetary Policy Committee (MPC) meeting scheduled in April, its meeting on 22nd March will be the last opportunity for the MPC to lay the groundwork for another interest rate hike in May. Markets are pricing in around a 70% chance of one. But with …
15th March 2018
With the benefits of the fiscal stimulus, strong global demand and the weaker dollar, we expect GDP growth to accelerate to 2.8% in 2018. As the fiscal stimulus begins to wear off and the cumulative monetary tightening starts to bite, however, GDP growth …
Following the recent reduction in its inflation target, the Norges Bank now clearly expects to begin raising interest rates this year. However, we think that it will tighten monetary policy more slowly than investors anticipate. Along with our forecast …
Despite sounding a slightly more positive tone on the economy, the Swiss National Bank today reiterated that the Swiss franc remained “highly valued” and that it still needed to keep interest rates at rock-bottom levels and intervene in the currency …
The Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at Grant Spencer’s final meeting as Governor on Thursday 22nd March and it’s likely to reiterate that policy will remain accommodative for a considerable …
The rebound in inflation, rapid employment growth and the recently announced boost to Federal spending for the next two years should convince the Fed to raise rates by 25bp at Jerome Powell’s first FOMC meeting as Chair. We expect the Fed’s updated …
14th March 2018
While the Central Bank of Iceland left policy unchanged today, it also acknowledged that inflation expectations are rising. We expect higher actual and expected inflation to prompt the Bank to raise interest rates in the next two years, contrary to the …
Slower inflation and a political breakthrough have opened the way to interest rate cuts in Nigeria. We expect that policymakers will lower their key rate from 14.00% to 13.00% in Q2. … Nigeria Consumer Prices …
Headline wholesale price inflation edged down in February. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation rose accelerated month. With reasons to think that core price pressures will rise further, we …
The rise in Romanian inflation – which hit a five-year high last month – appears to have been driven by rapid wage growth and provides further signs that the economy is overheating. As a result, we now think that the National Bank will step up the pace of …
13th March 2018
The economy will probably cope reasonably well even though both the mining and housing booms are over, but over the next couple of years it is unlikely to strengthen as much as policymakers hope. Over the next decade, life after mining may prove to be …
12th March 2018
In addition to reducing the monthly pace of its asset purchases from €60bn to €30bn, in January the ECB also changed the composition of its purchases. Corporate sector debt now accounts for a larger share of the total, as we expected. This should help to …
9th March 2018
The likely dent to retail sales, spending on consumer services and construction output as a result of February’s bad weather will make the economy look fragile. But the hit to the economy will be cushioned by households spending more to heat their homes. …
The Norges Bank’s new inflation target strengthens the case for tighter monetary policy. But we think that the Bank will move very cautiously. … How big a deal is the new lower inflation …
The decision by Peru’s central bank to cut interest rates by 25bp, to 2.75%, was accompanied by a statement that left the door open for one more cut in the easing cycle. But the big picture is that attention will quickly shift towards policy tightening, …
Inflation in Norway rose quite sharply in February, but we do not think that it is about to surge. Meanwhile, Icelandic GDP growth would have been negative in Q4 was it not for a one-off intellectual property payment which boosted exports. Nevertheless, …
Sluggish wage growth, subdued inflation expectations and the renewed strengthening of the exchange rate suggest that inflation will remain below the Bank’s 2% target for the foreseeable future. The upshot is that the Bank’s new leadership will have to …
The yen would have to strengthen much further before it turns into a major drag on export competitiveness and corporate profits. However, the recent appreciation should bring the pick-up in goods inflation to a halt over the coming months. … Yen strength …
In an environment of global uncertainty, the Swiss National Bank will be wary of exacerbating any upward pressure on the safe haven franc when it meets on 15th March. Admittedly, its forecast for inflation to surpass 2% by 2020 suggests that it may soon …
8th March 2018
The ECB’s decision to remove the loosening bias from its monetary policy statement today was arguably the first step along a path of policy normalisation. But note that its balance sheet will continue to expand with new asset purchases until at least …
The Bank of Canada implied in its policy statement this morning that, despite growing concerns around trade, it still believes further interest rate increases will be needed later this year. That said, in its decision to keep rates at 1.25%, there were …
7th March 2018
Governor Glapinski struck a dovish tone in the press conference accompanying today’s MPC meeting. However, we think that inflation will rise faster than the central bank anticipates over the coming months, prompting the first hike in the policy rate …
Little has changed since the Central Bank of Iceland’s (CBI) last policy meeting, so we expect it to keep policy unchanged next week. Later this year, we see the Bank raising interest rates. … Central Bank of Iceland on hold for time …
After a tough start to 2018, we think that equities in the Nordic countries and Switzerland will continue to struggle over the next couple of years. But their performance will be far from uniform. … Will Nordic and Swiss equities continue to …
Malaysia’s central bank (BNM) kept its policy rate on hold at 3.25% today following a hike at its last meeting in January. With inflation slowing, growth likely to cool further and the currency strong, we doubt that BNM will tighten again this year. … …
Following a downward revision to quarterly GDP growth in Q4, from 0.5% to 0.4%, a deterioration in all three of the headline PMI balances in January raised concerns that growth had continued to slow at the start of the year. But those fears were assuaged …
6th March 2018
The Reserve Bank of Australia left interest rates on hold at 1.5% for the 17 th consecutive meeting and it noted once again that progress in returning inflation to target is likely to be “gradual”, suggesting that a near-term rate hike remains unlikely. …
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
Japan’s economic expansion has become more shaky recently. And, while inflation has surged in recent months, it looks likely to moderate over the course of the year with the recent strengthening of the yen helping to keep price pressures in check. Against …
The large imbalances in the euro-zone’s TARGET2 payments system indicate that all is still not quite right in the region. There are some good reasons to expect the imbalances to narrow again over the next few years. But there is also a risk that sentiment …
2nd March 2018
Our relative views on monetary policy in the US and Australia suggest that US 10-year bond yields will rise further above Australian yields this year. While this would be rare, what’s more unusual is that the complete erosion of Australia’s traditional …
With the economy still performing well and the euro off the boil, we expect the ECB to remove the loosening bias from its forward guidance when it meets on 8th March. But the persistent weakness of inflation will have convinced the Bank to take a cautious …
1st March 2018
An advisor to PM Abe has suggested that the Bank of Japan should buy foreign bonds. However, economic conditions are far too buoyant at the moment for policymakers to take such a radical step. … Bank of Japan unlikely to buy foreign …
The Bank of Canada will raise interest rates again this year, most likely at the April policy meeting. In contrast to the consensus, we don’t see a series of further rate hikes beyond this. NAFTA’s potential demise cannot be ruled out. Meanwhile, the …
28th February 2018
The correction in global equities earlier this month coincided with a further rise in US Treasury yields, as higher inflation and the prospect of extra fiscal stimulus led investors to conclude that the Fed will step harder on the brakes. Our forecast …
International bond markets have been inundated with debt issuance from frontier markets over the past couple of years and there’s no sign yet that appetite is waning. Since the start of this year alone Nigeria, Kenya and Argentina have all issued dollar …
Monetary policy cycles across the region are nearing turning points. In most cases this means that easing cycles are drawing to a close and, as markets start to consider the eventual onset of monetary tightening, bond yields at the short end of the curve …
