Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Canada’s new-found optimism in the economy means that there is a risk it could raise interest rates very soon, but we don’t think a rate hike next week to 0.75%, from 0.50%, is a foregone conclusion. Although markets are betting that way, we …
5th July 2017
The euro’s rise has not yet been sharp enough to cause a significant tightening of monetary conditions and we doubt that it will dissuade the ECB from tapering QE next year. But a further appreciation might cause the Bank to opt for a long taper or to …
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 …
It is widely thought that recessions are generally triggered by central banks stepping on the brakes in response to rising inflation. But many recessions have not been preceded by an increase in inflation, particularly since the 1980s. This suggests that …
4th July 2017
By indicating that it no longer expects to cut interest rates, the Riksbank has taken a small step toward monetary policy normalisation. While the Bank indicated that it will continue to guard against a rapid appreciation of the krona, we expect its …
The Reserve Bank of Australia (RBA) left interest rates on hold at 1.5% for the tenth consecutive meeting today and retained its fairly optimistic tone on the outlook for economic growth in the accompanying statement. Nonetheless, we expect rates will …
The decision by Colombia’s central bank to step up the pace of easing caught the consensus off guard, but supports our view that the policy rate will be cut by more than most expect this year. We remain comfortable with our forecast for it fall to 4.50% …
3rd July 2017
The Bank of Canada’s recent hawkishness doesn’t fit with the weaker core inflation data. Amid further warnings from the BIS about the dangers of sticking too closely to inflation targets when asset bubbles are forming, the Bank might be stealthily heeding …
30th June 2017
Bond yields across the Nordic and Swiss economies increased in June, in line with global market moves following major central bank speeches that prompted investors to bring forward their expectations for monetary policy normalisation. Meanwhile, equity …
ECB President Draghi’s speech earlier this week prompted investors to re-assess the outlook for monetary policy. They now seem to expect the Bank to raise interest rates around the middle of next year. However, nothing in his speech changes our view that …
While the recent run of positive news on the health of the Australian labour market is certainly encouraging, it doesn’t alter the bigger picture that there is still plenty of spare capacity. This will prevent a sustained pick-up in wage growth from …
The hawkish tone of today’s post-meeting statement and press conference supports our non-consensus view that the first interest rate hike in the Czech Republic will come at August’s MPC meeting. Following that, we see the policy rate being raised to 1.00% …
29th June 2017
June’s rise in German HICP inflation and a sharper fall in the Spanish rate suggest that euro-zone inflation probably edged down from May’s 1.4%. German core inflation is now rising, but underlying price pressures remain weak elsewhere in the euro-zone. … …
We still think the US Fed is likely to raise interest rates two more times this year and to start gradually shrinking its balance sheet in Q4. But the ECB will probably not start tapering its asset purchases until next year and will leave interest rate on …
28th June 2017
We think that the euro’s latest rise against the US dollar was a justified reaction to Mario Draghi’s hints that QE will be tapered early next year, despite warnings from the ECB that the comments were over-interpreted. We still expect the euro to edge …
The Norges Bank’s latest projections suggest that it is unwilling, or unable, to loosen policy by enough to hit its inflation target. This will weigh on economic growth over the coming years, and probably hinder the necessary medium-term rebalancing of …
Since the Riksbank last met in April, underlying inflation has been stronger than expected, international political risks have diminished and economic conditions in Sweden’s trading partners have improved. In light of these developments, next week we …
The publication today of the Financial Stability Report revealed that while the Bank of England’s Financial Policy Committee is fairly sanguine about the resilience of the financial system as a whole, it is keen to tighten lending standards for unsecured …
27th June 2017
The Reserve Bank of Australia (RBA) will almost certainly keep interest rates on hold at 1.50% when it meets on Tuesday 4 th July. And while the sustained improvement in the labour market in recent months has quashed any talk of a further interest rate …
The sharp drop in Argentine inflation to an 18-month low in May is likely to prompt the central bank to shift into easing mode over the coming quarters. But with core inflation likely to be slow to fall back, we think interest rate cuts will be more …
23rd June 2017
After a surprisingly large split in the vote at June’s Monetary Policy Committee meeting, two speeches this week provided further signs of a growing rift on the Committee. Indeed, the fact that Andy Haldane – Bank of England Chief Economist – appears to …
Sri Lanka’s central bank left interest rates on hold today, and the less hawkish tone of the statement suggests the central bank’s tightening cycle may be nearing an end. We are changing our forecast for this year, and now expect policy rates to rise by …
If the relative performance of the economies of New Zealand and the UK/Ireland over the next few years is anything to go by, the All Blacks will beat the British & Irish Lions 2-1 in the rugby test series. In our three economic tests, New Zealand come out …
Janet Yellen’s remarks about the case for reconsidering the Fed’s inflation target have generated some attention this week. But in practice, there is little prospect of the inflation target being raised in the near future, either in the US or in any other …
22nd June 2017
With the economy experiencing a steady recovery and inflationary pressures still very subdued, it was no surprise that Taiwan’s central bank (CBC) decided to keep its policy rate on hold today at 1.375%. The dovish tone of the CBC’s accompanying statement …
