Filtered by Topic: Monetary Policy Use setting Monetary Policy
We think government bond yields in the euro-zone will rebound a bit, particularly in those countries, like France, where public finances are concerning. The September PMIs released today for the euro-zone and its two largest economies painted a very bleak …
23rd September 2024
The latest flash PMIs suggest that GDP growth slowed in advanced economies at the end of Q3, particularly in the euro-zone. Meanwhile, weaker activity seems to be weighing on services price pressures, which should give central banks confidence to continue …
We held an online Drop-In session last week to discuss the likely pace and extent of interest rate cuts and their implications now that the US Fed has joined the party. (See a recording here .) This Update answers some of the questions that we received, …
After the long-awaited start to the Federal Reserve’s easing cycle, Group Chief Economist Neil Shearing discusses next steps. He answers client questions about the risks of inflation bouncing back and explains why we expect rates to settle at levels much …
20th September 2024
Milei’s ‘zero deficit’ budget The cornerstone of Argentine President Milei’s draft 2025 budget is a continuation of his ‘zero deficit’ policy, which implies a primary surplus of 1.3% of GDP in 2025 (versus 1.5% this year). But this looks optimistic, for a …
SARB predicts higher growth and lower inflation The South African Reserve Bank (SARB) outlined a “goldilocks” scenario of stronger growth and lower inflation at its MPC meeting this week. The actual decision to cut the benchmark repo rate by 25bp, to …
Bank to step up the pace of easing The Summary of Deliberations from September’s policy meeting, published on Wednesday, revealed that the Bank of Canada is placing increasing emphasis on the downside risks to inflation and activity. Some on the Governing …
Fed opts for a 50 despite strong GDP growth Fed goes big The Fed’s decision to start its rate cutting cycle with a bang was not a big surprise after the seemingly coordinated media articles late last week warning that the 25bp vs 50bp debate was closer …
The contrast between the Bank of England keeping interest rates on hold at 5.00% this week, along with the accompanying message that it will cut interest rates only gradually, and the US Fed kick-starting its easing cycle with a big 50 basis point (bps) …
Note: We’ll be discussing key takeaways from our Europe Economic Outlook, including the scope of Germany’s downturn, in a Drop-In on Tuesday, 24th September . Register here for the 20-minute online briefing. The US Fed’s decision this week to cut interest …
Tailwind from Fed’s easing cycle will be small The US easing cycle that got underway with a 50bp cut this week will provide a boost to economic activity in Hong Kong, where a fixed exchange rate means interest rates track those in the US. We expect the …
Storm Boris floods Central Europe The flooding in Central Europe over the past week has been described as the worst in the region in the last two decades and our thoughts are with those affected. The most heavily impacted areas have been in Poland, …
RBI will focus on domestic factors rather than Fed Events this week have been dominated by the Fed’s 50bp rate cut to kick off its easing cycle. Clients can read our analysis of the decision here and watch our online briefing on demand here . Some EM …
The Bank of Japan today signalled that it’s in no rush to tighten monetary policy any further and we’re pushing back our forecast for a final rate hike to 0.5% from October to December. As widely anticipated, the Bank kept its policy rate unchanged at …
Election risk to Sri Lanka’s recovery Sri Lanka has enjoyed a steady, if unspectacular recovery from the 2022 crisis which saw the country default on its debts and the president ejected from power in the face of huge popular protests. Data released late …
O labour market slack, where art thou? In the wake of the Fed’s hawkish 50bp cut and another set of strong Australian labour market data , the financial markets now see a lower 60% chance of an RBA rate cut by the end of the year, down from 85% when we …
The Bank of Japan kept policy unchanged today as widely anticipated and we’re sticking to our forecast that it will deliver another 25bp rate hike at its October meeting. As correctly anticipated by all analysts polled by Reuters, including ourselves, the …
The PBOC fails to deliver cuts The lack of any reduction to policy rates today, despite the clear economic case for doing so, underscores the extent to which the PBOC remains constrained by concerns about bank profitability and declining long-term bond …
We think SNB Chairman Thomas Jordan will probably use his last meeting to once again surprise markets by cutting the policy rate by 50bp to 0.75%. Policymakers will be unhappy with the franc’s recent appreciation and will use rate cuts to try and stifle …
19th September 2024
The South African Reserve Bank finally joined the EM easing cycle today, lowering its repo rate by 25bp to 8.00%. While the MPC clearly has some lingering concerns about the inflation outlook, we think sluggish growth and at-target inflation will provide …
Overview – Tight policy and deteriorating terms of trade will keep growth across Latin America subdued and we think that the region will underperform other parts of the emerging world – as well as consensus expectations – over the next couple of years. …
While UK Gilt yields might rise a bit further in the near term, we think that they will fall back before long, as the Bank of England eventually delivers more rate cuts than most anticipate. After delivering a first cut in August, the Bank of England left …
PIF investment in Egypt: the first of many? Saudi Arabia’s Public Investment Fund (PIF) has pledged to invest $5bn into Egypt in a further sign that March’s policy shift is attracting international attention. At the same time, this will help to put …
SARB cautiously cuts by 25bp The South African Reserve Bank finally joined other EM economies in starting its monetary policy easing cycle, lowering its repo rate by 25bp to 8.00%. While the decision to cut was unanimous, the MPC did consider both holding …
