Filtered by Topic: Monetary Policy Use setting Monetary Policy
The latest flash PMIs suggest that while industry continues to struggle across advanced economies, services activity is now slowing in Europe too. While reduced political uncertainty seems to have lifted business sentiment in the US, the PMIs suggest that …
22nd November 2024
While it was widely expected that CPI inflation would rise above the 2.0% target in October, the rebound from 1.7% to 2.3% was stronger than most forecasters had anticipated. And our view is that CPI inflation will rise further, to nearly 3.0% in January …
Russia’s war in Ukraine escalates Tensions between Russia and Ukraine escalated this week, with the US shifting its strategy to give Ukraine the go-ahead to use Western-provided long-range weapons on Russian territory and Russia launching an …
Earlier this week, our markets team revised our bond yield forecasts, raising our 10-year US Treasury yield forecast on the back of Trump’s election, but generally lowering our forecasts for euro-zone yields. (See here .) We now forecast the 10-year …
Fall in inflation leaves door open for December cut The larger-than-expected fall in Mexican inflation in the first half of November, to 4.6% y/y, alongside easing core price pressures and the relative resilience in the peso mean that Banxico is likely to …
Air pollution a modest but persistent headwind Even by India’s unenviable standards, there has been a marked deterioration in air quality over recent weeks. Air pollution in New Delhi has been above the government’s “severe” threshold for much of the …
Risks are shifting towards more BoJ tightening The stars are aligning for our long-held view of another rate hike before year-end. For a start, the LDP/Komeito coalition and the DPP have agreed on a ¥13.9tn (2.3% of GDP) supplementary budget. The LDP …
Student numbers set to fall regardless The minutes of the November RBA meeting were rather hawkish. The Bank noted that even if inflation weakened more sharply than expected, it would “need to observe more than one good quarterly inflation outcome to be …
The South African Reserve Bank’s decision to lower its repo rate by 25bp to 7.75% was not a surprise and Governor Kganyago sounded more optimistic that inflation is under control. Lingering concerns about the vulnerability of the rand and the growing …
21st November 2024
Interest rate cuts still a few months away (at least) The communications accompanying the decision by the Turkish central bank (CBRT) to leave its policy rate unchanged again today, at 50.00%, suggest that analysts’ expectations for an easing cycle to …
Morocco’s weaker economic performance this year is likely to be a blip. Buoyed by low and stable inflation, looser monetary policy, and a burgeoning manufacturing sector, we expect Morocco’s economy to grow by around 5% in 2025 and 2026, which is faster …
Our ANZ Chart Pack has been updated with the latest data and our analysis of recent developments. The Antipodean central banks will tread different paths on policy over the forecast horizon. With the New Zealand economy in a tailspin and inflation well …
The jump in euro-zone negotiated wage growth in Q3, to a record high of 5.4%, was mostly due to one-off payments in Germany. Wage growth elsewhere was little changed. With headline inflation around 2% and the labour market loosening, wage growth is very …
20th November 2024
Sharp drop in inflation sets the stage for 25bp cut tomorrow The drop in South Africa’s headline inflation, to 2.8% y/y, in October, will make it harder for the SARB to strike a hawkish tone regarding inflation pressures at its monetary policy committee …
Policy easing to resume in the second half of next year Bank Indonesia today left interest rates on hold at 6.00%, and we don’t think it will be until the second half of next year that the central bank resumes its easing cycle. The decision was broadly …
This page has been updated with additional analysis since first publication. Surprisingly big rebound suggests BoE will leave rates at 4.75% in December October’s surprisingly large rebound in CPI inflation from 1.7% to 2.3% (CE 2.1%, consensus & BoE …
We expect the Reserve Bank of New Zealand to cut its policy rate by 50bp, to 4.25%, at its meeting next week. With inflation back at target, the labour market loosening rapidly and activity in the doldrums, there continues to be a compelling case for the …
We doubt upward pressure on Japan’s long-term bond yields will persist for long, as the Bank of Japan tightens policy by less than investors anticipate and yields in the US remain quite stable. The 10-year JGB yield has risen a lot since October. Despite …
19th November 2024
Services inflation in the euro-zone has been stuck around 4% for the past 12 months, but there are good reasons to expect it to decline significantly next year. We think that core inflation will continue to edge down in 2025 and the headline rate will …
The latest data suggest that Colombia and Chile underperformed Peru’s economy in Q3. Looking ahead, we think that lower prices for key commodity exports combined with relatively tight fiscal stances will offset any the favourable effect from looser …
Recession not enough for MNB to resume easing The Hungarian central bank (MNB) left its base rate on hold again today, at 6.50%, despite the economy having just fallen back into recession. We think that the easing cycle will remain on pause over the next …
RBA still in “wait and watch” mode With the RBA maintaining its neutral stance, we’re sticking to our view that the Bank won’t begin cutting rates before Q2 2025. The minutes of the RBA’s November meeting confirmed that the decision to leaves interest …
In response to Donald Trump’s election win and the likelihood that his policies will be inflationary, we have revised up our forecast for the terminal fed funds target range in 2025 by 50bp, to between 3.50% and 3.75%. There are, if anything, still some …
18th November 2024
We think that the euro will fall to parity against the US dollar next year but will strengthen against some other currencies, such as the renminbi, and on a trade-weighted basis we forecast it to be little changed. So the effect of FX moves on growth and …
