Filtered by Topic: Monetary Policy Use setting Monetary Policy
With the economy gaining momentum and price pressure benign, it was no surprise that the Bank of Thailand (BoT) left its policy rate on hold at 1.50% today. Looking ahead, we expect the BoT to keep interest rates unchanged for the rest of this year and …
24th May 2017
Our China Activity Proxy (CAP) shows growth stayed in April at the slowest pace in half a year. Looking ahead, as officials continue their efforts to rein in credit risks, we think activity will slow further in the quarters ahead. … Growth remains at …
The outlook for Latin America is improving and we expect economic growth to accelerate over the next year. The latest political crisis to engulf Brazil has cast fresh doubts over the outlook there but the early signs suggest that this is unlikely to …
23rd May 2017
Nigeria’s central bank held its key rate on hold again, but we expect that policymakers will cut rates later this year as inflation slows and the economy remains weak. … Nigeria: CBN holds rates, but hints that cuts are …
The euro’s recent appreciation against the US dollar appears to reflect better prospects for euro-zone growth and has occurred despite expectations that ECB monetary policy will remain very loose. Accordingly, while we still expect interest rates to rise …
After a sharp decline at the start of the year, net capital outflows have crept up again recently. Unless we witness another misstep on exchange rate policy though, outflow pressure should remain manageable. … Capital Flows Monitor …
First quarter GDP estimates for Emerging Europe published this month beat expectations across the board and suggest that growth in the region as a whole picked up to a three-year high of 2.3% y/y. Romania was the region’s star performer, growing by close …
The consensus reached between India’s national and state governments on how different products will be dealt with under the Goods and Services Tax (GST) marks another important step towards its implementation. The finance ministry on Friday confirmed both …
The Egyptian central bank’s surprise decision late last night to hike its benchmark interest rate by 200bp, to 16.75%, appears to the result of pressure from the IMF. The move is likely to be a one-off and we expect the next change in interest rates to be …
22nd May 2017
The decision on Friday by the rating agency, S&P, to upgrade Indonesia to investment grade rating was long overdue. At under 30% of GDP, Indonesia has one of the lowest levels of government debt in the region. Last year the government demonstrated its …
19th May 2017
The overall trend in EMs has remained towards looser monetary policy in recent months, with more EM central banks cutting interest rates than hiking them. But significant divergences exist at a country level. The central banks that are loosening policy …
Diminishing political risk and early expectations of ECB asset purchase tapering have driven the euro up to around its highest level since before QE began. We think that the single currency will fall back again later in the year. But its rise has added to …
Chile’s central bank cut its policy interest rate by another 25bp, to 2.50%, but with the economy showing tentative signs of recovery, we think the easing cycle is over for now. We expect the policy rate to remain on hold for the rest of this year and all …
With inflationary pressures rising, Bank Indonesia’s (BI) decision to leave interest rates on hold today came as no surprise. The central bank’s accompanying statement struck a fairly cautious tone, supporting our view that interest rates will remain on …
18th May 2017
While the recent pick-up in euro-zone growth has owed much to temporary factors, the economy now seems to be gaining its own momentum and we expect it to outperform consensus forecasts this year and next. But a lack of price pressures should keep ECB …
The latest decline in the core CPI inflation rate to 1.9% in April, at the same time as the unemployment rate dropped to a decade low of 4.4%, presents a dilemma for the Fed. The price stability part of its dual mandate suggests that it would be prudent …
17th May 2017
The statement that followed today’s MPC meeting in Poland was broadly unchanged from previous months and suggests that any change in interest rates is unlikely in the coming months. But with core price pressures set to build over the second half of the …
Today’s decision by the Central Bank of Iceland to cut interest rates is likely to be followed by another cut later this year. Granted, strong economic growth will put pressure on domestic inflation. But we think that the CBI is still underestimating the …
While the Bank of Canada will likely hold interest rates at 0.50% next week, the balance of risks around its neutral stance on the interest rate outlook are beginning to tilt to the downside, mainly due to oil price volatility, trade policy uncertainty …
The Riksbank has stated that its new inflation tolerance band will have no effect on policy. But with some Board members growing increasingly concerned about the effects of ultra-loose monetary policy on the housing market, the added flexibility could …
16th May 2017
The weak activity and spending data published yesterday add to evidence that growth in China is starting to slow. We think the deceleration in the economy will be gradual and expect official efforts to contain credit risks to continue in the months ahead. …
Credit growth is the strongest it has been in years but continues to fall short of growth in bank deposits. Meanwhile, the volume of external lending dipped slightly in Q4 but remains close to a record high. … Monetary Indicators Monitor …
In the minutes of its latest meeting, the MPC commented that if the economy evolves in line with its forecast, rate hikes would be justified before markets currently expect. But judging by the market reaction following the meeting, others are clearly more …
12th May 2017
The election of Emmanuel Macron as France’s next president has removed a big risk to the euro-zone economic outlook. This could allow the ECB to stop worrying about political risks and to concentrate more on the euro-zone’s healthy economic performance. …
One of the biggest challenges facing South Korea’s newly elected president, Moon Jae-in, is the country’s dreadful demographic outlook. Although there are steps the new government could take to boost fertility rates and encourage more women into the …
In a recent Quick Take audio recording (available here) , we discussed why the Central Bank of Russia had caught the markets (but not us) off guard at its last two meetings and why interest rates are likely to fall further than most expect in the coming …
The Central Reserve Bank of Peru’s decision to cut its policy interest rate by 25bp, to 4.00%, took most analysts by surprise, but not us. We expect one further 25bp cut, to 3.75%, over the coming months, although we don’t think that this marks that start …
Despite the recent spike in inflation, it was no surprise that Malaysia’s central bank (BNM) kept its policy rate unchanged at 3.0% today. Looking ahead, we expect BNM to keep interest rates steady for the rest of 2017. … Interest rates in Malaysia to …
May’s Bank of England Inflation Report confirmed that the Monetary Policy Committee is in no hurry to raise interest rates. But it also lent some support to our view that it will begin to tighten monetary policy somewhat sooner than markets expect. … UK …
11th May 2017
Today’s decision by the central bank in the Philippines (BSP) to keep its main policy rate on hold at 3.0% had been widely expected. But while the consensus among analysts is that the BSP will hike rates twice this year, we continue to think that rates …
Following the sharp drop in the Icelandic króna after the lifting of capital controls in March, we pushed back our forecast for an Icelandic interest rate cut from May to August. But since the currency has recovered quicker than even we had expected, a …
The sharp divergence in Swiss and Swedish inflation in April supports our views that the Swiss National Bank will need to keep monetary policy loose for a long time to come but that Sweden’s Riksbank will raise rates next year. … Swiss & Swedish Consumer …
Despite the criticisms levelled at them over the past year, central banks are not likely to be stripped of their independence anytime soon, or have their mandates radically changed. Politicians who were most critical in opposition have been quiet on the …
10th May 2017
Today’s Riksbank minutes suggest that the proponents of last month’s shock QE extension are unlikely to change their minds on the direction of monetary policy any time soon. So there is little chance of a material shift in the Riksbank’s policy stance …
The sharp decline in Norwegian CPI-ATE inflation has paused over the past three months, but it should soon resume. We think that it will fall to 1.0% later in the year, and remain well below the Norges Bank’s target in the medium term. … Norwegian & …
The central bank in Sri Lanka (CBSL) today left interest rates on hold, but a combination of rapid credit growth, high inflation and a weak currency suggests further tightening is only a matter of time. … Sri Lanka holds rates, pause unlikely to …
9th May 2017
There is less evidence of spare capacity in Japan’s economy than in the euro-zone which might suggest that the Bank of Japan is likely to hike rates before the ECB. However, the Bank has pledged to let inflation overshoot its 2% target which is unlikely …
8th May 2017
Recent news on the economy might suggest that the effects of the pound’s post-referendum depreciation will be closer to those seen after the pound’s fall in 2008 – which raised inflation and squeezed real incomes – than those seen after its 1992 ERM exit, …
5th May 2017
Even without the US, the Trans-Pacific Partnership (TPP) could still provide a decent boost to the four countries from Emerging Asia included in the deal. The risk is that without the carrot of access to the large US market, countries will row back on …
Weaker economic data and a rise in the pound is likely to silence some of the tentatively hawkish members of the MPC and mean that May’s Inflation Report strikes a relatively dovish tone. Nonetheless, we still think that the first hike in Bank Rate will …
Underlying price pressures in Japan are not quite as weak as the recent negative reading for core inflation might suggest: it was caused by a slump in mobile phone prices that won’t continue. But while we expect a rebound in inflation over coming months, …
We’re not too keen on the plans of the Australian Treasurer to distinguish “good” debt from “bad” debt in the Federal Budget on Tuesday, but we do like the sound of a budget that is expected to allocate more funds to spending on infrastructure. That would …
The upbeat tone of the Statement on Monetary Policy confirms that the Reserve Bank of Australia has become less worried about low inflation and that further interest rates cuts have become much less likely. But the RBA is not expecting inflation to rise …
Survey data suggest that economic momentum among the major euro-zone economies has converged in 2017. Indeed, in April the spread between the Composite PMIs for Germany, France, Italy and Spain was the second lowest on record. Each economy has benefited …
4th May 2017
The Czech MPC’s statement accompanying today’s rate-setting meeting was generally quite dovish, but it does looks like the Council intends to start raising interest rates, albeit very slowly, this year. Accordingly, we are now pencilling in one hike in …
The Norges Bank’s decision to leave interest rates unchanged came as no surprise, but we are among a very small minority of forecasters who think that the Bank will cut rates later in the year. … Norges Bank stands pat, but a rate cut not far …
While the Reserve Bank of New Zealand will almost certainly keep the official cash rate on hold at 1.75% at its policy meeting on Thursday 11 th May, in light of the stronger-than-anticipated first-quarter inflation figures the RBNZ may adjust its OCR …
The Fed left its policy rate unchanged today, but the statement kept the door open to another rate hike at the June FOMC meeting. We still expect another three 25bp hikes from the Fed this year, taking the fed funds target range to between 1.50% and 1.75% …
3rd May 2017
After depreciating against the euro in April, we think that the Swiss franc, Swedish krona and Norwegian krone will rebound, but for different reasons. Political risk could yet re-escalate in Europe and elsewhere, boosting demand for the safe-haven franc. …
There is now broad agreement in financial markets that interest rates in Brazil will fall into single digits this year, but keeping them there will require the “neutral” or “structural” level of interest rates in the economy to fall. This in turn will …
2nd May 2017
