Filtered by Topic: Monetary Policy Use setting Monetary Policy
The minutes of the Riksbank’s February meeting were fairly dovish. With board members concerned about the krona’s appreciation and political risks in the euro-zone, we think that the Bank will wait until July before dropping talk of the repo rate being …
1st March 2017
Recent comments by Governor Lowe have made it pretty clear that the Reserve Bank of Australia doesn’t intend to cut interest rates further, including at its next policy meeting on Tuesday 7 th March. That’s not too surprising given the RBA remains fairly …
Inflation in Brazil has fallen more quickly than even we had anticipated and, as such, we have pencilled in additional cuts to interest rates this year. We now expect the Selic to fall to 9.00% by end-2017 (previously 10.00%), which is a little below what …
28th February 2017
Chinese equities started the Year of the Chicken on a bright note, rising in February by the most in three months. Meanwhile, the PBOC has continued to tighten monetary conditions by pushing market interest rates higher. … Equities hit three-month …
It seems increasingly likely that the much anticipated Trump fiscal stimulus will not take place until later this year. But economic growth and headline inflation have both picked up in the US and this has strengthened the case for the Fed to raise rates …
27th February 2017
January’s euro-zone money and credit data point to steady economic growth. But they still suggest that core inflation will remain very weak. … Euro-zone Monetary Indicators Monitor …
The decision by Colombia’s central bank to cut its policy interest rate by 25bp (to 7.25%) caught most off guard but was in line with our expectations. The statement accompanying the decision was dovish and supports our view that the policy rate will be …
A jump in export demand provided a boost to economic growth in the region’s most trade dependent economies last quarter, with Hong Kong, Taiwan and Singapore all expanding at their fastest pace in nearly two years. Although relatively buoyant global …
24th February 2017
Despite edging down in February, the NIER’s Economic Tendency Indicator still points to a surge in Swedish GDP growth. And with inflation expectations rising far above the Riksbank’s target, the Bank’s next move will be to tighten policy. … Swedish …
The statement accompanying the Brazilian central bank’s decision to cut the Selic interest rate by 75bp to 12.25% maintained an explicit easing bias but gave little away in terms of the future pace of rate reductions. For our part, we suspect that the …
23rd February 2017
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, but with the economy struggling for momentum and underlying price pressures benign, we think it will resume its easing cycle later this year. … Korea holds rates, but easing cycle not …
A number of developments over the past month have cast a shadow over Indonesia’s prospects. The first was the publication of GDP figures for the final quarter of last year which showed a slowdown in the pace of growth. A fall in government spending, which …
We expect the Bank of Canada to hold its policy interest rate at 0.50% next week. Although core inflation and wage growth have slowed, activity and business confidence data have been more positive lately. Additional monetary stimulus later this year, …
22nd February 2017
The rise in CPI inflation to a five-year high of 2.5% in January was principally due to a surge in gasoline prices, which appears to have been partly reversed in February. Nevertheless, with headline inflation now much closer to the Fed’s target, it will …
Data to mid-February showed another big drop in Brazilian inflation which, coming alongside the recent strength of the real, paves the way for a large reduction in the Selic interest rate at tonight’s meeting. A 100bp cut is now possible, but we still …
Credit growth has slowed in the US in recent months, but has edged higher in other advanced economies. As a result, we expect overall credit growth in advanced economies to continue at around 5% or so in year-on-year terms. Meanwhile, bank lending in …
The Reserve Bank of India’s decision to keep rates on hold and signal the end of its loosening cycle in this month’s policy meeting took many by surprise. But subsequent data showing that core inflation has risen to its highest rate since October 2014 …
While some policymakers have floated the idea that the Fed should begin to shrink its balance sheet soon, we suspect that it will proceed very slowly. And as other central banks will be adding to their assets until well into 2018, it will be many years …
21st February 2017
The decision by Egypt’s central bank to leave its policy interest rate on hold despite the rise in inflation to a 30-year high last month means that additional monetary tightening is no longer on the cards. We have taken the 150bp of rate hikes that we …
16th February 2017
Bank Indonesia kept its policy rate on hold at 4.75% today, and we think that worries about inflation will prevent the central bank from loosening policy any further over the rest of the year too. … Bank Indonesia holds again, rates unlikely to change …
There is definitely a role for the Reserve Bank of Australia to manage expectations by signalling where it thinks the economy is heading. But by sounding more optimistic than its own forecasts, there’s a danger that the RBA has moved from signal to spin. …