Rand hit by Trump trade, falling commodity prices The recent weakness of the South African rand is a symptom of the “Trump trade”, but sharp falls in some of South Africa key commodity exports also appear to have played a role. We expect the currency to …
15th November 2024
Yet another week of disappointing activity data … The Q3 GDP data released out of Central and Eastern Europe (CEE) this week has only added to concerns about the health of the region’s economies. Poland’s economy contracted by 0.2% q/q , while GDP …
New currency forecast and policy implications We have finalised our financial market forecasts following Donald Trump’s election victory. In short, we think US Treasury yields will remain elevated over the coming year (we previously anticipated falls) …
Inflation jump to prompt 100bp hike from CBN this month Nigeria’s headline inflation picked up for a second consecutive month, to 33.9% y/y in October, largely due to the impact of rising petrol prices. The CBN now appears to have little choice but …
Powerhouse state takes to the polls The dust is settling on the US election and we’ve been considering the implications for different economies and asset classes; clients can see all of our work on this dedicated webpage . For India Watchers, the action …
Consumption continuing to surge For the first time since the market turmoil in August, the financial markets consider it more likely than not that the Bank of Japan will hike rates by another 25bp at its December meeting. One reason is that markets now …
RBA to stay vigilant for a bit longer At her post-meeting press conference last week, RBA Governor Bullock cited the tightness of the Australian labour market as a key reason why the Board remains reluctant to shift to an easing bias. Those remarks seem …
Banxico cuts, scope for further easing rests on the peso Mexico’s central bank delivered another 25bp interest rate cut at today’s meeting, to 10.25%, and it left the door open to further easing over the coming months, although a lot will depend on moves …
14th November 2024
The latest data have shown some improvement in global activity with the US holding up well, the euro-zone exceeding weak expectations and China starting to respond to policy support. However, forward-looking indicators point to a renewed slowdown in world …
Stronger inflation rules out rate cut before end-24 The third successive rise in Egypt’s headline inflation rate has all but quashed hopes that the central bank will cut interest rates before the end of this year. But, as we have long argued, a sharp …
This page has been updated with additional analysis since first publication. Resilient labour market heightens risk that policy easing will be delayed With the labour market still on sturdy ground, there is a growing risk to our forecast that the RBA will …
Growth slowing, but inflation pressures still strong The slowdown in Russian GDP growth in Q3, to 3.1% y/y, is likely to be followed by a further loss of momentum in growth over the coming quarters. But, alongside CPI data which show that inflationary …
13th November 2024
Chief North America Economist Paul Ashworth discusses how Donald Trump’s return could influence the US economic outlook in this 22-minute video presentation. During this presentation, Paul addresses key issues around Trump's second term, including: The …
The deterioration in Colombia’s public finances has spooked investors and, with the government showing no clear willingness to rein in spending, Colombian financial assets are likely to remain under pressure. One implication is that the fiscal situation …
12th November 2024
Inflation jump scuppers December rate cut hopes Another bigger-than-expected jump in headline consumer price inflation last month will be enough to convince a majority of MPC members that conditions are not yet right to begin easing policy. We now think …
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. With the Bank of Japan …
Clearer window into policymakers’ minds While the Summary of Deliberations from the Bank of Canada’s October meeting didn’t give much away about the size and pace of further interest rate cuts, we did learn more about policymakers’ aims. The Bank has …
8th November 2024
GDP growth picked up in Q3 but timelier data suggest that the economy is poised for a weak Q4. We expect growth to remain slow next year regardless of whether President Trump raises tariffs on imports from Europe. We also think that inflation will be well …
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
Easing cycle on pause, waiting for more clarity on fiscal policy The National Bank of Romania (NBR) left its policy rate on hold again today, at 6.50%, against a backdrop of stubborn above-target inflation and concerns about the loose fiscal stance ahead …
Inflation rises, more rate hikes on the cards The further rise in Brazil’s headline inflation rate to 4.8% y/y in October means that the central bank is almost certain to deliver additional interest rate hikes at its upcoming meetings. The risks are …
Financial market and monetary policy impact Asian currencies fell against the dollar after the US election result was announced, and we think they will weaken over the coming months on the back of higher US Treasury yields and an increase in US tariffs. …
Tariffs won’t be a big drag We’re now assuming that Donald Trump will impose a 60% tariff on US imports from China and a 10% tariff on imports from all other countries next year. The US is Japan’s largest export destination, with shipments equivalent to a …
RBA need not fret geopolitical risks The RBA’s meeting this week came and went without much ado, with the Bank leaving rates on hold yet again and providing little in terms of new forward guidance. In fact, the RBA’s meeting was quickly overshadowed by …
As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC meeting, taking the fed funds …
7th November 2024
Fed slows pace of rate cuts As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC …
