Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Swiss National Bank’s decision to leave interest rates on hold and pledge continued currency intervention if needed reflected the fact that inflation is still very low. With price pressures likely to remain subdued, we think that the SNB won’t start …
15th June 2017
As widely expected, the Fed raised its policy rate target by an additional 25bp today, to between 1.00% and 1.25% and, despite the recent weakness of core inflation, Fed officials still expect to raise that rate once more in the second half of this year. …
14th June 2017
Latin America’s economy finally returned to growth in Q1 and the latest data suggest that the recovery continued in Q2. While domestic political developments are a key downside risk to the outlook, we expect the recovery to strengthen in the coming …
There is little sign that the Central Bank of Iceland (CBI) expects to reduce interest rates further after today’s cut, but we think there is scope for a further appreciation of the króna to weigh on imported goods and services prices. As such, we suspect …
The US Fed looks almost certain to raise interest rates at its meeting later today. For most of Emerging Asia, higher rates in the US do not pose a major threat, even if the US Fed ends up hiking rates more aggressively than is generally expected over the …
Bank profits have continued to shrink as lenders’ net interest margins have declined. However, non-financial firms are benefitting from rock-bottom borrowing costs and corporate bankruptcies remain very low. … Monetary Indicators Monitor …
The drop in headline Indian wholesale price inflation in May will increase the clamour for rate cuts. But stripping out the effect of volatile fuel and food prices, our measure of core WPI inflation actually edged up last month. With reasons to think that …
The US Fed is poised to raise rates on Wednesday. When it last hiked back in March, the People’s Bank quickly followed suit. This time, however, we expect the PBOC to stay on hold and, indeed, to keep rates stable for the next few quarters as China’s …
13th June 2017
The sharp drop in Indian consumer price inflation in May is likely to raise further questions about the RBI’s reluctance to loosen policy. But we think the central bank’s unwillingness to cut rates is justified. Inflation is close to bottoming out, and is …
12th June 2017
The Indian government is treading on dangerous ground with calls for monetary easing and other moves that could put the independence of the Reserve Bank of India (RBI) at risk. A loss of credibility for the central bank could jeopardise its efforts to …
With the General Election resulting in a hung parliament, there is a lot of uncertainty about the outlook for demand, Brexit and policy. As a result, the MPC is even more likely to sit firmly on its hands than before the election at next week’s meeting …
9th June 2017
The Fed is almost certain to raise interest rates at its policy meeting next week, but faces a growing dilemma over its plans for the rest of the year. Core inflation has dropped back recently, while at the same time the unemployment rate has fallen …
The ECB revised its inflation forecast down this week, but we doubt that this has meaningfully changed the outlook for monetary policy. After all, the change was small, and largely reflected tweaks to the assumptions about oil prices and the euro exchange …
Peru’s central bank unexpectedly left its policy interest rate unchanged at 4.00%, but the accompanying statement hinted at further easing and we think additional rate cuts are likely. We expect the policy rate to ultimately fall to 3.50% over the coming …
Norwegian inflation resumed its decline in May, and we think that the fall has further to run. So we still forecast one interest rate cut by the Norges Bank later this year. … Norwegian Consumer Prices …
The Bank of Japan’s JGB purchases of ¥4.3 trillion in May were the lowest since it stepped up purchases in October 2014. If overseas yields rebound in coming months as we expect, we will probably see a couple of months with larger purchases. But the …
The Swiss National Bank will once again stress after its meeting on 15th June that it remains prepared to act to prevent any significant renewed appreciation of the Swiss franc. Granted, the recent depreciation of the currency against the euro, as …
8th June 2017
Ahead of next week’s meeting, today’s soft GDP data are unlikely to concern the Central Bank of Iceland too much. The fact that last month’s interest rate cut has done little to stem the króna’s strength will receive more attention. While we expect …
The ECB removed its reference to possible interest rate cuts today, judging that the threat of deflation has passed. But it is still far from convinced that inflation is on a sustained path towards its target, supporting our view that interest rate hikes …
Consumer price inflation is likely to have eased in May due in large part to another drop in food inflation, and we have nudged down our full-year inflation forecast in response to the weakness in the first few months of 2017. But the more important point …
The Bank of Japan will almost certainly leave policy settings unchanged at the upcoming meeting. And with inflation set to fall short of its forecasts for the current fiscal year, there is little chance of policy tightening anytime soon. … Board will have …
We expect the Fed will press ahead and raise interest rates for the third time in seven months at the FOMC meeting that concludes on 14th June. There is also a good chance that it announces formal plans to phase out the reinvestment of maturing securities …
7th June 2017
The press conference that followed today’s MPC meeting in Poland highlighted that some members of the Council are becoming more hawkish. While this supports our view that the policy interest rate will eventually be hiked by more than most expect over the …
Net trade probably contributed little to euro-zone GDP growth in Q1, but the outlook for exports is encouraging. The monthly goods export and import values data show a decline in the goods trade surplus from €65.3bn in Q4 to €57.3bn in Q1. Admittedly, …