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. But while the consensus among analysts is that the BSP will hike rates twice this year, we continue to think that rates will be …
The Norges Bank revised up its forecast for interest rates this year, so a cut now looks unlikely. But while the Bank expects to raise its policy rate in 2019, we think that it will be unchanged until 2020. … Norway rate cut off the table, but a long way …
The Reserve Bank of India (RBI) has started to put to use its new powers to clean up the banking sector. Earlier this month it instructed several commercial banks to begin insolvency proceedings against the biggest corporate defaulters. On some estimates, …
The Reserve Bank of New Zealand’s decision to leave interest rates at 1.75% today and repeat its comment that they will stay there for a “considerable period” should prompt the financial markets to further pare back their expectations that rates will rise …
21st June 2017
Even though the US Fed will start to reduce its asset holdings, probably in Q4, global monetary conditions are set to remain accommodative for a while yet. Meanwhile, growth in bank lending in advanced economies should continue to hold up well. … …
The Hungarian MPC’s extremely dovish post-meeting press statement provided further evidence that policymakers are as yet untroubled by growing signs of capacity constraints. Monetary policy is set to remain extremely loose over the rest of this year. But …
20th June 2017
It is often assumed that monetary policy is highly accommodative simply because nominal interest rates are very low. But if the neutral real interest rate has fallen, monetary policy may not be as loose as it appears. This is especially true of economies …
The surprise outcome of the General Election and the MPC’s unexpectedly tight vote on interest rates have triggered only a muted market reaction. Admittedly, trade-weighted sterling fell to its lowest level since March following the election, but that was …
19th June 2017
This week, the Bank of England’s Monetary Policy Committee came close to voting to tighten monetary policy. At the same time, we saw claims that austerity is now over. It is remarkable therefore that markets still think the MPC will leave rates on hold …
16th June 2017
The Bank of Canada mentioned this week that the economy is gathering momentum and indicated that it is considering hiking interest rates soon, prompting financial markets to quickly raise bets on a rate hike later this year. But we aren’t convinced the …
Relatively hawkish comments from the Russian central bank today appear to be aimed at dampening hopes that the pace of monetary easing might be stepped up. But while the policy rate is likely to be cut in small steps, low inflation should allow a lengthy …
The latest economic data from across the emerging world have been mixed but our EM GDP Tracker suggests that growth has levelled off at around 4% y/y. While China’s growth has now passed its peak, other economies are picking up the baton. Brazil and …
Fed officials continue to anticipate one more rate hike in the second half of this year, but markets are not even convinced that the Fed will hike rates again within the next two years. The Fed has brought some of the market scepticism on itself, by …
MSCI will announce on Tuesday whether it will include China’s domestically-listed A-shares in its benchmark indices. It has chosen not to in the past on concerns over market access and official intervention. Another issue is the sheer size of China’s …
The recent acceleration in credit growth in the Philippines is unlikely to lead the central bank (BSP) to hike interest rates at its meeting on Thursday. However, it could prompt the BSP to introduce more measures to clamp down on lending to the property …
Chile’s central bank left its policy interest rate unchanged at 2.50% following its latest MPC meeting, but with inflation set to remain below target and no sign of a turnaround in the economy, we expect rates to fall to 2.00% this year. This is below …
The Bank of Japan today turned more upbeat in its assessment of economic conditions, but Governor Kuroda remained cautious on the prospect of hitting the inflation target. With inflation set to undershoot the Bank’s projections by a wide margin, the …
Although the first-quarter GDP growth figures were notably weaker than the RBNZ had expected, the Bank will almost certainly keep the official cash rate (OCR) on hold at 1.75% at its monetary policy meeting on Thursday 22 nd June. Looking ahead, we expect …
In our baseline scenario, which still includes a fiscal stimulus early next year, we expect GDP growth to accelerate from 2.2% this year to 2.5% in 2018. The downside risks to that scenario have increased, however, in particular the danger of a damaging …
15th June 2017
The Norges Bank is likely to leave interest rates unchanged at its meeting in June, but we think that it will revise its rate forecast down. After all, while economic growth has strengthened since the Bank last produced forecasts, consumer price inflation …
While an interest rate hike in the UK within the next few months still looks unlikely, the hawkish tone of June’s Monetary Policy Committee (MPC) policy decision and minutes supports our view that rates will rise rather sooner than markets expect. … MPC …
The Turkish central bank ended the recent tightening cycle today, but high inflation, strong GDP growth (this year at least), and hawkish comments from the MPC, mean that a shift towards interest rate cuts this year is unlikely. … Turkish MPC ends …
The Fed’s decision to raise interest rates again yesterday does not change the big picture that global monetary policy will remain highly accommodative. We expect policy rates to stay close to zero in the euro-zone and Japan for the next two years, and …
Despite the poor growth outlook, Bank Indonesia left its policy rate on hold today at 4.75%. With inflation set to remain elevated over the coming months, the central bank is likely to be in little hurry to cut interest rates any further. … Inflation and …
Recent comments from the IMF and ratings agencies have put the focus back on the weak balance sheets of the Gulf’s two smallest economies, Bahrain and Oman. We have warned for some time that both countries faced a sizeable adjustment to low oil prices …
