Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Romanian MPC’s decision to raise its overnight deposit interest rate represents a move to tighten monetary policy further. And the hawkish post-meeting press statement supports our view that interest rates are likely to be raised by more than most …
7th November 2017
Although the Reserve Bank of Australia (RBA) left interest rates at 1.5% for the 15 th month today, we don’t think it is placing enough weight on the recent weakening in retail sales and softer news on inflation. If GDP growth and underlying inflation …
Sri Lanka’s central bank (CBSL) left rates on hold today, and the accompanying monetary policy statement supports our view that rate changes are not on the horizon. CBSL will be wary of hiking rates at a time when growth is sluggish, but with inflation …
Data released by the ECB today imply that a significant volume of its German Bunds will mature next year, which the Bank will re-invest in German assets. But we don’t think that re-investments will benefit Bunds more than other countries’ government …
6th November 2017
October’s weak Swiss inflation data support our view that SNB interest rate hikes are a very distant prospect. Elsewhere, Swedish production data suggest that quarterly GDP growth slowed in Q3. … Swiss CPI (Oct.) & Swedish Production Index. …
Suggestions from Japan’s government that it has vanquished deflation are premature when wages are barely rising, core inflation is close to zero and inflation expectations are lower than a few years ago. As things stand, a drop back into deflation still …
While the Monetary Policy Committee’s (MPC) decision to increase Bank Rate for the first time in a decade was largely priced into financial markets ahead of the November meeting, the Committee struck a more dovish tone than expected on the future path of …
3rd November 2017
The ECB’s decision last week to extend its bond-buying well into 2018 means that it will probably need to change the composition of its purchases. After all, it has already had to reduce its purchases of bonds in some countries as it is approaching its …
The nomination of Jerome Powell to be the next chair of the Fed doesn’t have significant implications for EMs. We think that the economic recovery is close to peaking in several emerging economies and that the best days of the rally in EM asset prices are …
2nd November 2017
Some are born great, some achieve greatness and some have greatness thrust upon them. Jerome Powell belongs in the third category. President Donald Trump’s nomination of Powell to be the next Fed Chair is an underwhelming choice. The Fed will face many …
The statement accompanying the Czech MPC’s meeting – at which it resumed its tightening cycle via a 25bp hike to the policy rate – was more dovish than we had anticipated. Accordingly, we think that the Council will hold fire at December’s meeting and …
The Monetary Policy Committee’s dovish comments and forecasts accompanying the first rise in interest rates for a decade left the markets anticipating only a very modest pace of monetary policy tightening over the coming years. But we still think that …
The Reserve Bank of New Zealand will leave interest rates at 1.75% at the policy meeting on Thursday 9th November and by adopting a more cautious tone in the accompanying Monetary Policy Statement it will again warn the financial markets that they are …
The Fed issued a very similar statement at the conclusion of the latest FOMC meeting today, which included an upgrade to its assessment of economic growth. On balance, this is a marginally more hawkish statement that leaves the Fed firmly on course to …
1st November 2017
The ECB seems set to raise interest rates even later than we had previously assumed and we are now pencilling in the first hike for September 2019. Accordingly, we have made small downward revisions to our Bund yield forecasts and now see the euro …
We think the financial markets are right to pare back their expectations of how far interest rates will rise next year. Admittedly, we expect that after leaving rates at 1.5% at the meeting on Tuesday 7th November, the forecasts the Reserve Bank of …
The Bank of Japan still expects growth to exceed its sustainable rate both this year and next. However, sluggish price pressures forced the Board to slash its inflation forecasts yet again at today’s meeting. The upshot is that policy tightening remains a …
31st October 2017
Despite the sustained strengthening in the Australian labour market, retail sales have been unusually weak in recent months. Admittedly, some of this weakness can be explained by weak price pressures. Nevertheless, households are clearly struggling under …
The unprecedented upswing in the national home ownership rate, fuelled in large part by a credit boom, appears to have peaked and is now going into reverse, even though the aging population should be putting it under upward pressure. We expect further …
27th October 2017
The ECB’s decision to reduce its monthly asset purchases from January largely reflected growing optimism that euro-zone inflation will rise towards the target of below, but close to, 2%. Indeed, the latest surveys suggest that underlying price pressures …
Regardless of who is nominated to be the next Fed Chair, we expect a rebound in core inflation will prompt the Fed to raise interest rates four times in 2018. The components that have dragged core CPI inflation lower this year look set to reverse course, …
The Bank of England is set to hike its policy rate for the first time in a decade at its meeting next week, and the US Fed is on course to raise rates again in December, while continuing to unwind QE slowly. Meanwhile, the ECB has announced its plans to …
The Russian central bank statement, which accompanied today’s decision to cut the policy rate by 25bp, suggests that policymakers have become increasingly confident that inflation will remain low and that they see more scope for loosening than before. …
Financial markets in Brazil have come under pressure over the past week as a split in President Temer’s ruling coalition has cast doubt over important parts of his reform agenda. The trigger for the latest sell-off has been a fresh vote in the lower house …
While the Swedish Economic Tendency Indicator edged down in October, the sharp rise in the consumer confidence index means that the survey now paints a more balanced picture of the economy. And with consumers’ inflation expectations reaching a five-year …
