Filtered by Topic: Monetary Policy Use setting Monetary Policy
According to our latest detailed estimates, China witnessed a net inflow of capital last month for the first time in almost three years. Tighter capital controls and seasonal factors helped drive this reversal. But more important may have been an easing …
17th March 2017
Chile’s central bank cut its policy interest rate by 25bp, to 3.00%, and used the accompanying statement to signal that further easing is likely over the coming months. This supports our non-consensus view that the policy rate is set to fall to 2.50% by …
House prices in Australia are rising at their fastest pace since 2010 and the recent surge in auction clearance rates suggests that a further pick-up is on the cards. However, most other leading indicators point to an easing in house price inflation and …
There is an increasingly common view that we are on the cusp of a global policy tightening cycle. However, while we no longer expect many central banks to loosen policy further, we expect interest rates in many advanced economies to remain at rock-bottom …
16th March 2017
People’s Bank Governor Zhou Xiaochuan made clear at the National People’s Congress that the trend would be towards further monetary tightening over coming months. So today’s decision by the PBOC to raise the interest rates it charges on reverse repos was …
After raising rates yesterday, we expect the Fed to continue tightening the screws and hike by more than investors are expecting over the next couple of years. However, we think that few emerging market (EM) central banks will follow suit. If we are …
The decision by the Monetary Policy Committee to leave interest rates on hold and the scale of its asset purchases unchanged, at the same time as the US Fed tightened policy again, highlights the likely divergence in policy rates that is set to occur over …
The Turkish central bank had good domestic reasons to tighten monetary policy today given growing concerns about inflation. But the Fed’s rate hike last night made their job easier by providing some cover from political pressure from the government to …
Bank Indonesia (BI) left interest rates on hold today and struck a cautious tone in its statement which followed the meeting. Looking ahead, we think that worries about inflation and concerns about the currency will prevent the central bank from loosening …
The Norges Bank’s decision to leave interest rates unchanged came despite a deterioration in the outlook for inflation. Policymakers remain concerned about the impact of loose monetary policy on the housing market. But we still think that the Bank will …
The Swiss National Bank’s decision to leave interest rates on hold was as expected given the recent rise in inflation. But with euro-zone political developments likely to put upward pressure on the franc, we think that the SNB will continue to intervene …
The Bank of Japan left policy settings unchanged today as widely anticipated and Governor Kuroda remained cautious about the prospect of hitting the inflation target. While the consensus is increasingly shifting towards policy tightening in coming months, …
The People’s Bank has followed the Fed in raising the interest rate it charges when providing funds in China’s interbank market. But we believe that tighter policy in China continues to be primarily driven by efforts to tackle domestic credit risks, not …
While there is a consensus among economists and financial markets alike that the Reserve Bank of New Zealand will keep rates on hold at 1.75% when it meets next Thursday 23 rd March, we believe that financial markets have gone too far by pricing in the …
For most economies in Emerging Asia it will be local factors, not the actions of the US Federal Reserve, which will determine the next moves by the region’s central banks. … Asia will not follow the Fed’s …
The stronger than expected rise in the unemployment rate and the pick-up in the underutilisation rate, which is a broader measure of spare capacity, suggests that there is still plenty of slack in the labour market. As such, the labour market is unlikely …
While GDP growth in the fourth quarter of last year was weaker than most had expected, this was largely the result of temporary factors and as such we expect growth in New Zealand to bounce back early this year. … New Zealand GDP (Q4 …
15th March 2017
As everyone expected following the recent blitz by officials to prepare the markets, the Fed raised the fed funds target by another 25bp today, to between 0.75% and 1.00%, but officials left their interest rate projections largely unchanged. As a result, …
The Central Bank of Iceland’s decision to keep policy unchanged after the lifting of capital controls was unsurprising. The recent drop in the króna reduces the need for the CBI to cut interest rates soon. But with the króna set to rise again before long, …
After rising to a five-year high in February, Swedish headline inflation is set to ease back in the coming months as energy inflation cools. But with signs that underlying price pressures are rising, we expect the Riksbank to tighten policy this year. … …
14th March 2017
The rise in Indian wholesale price inflation in February to its highest rate in over three years supports our view that the Reserve Bank of India will have to reverse course and begin hiking interest rates much sooner than is generally anticipated. … …
Investors are now united in the belief that the Fed will raise interest rates this week, but we doubt that central banks in the emerging world will necessarily follow suit. Indeed, in several major EMs – notably Brazil and Russia – the bias over the …
13th March 2017
The strong US Employment Report for February has all but sealed the deal for an interest rate rise at this week’s FOMC meeting. Risky asset markets seem relatively unfazed by the prospect, given how they have reacted as the chances of a March hike have …
The Icelandic króna has fallen after the final step in the lifting of capital controls. But with tourism set to grow strongly, we suspect that the króna will rise and put downward pressure on import prices. That will prompt the Central Bank of Iceland to …
The Bank of Japan may upgrade its near-term outlook for inflation at its meeting this week. With inflation picking up again, a rising number of analysts now expect the Bank to tighten policy in coming months. But with inflation expectations still subdued, …
