Filtered by Topic: Monetary Policy Use setting Monetary Policy
The franc’s downward trend went into reverse last month and turbulence in global financial markets has since threatened to push it up further. In the event of a sustained rout in equity markets, the safe haven currency would probably appreciate. But as …
7th February 2018
China’s foreign exchange reserves data suggest that the People’s Bank has not been directly intervening to limit the renminbi’s recent gains against the dollar. That partly reflects the fact that the renminbi has strengthened much less against other …
As the recent rise in inflation has been due to temporary exchange rate effects, it was little surprise that the Central Bank of Iceland left policy unchanged today. But with further rises in inflation set to put upward pressure on inflation expectations …
The RBI’s decision to hold its repo rate at 6.00% today came as no surprise but it sounded notably more hawkish in the policy statement. This supports our non-consensus view that rate hikes are likely later this year. … RBI turns more …
The usual pattern around Chinese New Year is for inflation to rise sharply either in January or February and fall in the other month. This year, we think inflation will have picked up in both. And rising food price inflation will probably keep the …
6th February 2018
The severity of any further sell-off in global financial markets may be limited by the general health of the global economy and the scope for policymakers to respond if necessary. Nonetheless, the episode supports our repeated warnings that markets were …
The jitters in the financial markets are due to concerns that global interest rates will rise rapidly, but the Reserve Bank of Australia (RBA) did its part to calm fears by leaving interest rates at the record low of 1.5% today and by providing a new hint …
Despite long-term Treasury yields rising sharply this week to their highest level in four years, broader measures suggest that overall financial conditions have actually continued to loosen. Corporate bond spreads have fallen to levels not seen since …
2nd February 2018
The 200,000 gain in non-farm payrolls in January, which was above the consensus estimate but in line with our own forecast, leaves the Fed firmly on track to raise rates in March. And with signs that wage pressures are starting to build, we expect that …
We have long-argued that interest rates would rise somewhat faster, and sooner, than markets expecting. Recent comments by Governor Carney offer tentative support to this view and suggest that February’s Inflation Report could strike a more hawkish tone …
German Bund yields continued to rise this week, with the 10-year yield hitting a 29-month high. Higher yields are unlikely to have much of a direct effect on the German economy, but by boosting the euro they may have significant indirect effects. Indeed, …
The Bank of Japan’s offer to buy an unlimited amount of bonds today for the first time since July has dampened expectations that policymakers are about to withdraw stimulus. As a result, the yen has now started to weaken again. We expect it to fall …
With the data continuing to surprise the Monetary Policy Committee (MPC) on the upside and the Governor sounding encouraged by progress in Brexit negotiations and a bit more upbeat on the outlook, there is a chance that the Inflation Report on February …
1st February 2018
The statement accompanying today’s Czech MPC meeting – at which the policy interest rate was hiked by 25bp – suggests that the Council will hold fire at its next meeting on 29th March. Even so, we think that the tightening cycle will ultimately be larger …
Inflation pressures seem to be rising faster than we had expected. As a result, we now see the Central Bank of Iceland raising interest rates this year. … Central Bank of Iceland to raise rates later this …
Contrary to suggestions that the ECB and Bank of Japan are gearing up to tighten monetary policy sooner than expected, we think they will be happy to trail a long way behind the Fed and Bank of England. Indeed, the case for the Fed to raise rates four …
The Reserve Bank of New Zealand (RBNZ) will almost certainly leave the official cash rate on hold at 1.75% at its policy meeting on Thursday 8th February and, in the accompanying Monetary Policy Statement (MPS), we doubt that the Bank’s interest rate …
Janet Yellen’s final meeting as Fed Chair pretty much summed up her entire tenure; policy was left accommodative but there were hints it will be tightened gradually in the future. The more hawkish statement confirms expectations of a March hike and we …
31st January 2018
Our analysis shows that dollar weakness can explain much of the recent strength in the price of gold. As such, given our view that the US currency will appreciate this year, we think that those gains will soon be reversed. … Is there more to the gold …
The price gains of recent years have left housing looking expensive and commercial property looking fully-valued. The good news is that interest rate rises on the scale that we anticipate are unlikely to be enough to push either market into a major …
Despite the strengthening of the activity data, the Reserve Bank of Australia won’t raise interest rates from 1.5% at the meeting on Tuesday 6th February and probably won’t hint in the following Friday’s Statement on Monetary Policy that rate hikes are …
Malaysia and Pakistan have both hiked interest rates over the past week, and while the consensus and financial markets are expecting most other central banks in the region to tighten policy in 2018, we think rates in the majority of countries will either …
30th January 2018
The household saving rate fell to a 12-year low of 2.4% of disposable income in December and, based on the recent surge in the values of equities and real estate, it could fall all the way to zero. … Saving rate going to zero…and that’s okay …
We expect that economic growth in Sub-Saharan Africa will continue to accelerate in 2018. This recovery will be driven largely by faster growth in South Africa and Nigeria, the region’s two biggest economies. Indeed, our views on South Africa are …
29th January 2018
