Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Riksbank’s announcement that it will end its net asset purchases this month is the beginning of a shift towards tighter monetary policy in Sweden. We think that it will ultimately raise interest rates more quickly than most other analysts anticipate, …
20th December 2017
With growth robust and inflationary pressures subdued, the Bank of Thailand (BoT) unsurprisingly kept its policy rate on hold today at 1.50%. The accompanying monetary policy statement reaffirms our view that the policy rate will remain unchanged for some …
There are reasons why the US Federal Reserve should be further along the path to policy normalisation than other major central banks. But there are also reasons why they should not lag too far behind. … Should other central banks follow the …
19th December 2017
Unsurprisingly December’s uneventful Monetary Policy Committee (MPC) meeting barely caused a ripple in financial markets, leaving market participants’ expectations for future interest rates all but unchanged. But we suspect that market expectations for …
In our final Watch of this year, we outline the prospects for India’s economy in 2018. We expect growth to accelerate, due to a pick-up in private consumption as well as looser fiscal policy. However, inflation is also likely to continue rising, which …
The state election victories for Prime Minister Modi’s BJP in both Gujarat and Himachal Pradesh ensure that the ruling party remains firmly on track to secure a majority in the Rajya Sabha (upper house of parliament) in the not-too-distant future. They …
The subdued November CPI figures and the news that the Fed left its inflation and interest rate projections unchanged triggered a mini-rally in the bond markets, but arguably investors should be paying closer attention to the surge in producer price …
15th December 2017
The decision by Russia’s central bank to cut interest rates by a larger-than-expected 50bp today caught the market (and ourselves) by surprise but the scale of the cut, as well as the tone of subsequent comments from Governor Nabiullina, reinforce our …
We think that the euro-zone economic recovery is strong enough to cope with a gradual removal of policy support by the ECB over the coming years. The weak outlook for inflation will allow the ECB to tread carefully, limiting the adverse impact on …
Central banks in Chile and Peru left interest rates unchanged last night, but both accompanying statements left the door open for further easing. With inflation rising in Chile, the window for cuts is closing, but as things stand we continue to expect …
We expect Japan’s GDP growth to slow next year as the economy is now operating above capacity. Price and wage pressures should strengthen somewhat but inflation will remain well below the Bank of Japan’s 2% target and monetary policy settings will …
While ECB President Draghi was upbeat about the economy at today’s press conference, he stated that the desire of some Governing Council members to signal an end to asset purchases is far from a consensus view. With the inflation outlook still reliant on …
14th December 2017
As was widely expected, December’s Monetary Policy Committee meeting was a bit of a non-event. However, if we are right in expecting the economy to perform more strongly than the MPC expects, that should allow interest rates to be raised several more …
The emerging world is currently expanding at its fastest pace in four years, but we don’t think this will last in 2018. In this Focus we outline our key calls for next year. … Key calls for EMs in …
The Philippines central bank (BSP) left rates unchanged at 3.0% today while also downplaying fears that the economy is overheating. While both financial markets and the consensus are expecting monetary policy to be tightened next year, we continue to …
The Norges Bank left its key policy rate unchanged after its meeting today and brought the date at which it forecasts raising interest rates forward to autumn 2018. We think that it will wait until late 2019. … Interest rate hikes in Norway still a long …
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 markets as necessary. And with inflation set to remain low, we …
Wholesale price inflation rose to an eight-month high in November. Policymakers put less weight on the WPI measure, but it nevertheless supports our view that the debate will shift towards monetary tightening later next year. … Wholesale Prices …
The People’s Bank has raised the rates it charges when providing funds in China’s interbank market. But unlike in the US, the move seems unlikely to result in higher short-term funding costs for most banks. … The PBOC pretends to follow the …
As widely expected, the Fed hiked interest rates by 25bp today, taking the fed funds target range to between 1.25% and 1.50%. Despite factoring in the imminent fiscal stimulus into their GDP growth projections for 2018, however, officials still anticipate …
13th December 2017
While there are some reasons to think that the Riksbank will extend its quantitative easing programme when it meets next week, we think that policymakers will let it expire. We also think that the Bank will keep its forward guidance on interest rates …
Following today’s decision to keep interest rates unchanged, the Central Bank of Iceland (CBI) noted that looser fiscal policy is a short-term risk to the monetary policy outlook. While we expect the new Government to announce a small fiscal expansion in …
There are many reasons to think that inflation targeting has had its day. The framework has already evolved to some extent, with central banks adopting “flexible” inflation-targeting and macroprudential tools. But arguably this flexibility does not go far …
Indian financial markets have had a mixed year in 2017. Equities have surged and the rupee has strengthened a touch, but bonds have sold off. Looking ahead to 2018, we think that equities are unlikely to make many further gains, while the currency and …
With yields set to rise overseas and concerns that low policy rates may curtail lending likely to linger, speculation about policy tightening in Japan will not subside next year. However, we believe that subdued price pressures will force the Bank to keep …
