Filtered by Topic: Monetary Policy Use setting Monetary Policy
Whoever is leading the Fed next February, policy will be driven mostly by economic developments, which we think will prompt the FOMC to raise rates four times in 2018. But a new Chair, along with other board appointees, could shift the Fed’s stance in …
24th August 2017
After a torrid couple of years, the economies of Latin America have turned a corner and we expect growth to strengthen over the rest of 2017 and into 2018. Inflation has fallen in most countries and should remain low, allowing central banks across the …
23rd August 2017
Despite the current subdued rates of inflation across most of Emerging Asia, we don’t expect many of the region’s central banks to copy Bank Indonesia, which yesterday surprised markets by cutting interest rates. The main reason why other central banks …
While the Central Bank of Iceland (CBI) left rates unchanged today, our expectation that the króna will appreciate in the coming months means we expect one more rate cut this year, in November. … Central Bank of Iceland nearing the end of its loosening …
Just as the dollar’s earlier surge weighed on economic growth last year, the drop back in the exchange rate this year will provide a boost to growth over the next 12 months. The pick-up in global economic growth will also help. Real export growth has …
22nd August 2017
Given the improving outlook for inflation in Indonesia, we think today’s 25 basis point cut in the main policy rate is unlikely to be the last in the current cycle. We expect one further rate cut this year, although the timing and pace of further cuts …
Despite the focus in advanced economies on the timing of monetary policy tightening, the majority of EMs remain in easing mode. More EM central banks cut their policy interest rates than raised them for the fourth consecutive month in July. The bulk of …
The raft of second quarter GDP data released over the past few weeks showed that growth in Emerging Europe as a whole accelerated to around 3.7% y/y, its fastest pace since 2011. The pickup in growth was widespread across the region. It’s tempting to pin …
The Reserve Bank of India cut its policy rate by 25bp earlier this month, and subsequently called upon commercial banks to pass on the cut to borrowers. But the move is likely to have a negligible impact on lending growth to the private sector. After all, …
The euro-zone’s economic growth is unusually synchronised across the region. Economies in the core continue to do well, while previously-struggling countries like Italy and Portugal are growing again. This makes it less likely that a crisis will erupt in …
18th August 2017
Chile’s central bank left its policy interest rate unchanged at 2.50% for the third consecutive month and, while the accompanying statement gave no hints that rate cuts are being considered, we suspect policymakers remain divided over the need for …
If a cyclical rise in wage growth in Australia was underway, it would show up first in the strongest states and sectors. But wage growth hasn’t risen in New South Wales and Victoria. What’s more, labour market conditions in Queensland, Western Australia …
The minutes of the Reserve Bank of India’s (RBI’s) August policy meeting show that, despite voting to cut interest rates, most members remain cautious about the outlook for inflation. Indeed, with inflation data for July confirming a pick-up in price …
17th August 2017
At its last meeting in June, when it cut interest rates for the second time this year, the Central Bank of Iceland (CBI) left the door open to further rate cuts. But given that the króna has slumped since then, it now seems more likely that the CBI will …
16th August 2017
The Bank of Thailand (BoT) left interest rates on hold today and the accompanying monetary policy statement suggests the central bank is in no rush to adjust rates any time soon. We are maintaining our view that the BoT will keep interest rates unchanged …
Official data published on Monday show that commercial banks’ non-performing loan (NPL) ratio held steady at 1.74% in Q2 and that their net profits grew almost 12% y/y, the fastest pace since 2014. That said, we think it would be a mistake to conclude …
New lending declined in July, masking an uptick in underlying credit growth. We doubt this will translate to a sustained pick-up, however, since efforts to slow the build-up of debt mean that market rates should remain elevated in coming months. … Bank …
15th August 2017
History may be turned on its head over the next decade with Australia and New Zealand experiencing lower inflation rates than some of their peers. It follows that their exchange rates may be weaker than otherwise and their government bonds yield may be …
Indian wholesale price inflation rose in July, and looks set to accelerate further over the coming months. As such, we think that there is no scope for further monetary loosening. … Wholesale Prices …
14th August 2017
The surge in business confidence in Australia has made us a little more upbeat on the outlook for business investment. But with households showing some signs of struggling, a bit more investment won’t prevent GDP growth from falling short of most people’s …
11th August 2017
Today’s decision by the central bank in the Philippines (BSP) to keep its main policy rate on hold at 3.0% was widely expected. The accompanying statement, which was the first to be published since Nestor Espinalla took over as governor, suggests the …
10th August 2017
Egyptian inflation rose to its highest rate since 1986 in July, but it has been pushed up by a number of one-off factors that will fade over the next six-to-nine months. Indeed, we think inflation has now peaked and will begin to fall more quickly than …
Graeme Wheeler didn’t go out with a bang at his last policy meeting as Governor of the Reserve Bank of New Zealand as interest rates were left at 1.75% for the ninth month in a row. But he stressed more strongly than before that rates are unlikely to rise …
China’s foreign exchange reserves suggest that outflow pressures eased further last month, which seems to have encouraged the People’s Bank to halt its FX sales entirely. This shift is helping to support the renminbi, which we think will continue to …
7th August 2017
Despite softening home sales, the incoming data point to solid GDP growth in the second quarter, possibly outpacing the 3.7% q/q annualised rate posted in the first quarter. Needless to say, the performance of the economy over the first half of this year …