The Reserve Bank of India (RBI) opted to keep policy unchanged today despite the weakness of the latest inflation and GDP data. However, the less hawkish tone of the policy statement suggests that rate hikes may not come onto the agenda until next year. … …
Turkish GDP figures due next week are likely to show that the recovery levelled off in the first quarter at around 3.5% y/y. But there are signs of a healthy rebalancing of the drivers of growth. … Turkey’s economic recovery levelling …
6th June 2017
Even though the economy may have contracted in the first quarter, the Reserve Bank of Australia left interest rates at 1.5% today and retained its optimistic view on the economic outlook. We suspect the RBA would be willing to look through a temporary …
The fall in Philippines inflation from 3.4% y/y in April to 3.1% y/y in May adds weight to our view that it is now past its peak. The modest decline was a touch lower than our forecast of 3.2% (Bloomberg consensus: 3.3%). … Philippines and Taiwan Consumer …
The combination of strong growth and rising core inflation has led some members of Poland’s MPC to strike a more hawkish tone in recent months. However, while this is consistent with our view that interest rates will ultimately be raised by more than the …
5th June 2017
We think that the ECB will taper its asset purchases to zero in the first six months of 2018 and begin raising interest rates in 2019. The euro-zone economy as a whole should continue to perform well regardless, but there is a risk of more damaging …
The weakness of the latest GDP and inflation data has reignited talk that the Reserve Bank of India (RBI) may loosen at the upcoming policy meeting on 7th June. However, more timely indicators suggest that there has been a big improvement in activity …
2nd June 2017
The region’s rate cutting cycle has come to an end, but with inflation set to remain fairly subdued, interest rates are likely to remain low for some time yet. … Policy rates to remain low for longer than consensus …
Most of the recent gloomy headlines on Australia’s housing market are simply because people are mistaking the normal soft patch after the Easter school holidays for something more worrying. When you adjust for such seasonal swings, house prices actually …
At its meeting on 8th June, the ECB is likely to change its forward guidance, dropping the references to lower interest rates and expanding QE. But Mr Draghi will want to avoid stoking expectations of imminent policy tightening. So he is likely to repeat …
1st June 2017
May’s decline in euro-zone inflation to a five-month low does not change our view that the ECB will alter its forward guidance next week. … Euro-zone Flash CPI (May) & Unemployment …
31st May 2017
We expect energy inflation to peak next quarter and then drop back, providing another challenge to the Bank of Japan’s efforts to reach a 2% inflation target. … When will energy inflation …
OPEC’s decision this month to roll over its oil output cuts displayed a rare sense of cohesion from the cartel, but there are signs that de-facto leader Saudi Arabia is seeking an eventual end to intervention. The extension of the cuts to the end of March …
30th May 2017
While there is growing evidence that consumption growth has begun to falter, this won’t be enough to prompt the Reserve Bank of Australia (RBA) to cut interest rates from 1.5% when it meets on Tuesday 6 th June. That said, we expect that slow economic …
The US Fed is likely to raise interest rates in June and to begin a very gradual process of balance sheet normalisation before the end of the year. But other major central banks are a long way behind. We expect the ECB to change its forward guidance …
26th May 2017
The change in the renminbi fixing mechanism announced today shouldn’t rattle markets, not least because it appears to be an attempt to strengthen rather than weaken the currency. It suggests though that policymakers’ tolerance for letting market forces …
Given the improvement in the euro-zone’s political and economic outlook and the relative stance of monetary policy, we no longer expect the Swiss franc to appreciate against the euro. But the franc will remain historically strong, leading the SNB to keep …
25th May 2017
Today’s MPC statement from the governor of the South African Reserve Bank supports our nonconsensus view that policymakers will cut their key policy rate to 6.50% by the end of the year. … South Africa: MPC strikes a dovish …
News that the Fed will proceed very cautiously in scaling back its huge balance sheet does not change our view that US monetary policy will be tightened more rapidly than the markets anticipate this year and next – and that the world economy should be …
While the pound could fall again if the economy weakens or Brexit prospects worsen, there are good reasons to think that its recent appreciation can continue. … Sterling’s Brexit recovery can go …
The combination of strong growth and rising inflation in Central and Eastern Europe (CEE) has shifted attention to when and how policymakers might respond. To help answer this, we’ve created Taylor Rules for the region’s economies. These suggest that …
The Bank of Korea (BoK) left interest rates on hold today and the governor’s accompanying press conference makes clear the central bank is in little hurry to adjust rates anytime soon. We continue to expect the policy rate to be kept at 1.25% not just for …
The ongoing regulatory crackdown on banks’ off-balance-sheet activities has contributed to the mild slowdown in growth we’ve seen recently. But it is also bringing into focus the challenges that China’s policymakers face in putting credit growth onto a …
The latest FOMC meeting minutes revealed that the Fed intends to gradually phase out the reinvestment of maturing securities in its portfolio. The upshot is that the balance sheet will shrink more slowly than we previously suspected. That means that the …
24th May 2017
The Bank of Canada’s decision today to keep its policy interest rate at 0.50% and to remain neutral on the outlook for rates shows that, despite strong economic growth and employment gains, policymakers aren’t convinced that the economy is on a …
The ECB is edging towards ending asset purchases and raising interest rates. But there are good reasons to think that it won’t repeat the mistake that it made in 2011 of tightening policy too soon. … Will the ECB tighten prematurely …