We think that investors are still underestimating the extent to which the Fed will tighten policy next year. As a result, we forecast that the dollar and Treasury yields will rise in 2018. We don’t think that this will take a big toll on US equities, …
11th December 2017
We think that consumer price inflation rose again in November, due to an acceleration in both food and fuel inflation. With core price pressures also continuing to build, the Reserve Bank may have to shift the policy debate to tightening in 2018. … Rise …
8th December 2017
The Norges Bank is very unlikely to change its policy rate next week, but we think that it will push back the date at which it forecasts raising interest rates to the end of 2019. After all, the mainland economy is expanding at a decent pace, but spare …
7th December 2017
While the MPC is extremely unlikely to raise interest rates again at its meeting on 14th December, the key question is whether any of the nine committee members will vote for another hike so soon after the first rate rise in a decade in November. … MPC to …
Having announced a plan to buy assets at a reduced pace of €30bn per month from January until September 2018 after its last meeting, the ECB seems very unlikely to make any changes this month. It should confirm that corporate bonds will make up a greater …
Although the Swiss franc has weakened further over the past three months, we doubt that the Swiss National Bank (SNB) will sound any more relaxed about the exchange rate in its policy statement next week. Admittedly, the ECB’s gradual shift towards policy …
Provided that they follow the blue-print set out by the US Fed, the world’s major central banks should be able to scale back their balance sheets over the coming years without huge adverse economic consequences. The key is for them to do so slowly, …
We expect a spike in food price inflation to push headline CPI inflation up sharply over the months ahead. But with core inflation unlikely to pick up much further and PPI inflation set to fall, policymakers will look through the rise in the headline CPI …
A long period of sustained economic growth has helped drive unemployment in Japan to its lowest level in nearly a quarter of a century. Nonetheless, inflation and wage growth are both barely positive and look set to remain subdued. The Bank of Japan is …
At this stage, a 25bp rate hike at next week’s FOMC meeting is all-but guaranteed. Of more interest will be whether the increased prospect of a near-term fiscal stimulus prompts officials to revise up their projections for GDP growth, inflation and …
6th December 2017
The Bank of Canada’s decision to keep interest rates at 1.00% today and its cautious policy statement indicate that, in contrast to the market view, it is in no hurry to raise rates again soon. We think that markets are over-estimating the economy’s …
At its last meeting in November, the Central Bank of Iceland (CBI) kept policy on hold. Nothing has happened since then to alter our view that interest rates will remain unchanged until 2019. … Icelandic interest rates to remain on …
The soon-to-be-finalised fiscal stimulus could prompt the Fed to tighten monetary policy slightly more aggressively next year, although the potential interactions between fiscal and monetary policies over the next few years go well beyond that. … How will …
The RBI kept its repo rate on hold at 6.00% today, defying calls from prominent members of the government for further rate cuts. In fact, with core price pressures building, we think the debate may shift towards tighter policy later in 2018. … RBI on …
We’ve revised down our forecast for China’s growth next year on the back of the weakness in recent data. There will be little movement in the official GDP growth numbers but we now expect actual growth of 4.5% in 2018, compared with the above-trend 6.0% …
5th December 2017
The surprisingly dovish tone taken by Governor Glapinski in the press conference accompanying today’s MPC meeting belies the hawkish shift in sentiment across the Council as a whole. In spite of the governor’s rhetoric, we think the first interest rate …
The Office for National Statistics confirmed that GDP grew by 0.4% in Q3 and the economy appears to have maintained its recent momentum so far in the fourth quarter. Indeed, November’s Markit/CIPS activity surveys indicate that quarterly GDP is on course …
The Reserve Bank of Australia didn’t say as much in the statement released after it left interest rates at 1.5% for the 16th month today, but its Christmas wish must surely be for much more economic growth and a lot more inflation next year. We don’t …
The jump in Turkish inflation to a fourteen-year high of 13.0% y/y in November, from 11.9% y/y in October, will undoubtedly alarm policymakers at the central bank. With the government seemingly willing to tolerate tighter monetary policy, we have …
4th December 2017
The rise in inflation, primarily driven by sterling’s post-referendum slide, has taken its toll on consumer spending growth this year. However, we think that the worst of the real pay squeeze has probably now passed. With consumer confidence still solid, …
1st December 2017
The central banks in Asia most likely to follow the Bank of Korea over the coming year in raising interest rates are those of Malaysia, India and Pakistan. However, with the exception of Pakistan, the tightening cycles are likely to be very gradual. … Who …
Governor Kuroda has recently discussed the idea that extremely low interest rates could undermine bank profits and capital and, ultimately, lending. Evidence for this idea is lacking in Japan, where the main pressure on bank profits is coming from …
While the notable strengthening in the Australian labour market this year has led to some reduction in the high levels of existing spare capacity, wage growth has remained around record lows. And the experience of other advanced economies suggests that …
Rumours that members of the government are attempting to pressure the Reserve Bank of India (RBI) to loosen monetary policy are nothing new, although continued efforts to undermine the central bank’s independence are worrying. For its part, the RBI under …
We forecast a 200,000 gain in non-farm payrolls in November, with the unemployment rate holding steady at a 17-year low of 4.1%. The latter will concern those Fed officials worried that diminishing labour market slack is laying the foundations for a more …
30th November 2017
