Filtered by Topic: Monetary Policy Use setting Monetary Policy
While leading labour market indicators in Australia continue to point a decent pace of employment growth ahead, it is not just the rate of jobs growth that matters but also the composition. And at this stage it appears that future jobs growth may well be …
29th September 2017
Mortgage rates are set to move back above 3% by the end of 2019. On its own, a rise in mortgage interest rates on that scale is unlikely to trigger another downturn in house prices. But it will act as a brake on any recovery in mortgage lending and …
28th September 2017
The encouraging signs about the health of the Australian economy have continued over the past month, with employment growth gathering pace and the outlook for business investment improving. (See Chart 1.) The economic outlook has clearly improved and GDP …
There remains plenty of uncertainty around the formation of the next government and who will be the next permanent Governor of the Reserve Bank of New Zealand, but the one consistency is the dovish message that the RBNZ sent today after leaving interest …
27th September 2017
In his speech today, Bank of Canada Governor Stephen Poloz showed that he remains confident in the economy, suggesting that another interest rate hike is coming this year. That said, we still expect the knock-on effects from a housing downturn to worsen, …
The US Fed’s decision to begin scaling back its balance sheet nearly eight years after it started QE is a major milestone, but global financial conditions should remain highly accommodative for a long time yet. They are probably more influenced by total …
The Czech MPC’s decision to keep rates on hold today was a very close call and we think that an interest rate hike at the next MPC meeting on 2nd November is highly likely. Following that, our central view is that there will be a further 50bp of hikes in …
GDP figures released this month showed that the economic fortunes of Africa’s largest economies diverged in Q2. South Africa’s economy rebounded after a brief recession at the turn of the year. While investment spending remained weak, strength elsewhere …
The past month has brought further evidence that the recovery in Latin America is picking up pace. Our GDP Tracker suggests that regional growth is now running at a three-year high of 3% y/y. The rebound has been widespread. In Brazil, a combination of …
We no longer expect the Central Bank of Iceland (CBI) to cut interest rates again this year. The Government’s collapse and prospect of a left-wing coalition taking power have increased the chance of a expansion. And if sustained the króna’s recent …
The Bank of Thailand (BoT) today resisted pressure from the government to loosen monetary policy, and instead left its key interest rate unchanged at 1.50%. With headwinds to the economy mounting and inflationary pressures subdued, we think interest rates …
The prospect of the first rise in interest rates in a decade has raised concerns about the impact on the already beleaguered consumer. Indeed, there is clearly a risk that the sheer shock of the first hike could dent sentiment. But we think there are …
We are in agreement with financial market and analyst expectations of a rate hold in the Reserve Bank of India’s (RBI’s) upcoming policy meeting on 4th October. Further ahead, some are still expecting further, albeit modest, policy loosening. However, …
The jump in oil prices, from $51pb at the start of September to around $59pb at the time of writing, should provide a fillip to the large frontier oil economies, such as Saudi Arabia, Nigeria and Kazakhstan. If sustained, we estimate that this would …
26th September 2017
Nigerian policymakers kept rates on hold today, but the accompanying statement made it clear that easing is on the way. We expect that the first cut will come in Q1 2018. … Nigeria: Rates on hold, but cuts are still on the …
The move by Hungary’s MPC to loosen monetary policy last week appears to have been aimed at weakening the forint, which looks to us like a step in the wrong direction. The key threat to inflation and external competitiveness stems from rising wages, …
We believe that the financial markets are wrong to price in the possibility that the Reserve Bank of Australia (RBA) will raise interest rates twice next year. Admittedly, it is possible that after leaving rates at the current record low of 1.5% at the …
Although the economy grew strongly over the first half of this year, that growth was still overly dependent on the heavily indebted household sector. That arrangement was possible when interest rates were near record lows and house prices were rising …
25th September 2017
Given the economy’s poor growth prospects and the subdued outlook for inflation, today’s rate cut by Bank Indonesia (BI) is unlikely to be the last in the current cycle. However, as the central bank hinted at in today’s statement, further rate cuts are …
22nd September 2017
As the statement and updated projections from this week’s FOMC meeting made clear, a majority of Fed officials remain convinced that the recent weakness of core inflation is mostly due to transitory factors and still expect to hike rates again in …
The prospect of the first rise in interest rates in a decade has raised concerns about what impact it would have on the already beleaguered consumer. But modest rises in interest rates shouldn’t put a big dent in household incomes. And the real pay …
Recently-released GDP data confirmed that Argentina’s economic recovery continued in Q2, with economy growing at its fastest pace in two years. However, the drivers of growth are looking unbalanced. … Argentina’s economic recovery looking …
The government is putting pressure on the Bank of Thailand (BoT) to cut interest rates in order to weaken the baht, which has been the best performing currency in Asia so far this year. The central bank guards its independence very closely, and with …
Philip Lowe has notched up an impressive scorecard in his first year as Governor of the Reserve Bank of Australia, but greater challenges lie ahead. There are reasons to believe that economic growth and inflation won’t live up to Lowe’s lofty …
The South African Reserve Bank has paused its loosening cycle, but we expect that it will cut rates at its November meeting, by which time inflation will have eased further. … South African loosening cycle put on …