Australia’s third-quarter inflation data highlighted that inflation is highest for the items where prices are influenced by government decisions and inflation is lowest for the items where prices are set by market forces. Our measure of market forces …
While the ECB’s announcement that its asset purchase programme will now run until September 2018 and at a slower pace from January was largely in line with consensus forecast, its decision to keep the programme open-ended struck a dovish note and pushed …
26th October 2017
While it looks set to be quite a close call, on balance we think that a majority of the Monetary Policy Committee (MPC) will vote in favour of hiking interest rates at next Thursday’s meeting, for the first time in a decade. … MPC to press ahead with …
The hawkish tone of today’s Turkish MPC statement showed an overdue concern with high inflation (and expectations) and suggests that cuts in interest rates are off the agenda. That said, with inflation set to ease over the first half of 2018 and the …
The weakness of October’s CBI Distributive Trades survey was undeniably disappointing. But there are a number of reasons to take the sharp fall in the headline figure with a pinch of salt. … CBI Distributive Trades Survey …
The latest data on retail sales during China’s National Day “Golden Week” period suggest that consumer demand remains strong. Despite a further increase in overseas tourism during the holiday, domestic spending was 10.3% higher than last year, only …
While both the Riksbank and the Norges Bank kept policy unchanged today, the outlooks for monetary policy in the two countries are very different. We think that policy in Sweden will be tightened early next year, sooner than the Riksbank’s guidance …
While Malaysia has made good progress in bringing down its budget deficit, there remains limited room for a pre-election giveaway in the 2018 budget, which is due to be announced on 27th October. Given that Prime Minister Najib Razak must hold an election …
GDP growth in South Korea rose to a seven-year high in q/q terms last quarter as the economy brushed off the rising tensions on the Korean peninsula. Provided conflict is avoided, South Korea should continue to grow strongly over the coming year, helped …
If President Donald Trump is serious about being a “low-interest rate guy”, markets are probably right to brush off John Taylor’s chances of being nominated for Fed Chair. That said, we don’t agree with recent claims that Taylor could prove to be dovish …
25th October 2017
The Bank of Canada’s decision to hold interest rates at 1.00% and its less hawkish policy statement indicate it will take a cautious approach, supporting our view that there will be no further rate hikes this year. Next year, however, we expect the …
The Fed’s policy meeting next week could provide some insight into whether the majority of officials still support a December interest rate hike. But it will otherwise be overshadowed by the imminent announcement from the White House on who President …
The decision by Argentina’s central bank to hike its policy interest rate, when most analysts had been expecting the next move to be a cut, is an encouraging sign that policymakers are serious about bringing inflation down. With balance sheet …
Economic prospects for the Nordic and Swiss economies are fairly bright. Although Switzerland had a disappointing start to the year in terms of GDP growth, the surveys are universally positive about the coming quarters, suggesting that the recent weakness …
The Bank of Japan will leave policy settings unchanged at the upcoming meeting while further reductions in the Board’s inflation forecasts will underline that policy tightening remains a distant prospect. … Lower inflation forecasts underline case for …
Our measure of M3 shows broad money growth rising in September to its fastest pace in more than two years, although growth in narrow money continues to slow gradually. … Monetary Indicators Monitor …
24th October 2017
Our relatively sanguine view on the outlook for EMs over the next 12-18 months has prompted several clients to ask about risks to our forecasts. While risks – both positive and negative – are by their nature difficult to anticipate, we think there are …
The rapid expansion of the central government’s deficit in the early stages of the fiscal year is a regular occurrence, as revenues tend to get ramped up in latter months. Nevertheless, there are several reasons to think that the deficit will exceed the …
We are re-sending this publication because the previous one contained an error. Mr Abe is now entering his fourth term as Prime Minister. Fiscal policy will probably be tightened further during PM Abe’s fourth term and the economic expansion is set to …
23rd October 2017
Despite net external trade being a drag, the economy managed to grow by close to 2.0% q/q annualised in the third quarter, partly thanks to a big rebound in non-residential buildings investment. Nevertheless, that’s considerably slower than the torrid …
20th October 2017
The latest economic data suggest that growth in Emerging Europe as a whole picked up further in Q3 and one of the main drivers behind this appears to have been stronger consumer spending. Retail sales in Russia rose at their fastest pace since 2014 last …
The markets are right to remain relatively sanguine over the upcoming decision on who will be the next Fed Chair, since the Fed’s low rate regime will probably continue with President Donald Trump picking Jerome Powell. But there is still uncertainty over …
Market expectations towards South African interest rates have shifted markedly in recent weeks. While a rate cut next month is no-longer likely, we think that the markets have moved too far, and are now under-estimating the chance of looser policy over …
The headline inflation rate rose to 1.6% in September, from 1.4%, but the increase was partly due to higher energy prices, which have already begun to fall back. Although some of the core inflation measures edged higher, they remain well below the 2.0% …
While it is far from a done deal, there was nothing in the comments made by MPC members this week, or the latest economic data releases, to make us alter our view that the MPC will press ahead and raise interest rates for the first time in a decade on …