4th August 2017
Annual revisions to the income and spending data released this week mean that the household saving rate is now estimated to have fallen sharply over the past year, calling into question the sustainability of recent economic growth. While those revisions …
The surprisingly-dovish reaction of sterling to the Bank of England’s August Inflation Report has led some commentators to conclude that the prospect of an interest rate hike this year is now dead and buried. However, while our central forecast assumes …
The financial markets need to wake up to the fact that there is going to be fewer interest rate changes than in the past and more policy inertia. This is very much a global development, but the trend is more acute in Australia and New Zealand. The lower …
The statement accompanying the Czech MPC’s meeting, at which it hiked interest rates for the first time in nine years, was relatively dovish and adds to the impression that this will be a gradual tightening cycle. That said, we think inflation is likely …
3rd August 2017
While the Monetary Policy Committee (MPC) remained split on whether to increase interest rates at August’s meeting, the hawks are likely to remain in a minority for a while longer yet. Nonetheless, we still think that the first hike will come earlier than …
After the recent run of softer economic news, the improvement in the Markit/CIPS services survey in July provides reassurance that the economy has maintained the momentum it gathered over Q2. … Markit/CIPS Services PMI …
Sri Lanka’s central bank left interest rates on hold today, and the less hawkish tone of the statement suggests that its tightening cycle may now be at an end. We now expect rates to be left on hold for the remainder of the year, having previously …
The Reserve Bank of India (RBI) went with consensus expectations in cutting its repo rate by 25bp to 6.00% today. But it also acknowledged that inflation would soon be rising again. As such, further policy loosening is unlikely. … RBI rate cut to be …
2nd August 2017
Comments today by BoJ Board Member Funo suggest that the Bank has given up on reaching its inflation target any time soon. Market expectations of policy tightening are likely to recede further as a result … Is the Bank of Japan giving up on its 2% …
The recovery in frontier economies continued over the first half of this year. GDP growth averaged around 2.0% y/y in Q1, twice the rates seen in mid-2016. It would have been stronger still were it not for weakness in the largest frontier market, Saudi …
31st July 2017
After a soft patch at the beginning of this year, jobs growth has soared in Australia in recent months. What’s more, of the net new 154,000 jobs that have been created since March all of them have been full-time ones. And business surveys remain …
The Fed’s latest policy statement suggests that, barring any disruptive debt-ceiling stand-off, the FOMC is ready to announce it will begin reducing the size of its balance sheet at its September meeting. But policymakers are keeping their options open on …
28th July 2017
There is growing speculation that Malaysia’s prime minister, Najib Razak, will take advantage of the recent strength of the economy by calling an early general election. The weak state of the opposition means another victory for the ruling UMNO party is …
Once again the business surveys provided an over-optimistic reading of the economy’s health in the second quarter. This raises questions about their usefulness as a leading indicator, and suggests that we should perhaps put less weight on their current …
The statement accompanying the Colombian central bank’s decision to slow the pace of interest rate cuts to 25bp (from 50bp previously) suggests that policy might not be loosened as aggressively in the upcoming meetings as we had initially expected. …
Abenomics appeared to run out of momentum well before a recent slump in Prime Minister Abe’s popularity put his political future in doubt. In particular, his departure would matter little for structural reform. Monetary policy should also continue along a …
Most people are right to believe that their inflation rate is not 1.9% as the official ABS data show. As different people spend different shares of their income on different items than the ABS assumes, their own inflation rates are different. But most …
While the softer tone of recent economic data may not be enough to prevent another split on the Monetary Policy Committee at August’s meeting, it supports our view that the MPC is still a way away from raising interest rates. … Sluggish GDP growth to keep …
27th July 2017
Financial markets and a large majority of analysts are braced for a rate cut at the Reserve Bank of India’s policy meeting next week. But the RBI has developed a taste for springing surprises recently, going against the analyst consensus at four out of …
The tone of the Turkish MPC statement published at today’s meeting remained relatively hawkish, but we think that falling inflation is likely to prompt the Council to start loosening monetary policy later this year and in 2018. … Turkish MPC stands pat, …
The global picture for monetary policy has changed a little recently because inflation has been lower than expected in many countries. We now think the Fed is likely leave its policy rate on hold in September, but to resume its rate hikes in December. …
The Reserve Bank of Australia will almost certainly keep interest rates on hold at 1.5% when it meets next Tuesday 1 st August, and we expect it to retain its fairly upbeat view on the outlook for the economy when its latest forecasts are published in …
As widely expected, the Fed left its policy settings unchanged today, while hinting that it will begin the process of winding down its balance sheet as soon as September. The Fed will have plenty of opportunity to clarify its intentions before then, not …
26th July 2017
Inflation has continued to fall across Latin America – our measure of regional inflation (excluding Argentina and Venezuela) dropped below 4% y/y for the first time since 2010 last month. This is due largely to the collapse in Brazilian inflation, which …
The scale of the decline in inflation in Central Europe over the past month has taken many by surprise and reinforced expectations in the financial markets that monetary policy will remain very loose. However, this fall in inflation was due almost …