Overview – Headline GDP growth in the Gulf economies will strengthen sharply in 2025 as oil output cuts are unwound. But lower oil prices will prompt a turn to fiscal consolidation in most of the Gulf, causing growth in non-oil sectors to slow. Elsewhere, …
Our US Chart Pack has been updated with the latest data and our analysis of recent developments. After kicking off its loosening cycle with a 50bp cut, we suspect the Fed will now revert to 25bp moves until the fed funds target range reaches 3.00% to …
We’ll be discussing the differences in the policy outlook for the Bank, the ECB and the Fed in a 20-minute online briefing at 3pm BST today. (Register here .) By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the …
CBRT still waiting for further disinflation The communications accompanying the decision by the Turkish central bank (CBRT) to leave its policy rate on hold today, at 50.00%, were slightly more dovish than last month, but there are no clear signs to us …
For our more detailed analysis of the Bank's September policy announcement, see here . BoE underlines that interest rates will be reduced gradually By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the Fed and is …
The Norges Bank left rates unchanged today and shifted its guidance only very slightly in a dovish direction. Whereas the Bank does not expect to cut rates until Q1 next year, we think it is likely to do so in December and to then cut rates fairly rapidly …
CBC in no rush to join regional easing cycle Taiwan’s central bank (CBC) left its main policy rate unchanged today (at 2.0%), and with growth set to accelerate we expect rates to remain on hold throughout 2024 and 2025. In contrast, the consensus is …
Norges Bank stays hawkish In contrast to the uncertainty surrounding yesterday’s Fed decision, the Norges Bank’s announcement that it is leaving its policy rate unchanged at 4.5% was correctly anticipated by all the analysts polled by Reuters, so the main …
Markets barely reacted to the Fed’s 50bp rate cut, on balance, and our base case is that further cuts won’t move the needle too much either. The Fed started its easing cycle with a bang on Wednesday with a 50bp cut. That said, it was probably a “hawkish …
This page has been updated with additional analysis since first publication. RBNZ still on course to loosen policy aggressively Economic activity in New Zealand last quarter wasn’t quite as weak as most had anticipated. However, we still think there’s a …
Copom hikes, leaves door open to more Just four months after last lowering interest rates and hours after the US Federal Reserve started its easing cycle with a bang, Brazil’s central bank delivered a 25bp hike to the Selic rate, to 10.75%, as officials …
18th September 2024
The Fed did cut its policy rate by a bigger 50bp today, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections point to smaller 25bp cuts at the remaining two FOMC meetings this year. Accordingly, today’s announcement is …
A hawkish 50 The Fed did cut its policy rate by a bigger 50bp, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections only shows an additional 50bp of cuts between now and the end of this year. Accordingly, today’s …
Unlike their counterparts in the Fed, policymakers at the Riksbank have ruled out making a bumper 50bp rate cut anytime soon. Instead, they are likely to cut their key policy rate by 25bp at next week’s meeting. Further ahead, we think the Riksbank will …
Note: This Outlook was originally published on 17th September . It was updated on 1st October to reflect a revision to our ECB interest rate view . Overview – The euro-zone appears to have lost some momentum and is likely to remain sluggish in the coming …
South Africa’s mixed recovery South Africa’s economy is enduring a clear divergence in its economic recovery. Consumer-facing sectors appear to be performing better but industry, particularly mining, continues to struggle. We think interest rate cuts will …
Overview – The economy is cooling but remains primed to grow by 6-6.5% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to remain …
Drop in inflation sets the stage for rate cut tomorrow The dip in South Africa’s headline inflation rate, to 4.4% y/y, in August and the further decline in core inflation all but seals the deal on the SARB start an easing cycle tomorrow. We have pencilled …
The US Federal Reserve looks certain to start its loosening cycle this evening and, by virtue of their dollar pegs and open capital accounts, central banks across the Gulf will follow suit. Lower interest rates may provide relief to firms and households …
Bank Indonesia today kicked off its easing cycle with a 25bps cut, taking its main policy rate to 6.00%. With inflation under control and the rupiah rebounding against the US dollar, further cuts are likely. While the decision was unexpected (it was …
This page has been updated with additional analysis since first publication. Rise in services inflation makes September rate cut even less likely CPI inflation stayed at 2.2% in August (consensus & CE 2.2%, BoE 2.4%), but the rise in services inflation …
Overview – We have generally revised down our growth forecasts for this year and next. Weakness in the euro-zone will remain a drag on export sectors across Central and Eastern Europe (CEE) in the coming quarters, while tight policy will take some heat …
17th September 2024
EM recoveries are beginning to slow and will continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
Limited data flow since August meeting broadly in line with RBA’s expectations Bank will therefore reiterate pledge to keep rates unchanged this year First rate cut will happen in Q2 next year The Reserve Bank of Australia will probably stick to its …
Disinflation continues, CBN in place to cut rates yet Nigeria’s headline inflation rate dipped to 32.2% y/y in August, confirming the disinflation trend is firmly on course as the pass through from previous sharp falls in the naira continues to fade. This …
16th September 2024