An easing in economic growth in China coupled with the downside risks to Australia posed by the potential policies of President Trump will mean that the Reserve Bank of Australia won’t follow the US Fed by raising interest rates until 2019 at the …
12th March 2017
We think that the Norges Bank will leave monetary policy unchanged at its meeting next week. While inflation has fallen much more quickly than policymakers expected, accelerating house prices are a concern. So for now, we expect the Bank to leave its …
10th March 2017
After the Fed’s co-ordinated attempts to prepare markets for another interest rate hike at this week’s FOMC meeting, which concludes on Wednesday, another 25 basis point hike is fully priced into markets. Buoyed by the post-election improvement in the …
ECB President Mario Draghi last week reiterated the plan to buy assets throughout this year and keep interest rates at or below current levels for an extended period. But he also explained that additional interest rate cuts or non-standard policies are …
In his annual outing before the press at the National People’s Congress today, People’s Bank Governor Zhou Xiaochuan made a strong case that policy support for the renminbi can be sustained in the face of market pressure. In fact, he argued that sales of …
Peru’s central bank kept interest rates on hold once again at 4.25% and, while the economic outlook has deteriorated in recent months, stubbornly above-target inflation means the next move in the policy interest rate is still likely to be up. … Peruvian …
Although we still believe that the next move in interest rates in Australia will be down, it is useful to consider what would need to happen to prompt the RBA to raise rates. Two scenarios stand out. The first is where the strong global economy and the …
The Swiss National Bank will reiterate after its meeting on 16th March that it remains fully prepared to act to prevent any significant appreciation of the Swiss franc in the coming months. Although inflation has picked up since the start of the year, the …
9th March 2017
The ECB today reiterated its commitment to buying assets throughout this year and keeping interest rates at current or lower levels for an extended period. While the Bank believes that downside risks to growth have diminished, it will apparently not …
It may not be long before one or two Monetary Policy Committee members vote for a rise in Bank Rate. But with signs that the economic data have taken a bit of a softer turn since February’s Inflation Report, this month’s decision to keep rates on hold and …
Ahead of the Central Bank of Iceland’s meeting next week, today’s data revealed that Icelandic GDP expanded by a strong 2.6% in Q4. Despite the strength of the economy, the recent appreciation of the króna points to looser monetary policy. On balance, …
The dovish stance taken by the Polish MPC in its post-meeting press conference reinforces our view that, despite the recent rise in inflation, monetary policy will remain loose over the next couple of years. We think the Council is likely to keep the …
8th March 2017
Last week Fed officials acted on a clearly preconceived plan to prepare markets for another interest rate hike at the upcoming FOMC meeting, which finishes on Wednesday 15th March. Buoyed by the post-election improvement in the survey evidence and perhaps …
Switzerland’s consumer prices data for February revealed that prices are finally rising again. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … Swiss Consumer Prices …
There is a good chance that a strike at Chile’s largest copper mine will tip the economy into a technical recession in Q1. While growth should return in Q2, the weakness of the non-mining sector means that we expect GDP to expand by just 1.0% in 2017. …
7th March 2017
The recent rise in the Turkish central bank’s holdings of government debt doesn’t appear to be the backdoor effort to ease monetary policy that some fear. Even so, the concerns this has raised highlight the extent to which the Bank’s credibility has been …
Japan’s economy has performed well recently and inflation is set to rise sharply soon. But the spike in inflation won’t last and, with inflation expectations no higher now than when the Bank of Japan launched Quantitative and Qualitative Easing, any talk …
The statement released after the Reserve Bank of Australia today left interest rates at 1.5% remained fairly balanced, but recent speeches have made it clear that the RBA doesn’t intend to cut interest rates again. We think the combination of weaker …
Fed officials appear to have embarked on a co-ordinated attempt to prepare markets for another interest rate hike at the upcoming FOMC meeting in mid-March. The improvement in the survey evidence would certainly seem to justify additional monetary …
3rd March 2017
The recent strength of activity surveys, as well as increases in headline inflation and inflation expectations, are all good news for the ECB. But for now, we doubt that this will be enough to sway the Bank from its plan to continue purchasing assets …
The sharp rise in headline inflation across Emerging Asia is unlikely to be the trigger for the region’s central banks to start tightening monetary policy. The increase is almost entirely due to an acceleration in energy price inflation, which has been …
The recent run of positive data may lead the ECB to judge that downside risks to the economic outlook have receded when it meets next week. But core inflation has remained low despite the rise in the headline rate. And with political risks still a cause …
2nd March 2017
With the economy gaining momentum, 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 stay on …
The government’s demonetisation measures have caused growth in India to slow but the economy is set to recover as consumption and investment rebound. Longer-term prospects have also been boosted as Prime Minister Modi’s reform agenda has gained momentum. …
Although core inflation is dangerously low and wage growth anaemic, the Bank of Canada’s decision to hold its policy interest rate at 0.50% can be justified on the recent improvement in the activity data. But with non-energy exports still misfiring, …
1st March 2017