2018 will be the first year this century that the Australian economy won’t benefit from either a mining or housing boom. In those circumstances, we doubt that GDP growth will rise above 2.5%. And despite a decent fiscal boost in New Zealand, a still-weak …
28th January 2018
There are some reasons to think that the pound’s recent rally may struggle to go much further. Rising US interest rates could prompt something of a recovery in the ailing dollar, while Brexit uncertainty could rise again as the negotiations move on to the …
26th January 2018
The Canadian dollar hit 81 cents against the US dollar earlier this week but, rather than blaming the loonie’s rally on the Bank of Canada and its recent interest rate hike, the rebound appears to be linked more to the recent resurgence in crude oil …
While ECB President Mario Draghi sounded positive on the outlook for inflation at this week’s press conference, he did so with a justified degree of caution. After all, there is still economic slack in some member states that will keep a lid on wage …
The gradual strengthening in core inflation evident in December’s consumer price figures would seem to justify the Bank of Canada’s recent decision to raise interest rates again. … Consumer Price Index …
The party in the markets has remained in full swing while the Fed has emptied its punchbowl slowly. This year, though, the US central bank is likely to drain it more quickly. And in some other major economies, monetary policy is also likely to be …
Most economies in Emerging Europe had a very strong end to 2017, but we expect regional growth to soften in the coming quarters. The economic cycle in Central Europe is now looking mature and growth is likely to weaken gradually. Inflation will rise …
The ECB did not alter its forward guidance today, stressing that it will exercise patience and persistence when normalising policy and voicing concern about the strong euro. The currency’s further rise is puzzling against this backdrop, but only …
25th January 2018
Our China Activity Proxy (CAP) suggests that economic conditions stabilised at the end of last year after a fairly sharp slowdown since the middle of 2017. Growth may pick up slightly in the near term as disruption caused by the pollution crackdown eases. …
While today’s Norges Bank announcement implies that it still expects to raise interest rates this autumn, we think that below-target inflation and weakness in the housing market will cause the Bank to wait until next year. Along with our forecast for oil …
The Economic Tendency Survey suggests that the Swedish economy lost some momentum at the start of 2018. But this is unlikely to prevent the Riksbank from tightening policy later this year. … Sweden Econ. Tend. Survey (Jan.) & Unemploy. …
For all the talk about how the incoming Governor will deal with employment being added to the RBNZ’s mandate, the latest data suggest he may spend most of his time wondering why inflation is so low. … New Zealand Consumer Prices …
24th January 2018
Janet Yellen’s final FOMC meeting will pass with little fanfare, but the language of the accompanying policy statement looks set to strike a more hawkish tone. That would leave the Fed on course to raise rates at Jerome Powell’s first meeting as Chair in …
December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales …
23rd January 2018
For the first time since July 2014, the Bank of Japan didn’t lower its inflation forecasts any further. However, we believe that the Bank is too optimistic about the inflation outlook and we remain convinced that policy won’t be tightened anytime soon. … …
The ECB has effectively introduced a “put” option on peripheral bonds, pushing yields and spreads down to record lows. Given recent fiscal progress and the likelihood that the ECB normalises policy very slowly, we doubt that yields will soar. But there is …
22nd January 2018
Interest rates were kept hold today in Kenya & Ghana, and we expect that both will see rate cuts in 2018. Nigeria’s MPC was unable to meet, but policy there will probably also loosen later this year. … Africa: Cuts on the cards in Kenya, Ghana, & …
Prospects for the Nordic economies and Switzerland are strong, but there are divergent outlooks for monetary policy. In Sweden, inflation is already close to the Riksbank’s target and, with capacity constraints starting to bite, inflationary pressures are …
Capital outflows from China rose slightly in December as Chinese households and firms added to their foreign asset holdings. Looking at the year as a whole, capital outflows fell by 80% in 2017. … Capital Flows Monitor …
Rapid economic growth, surging imports and strong credit growth have fuelled fears that the Philippines is overheating and that the central bank will soon be forced to hike interest rates to bring the economy under control. We think such fears are …
The Bank of Canada’s upgraded GDP growth forecast for this year looks overly optimistic given NAFTA and housing-related risks. Despite further increases in household borrowing costs and tougher new mortgage lending rules, the contribution to growth from …
19th January 2018
The news flow in Central and Eastern Europe (CEE) in the past few weeks has been dominated by political troubles, but currencies have performed surprisingly well. One reason for this is likely to be the region’s relatively strong economic fundamentals. … …
The 2018 Winter Olympics, which get under way in South Korea next month, will not provide much of a boost to the country’s economy. But this will not stop South Korea from recording another year of strong growth. … Korea set for strong 2018, but not …
We expect the price of Brent crude oil to moderate from $70 per barrel to $55 by the end of 2018. But even if global oil prices remain close to current levels, inflation in Japan would only average 1% this year instead of our existing forecast of 0.7%. …
The stronger 0.3% m/m gain in core consumer prices in December provided clearer evidence that the forces weighing on core inflation last year are now firmly in reverse. Admittedly, core CPI inflation only edged up to 1.8% in December and will remain …
18th January 2018
While the ECB maintained all elements of its policy support last month, the recent news that it would soon “revisit” its forward guidance saw rate expectations rise and the euro strengthen. At its meeting on 25th January, we see the Bank dropping its …