21st September 2017
Tighter monetary policy in the UK, US and euro-zone in the next couple of years will undoubtedly cause risk-free rates to rise. However, given that property’s yield spread against risk-free rates is still elevated, we think there’s room for a gradual …
The slight increase in Brazilian inflation in the first half of this month, to 2.6% y/y from 2.5% y/y in August, is the first real sign that the headline rate may have now bottomed out, and reinforces COPOM’s message that the easing cycle is nearing an …
With economic growth fairly strong and inflationary pressures subdued, Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375%. The dovish tone of the Bank’s accompanying statement reaffirms our view that rates will remain …
Despite the recent rebound in inflation, it was no surprise that the Philippines central bank (BSP) kept its policy rate unchanged at 3.0% today. There was nothing in its statement to suggest BSP is in any rush to change its stance – we expect it to leave …
The Norges Bank today raised its interest rate forecast, implying that it will begin tightening monetary policy mid-way through 2019. By contrast, we think that it will wait until 2020. … Interest rate hikes in Norway a very long way …
Today’s Riksbank minutes suggest that at least two of the six Board members would support an extension of the Riksbank’s QE programme beyond the current December end date. But given our forecast for inflation to remain above the Riksbank’s target between …
The Bank of Japan left its upbeat assessment of economic conditions intact at today’s meeting. But inflation remains a long way below its projections, so further reductions in the Board’s forecasts next month are all but guaranteed. The upshot is that …
Some have argued that the recent jump in inflation is all about a surge in volatile food prices, with the implication that it shouldn’t have a significant bearing on monetary policy. But this ignores the fact that underlying price pressures are rising …
While Grant Spencer will almost certainly decide to keep interest rates on hold at 1.75% at his first meeting as Governor of the Reserve Bank of New Zealand (RBNZ) on Thursday 28 th September, the upcoming general election creates some uncertainty around …
The 0.8% q/q rise in the production measure of GDP in the second quarter won’t prevent the RBNZ from leaving interest rates at 1.75% at next Thursday’s policy meeting and striking a dovish tone too, but it may give the National Party a bit of a boost …
The Fed’s decision today to keep interest rates unchanged at 1.0-1.25%, as well as its long-anticipated move to formally announce the start of the balance sheet normalisation process next month, came as little surprise. The bigger news was that, despite …
20th September 2017
The latest data suggest that, following a strong Q2, growth in Emerging Europe as a whole picked up further in Q3. Activity figures from Poland improved in July and August and the early signs are that Turkey’s economy will record very robust growth in Q3, …
Inflation in South Africa was weaker than expected in August, which supports our view that the South African Reserve Bank will cut its key policy rate from 6.75% to 6.50% at its meeting tomorrow. … South Africa CPI …
The decision by the Hungarian MPC to ease monetary conditions further today looks like a policy misstep. Mounting capacity constraints and rapid wage growth mean that we think inflation will turn out to be much stronger next year than the central bank …
19th September 2017
Some have pointed to a rise in home sales and housing starts growth in August as evidence that China’s property sector is holding up well despite the government’s curbs. But while the property sector has not crashed this year, it has cooled significantly. …
The Fed’s reversal of QE is another sign that the world is inching away from ultra-loose monetary policy. But it is planning to proceed slowly and avoid surprises, and no other central bank is likely to start reversing QE for at least two years. As such, …
In seasonally-adjusted terms, capital outflows fell to a three-year low last month as Chinese firms and individuals reduced their foreign currency deposits at the fastest pace in half a year. Looking ahead, while outflows are likely to persist, we think …
18th September 2017
The Kenyan MPC kept rates unchanged today, but we expect that they will loosen policy next year as inflation falls towards the middle of the target range. … Kenyan MPC holds rates again, but will ease in …
There are no clear signs yet that Hungary’s economy is overheating but, by the same token, growing signs that the economy is hitting capacity constraints sit uncomfortably with the MPC’s continued dovish rhetoric. Any move to loosen policy, as looks …
We think that corporate bond yields will rise only gradually as the ECB tapers its asset purchases next year. After all, the economy looks set to continue performing well. And the Bank is likely to keep enough flexibility in the programme to increase …
Although we expect the Fed to raise its key policy rate more rapidly than financial markets anticipate next year, our forecast is for it to peak at only 2.25-2.50%, in 2019. In the euro-zone and Japan, where inflation is likely to stay below central bank …
15th September 2017
Russian central bank governor, Elvira Nabiullina, struck a predictably cautious tone at today’s postmeeting press conference. But the large amount of spare capacity in the economy is likely to keep inflation lower than the Bank expects, allowing interest …
The next stage of monetary policy normalisation in the developed world – balance sheet reduction by the US Fed, and the shift towards QE tapering in the euro-zone – will not have a major impact on Emerging Asia. Instead, domestic factors will determine …
Peru’s central bank cut its policy interest rate by 25bp last night, to 3.50%, and confirmed our view that rates are unlikely to fall further. What’s more, the surprise decision by Congress to dismiss the president’s cabinet is likely to trigger a …
Nigerian inflation remained high in August, but we expect that it will ease over the coming months, prompting policymakers to cut interest rates. … Nigeria Consumer Prices …