While the Riksbank maintained a very dovish tone today, the strength of the Swedish economy and rising inflationary pressures mean that the Bank will soon have to change its stance. We expect the repo rate to be increased by the end of this year. The …
15th February 2017
The decision by Chile’s central bank to keep interest rates on hold at 3.25% came as a bit of a surprise, but it only marks a pause in the easing cycle and we expect the policy rate to fall to 2.50% by year-end. … Chile pauses easing cycle, but more rate …
The sharper-than-expected decline in South African inflation – particularly core inflation – last month supports our view that the country’s monetary tightening cycle is now over. … South Africa Consumer Prices …
Fed Chair Janet Yellen at least kept the possibility of a March rate hike alive in today’s Congressional testimony, but she offered no strong hints that such a move was actually coming and we still think the FOMC will wait until June. According to Yellen, …
14th February 2017
Japan’s GDP expanded by 1.0% in 2016, which is a touch faster than the economy’s sustainable rate. We forecast a similar increase in 2017 so spare capacity should continue to decline. Helped by the tailwind from a weaker yen, we expect inflation to …
The sharp rise in Indian wholesale price inflation last month 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. … Wholesale Prices …
The response from policy makers is one of the main reasons that the UK economy has so far weathered the Brexit vote well. And there are reasons to think that monetary and fiscal policy can continue to support the economy as Brexit negotiations …
13th February 2017
The Central Reserve Bank of Peru’s decision to leave its policy rate on hold at 4.25% was widely expected and, while the outlook for the economy has deteriorated, we still expect rising inflation to trigger rate hikes later this year. Our forecast is for …
10th February 2017
The further rise in Czech inflation last month, to 2.2% y/y, reinforces our view that the koruna cap will be removed in the coming months. We see the MPC meeting on 4th May as the most likely date for the policy shift. … Czech CPI …
In February’s Statement on Monetary Policy the Reserve Bank of Australia drew particular attention to the recent pick up in mortgage lending to investors. Given its concerns, if investor lending remains elevated this may prove to be a barrier to further …
The new forecasts published in February’s Statement of Monetary Policy show that the RBA is largely expecting Australia’s slow growth and low underlying inflation problems to be solved over the next couple of years. In that sense, the RBA is almost …
The Bank of Japan’s preferred measure of underlying inflation fell to a fresh low in December. While the weaker exchange rate and the recovery in commodity prices should result in a rebound in coming months, the chances of hitting the Bank’s 2% inflation …
Compared to 2012, when ECB President Draghi’s pledge to do “whatever it takes to preserve the euro” helped to bring the currency union back from the brink, the central bank’s ability to address euro-zone break-up risks has diminished. … Can the ECB still …
9th February 2017
The surge in Mexican inflation in January, to 4.7% y/y from 3.4% y/y in December, is largely the result of hikes in regulated fuel prices. Nonetheless, core inflation also continued to rise as a result of the past falls in the peso. Against this backdrop, …
Recent economic data support our view that the Riksbank will raise interest rates this year. But given the recent appreciation of the krona, the Riksbank is likely to maintain a very dovish tone in its communications next week. … Riksbank to maintain …
With the economy growing strongly but inflation under control, today’s decision by the central bank in the Philippines (BSP) to keep its main policy rate on hold at 3.0% came as no surprise. Looking ahead, we don’t think the BSP will be in a rush to …
While leaving interest rates on hold at 1.75% today, the Reserve Bank of New Zealand suggested that the next move in interest rates is more likely to be up than down. But since we largely agree with the Bank that rates are unlikely to rise until 2019, …
8th February 2017
The dovish tone of the Polish MPC’s post-meeting press conference this afternoon reinforces our view that the policy interest rate will be kept at its current historic low of 1.50% throughout 2017-18. This stands in contrast to the markets, which are …
The Reserve Bank of India’s (RBI’s) decision to keep interest rates on hold today was in line with our non-consensus forecast and it signals the end of the loosening cycle. Looking ahead, with inflation set to accelerate, we continue to think that rate …
The Central Bank of Iceland (CBI) kept monetary policy unchanged today, but struck a hawkish note in its accompanying statement. However, we believe that the downward effects of a further strong appreciation of the króna on import prices will more than …
The Bank of Thailand (BoT) unsurprisingly left its policy rate on hold at 1.50% for its 14th straight meeting today. With the government prepared to do the heavy lifting to support the economy, the BoT is likely to remain on the sidelines in 2017. … Bank …
The fairly hawkish post-meeting press conference and upwards revisions to the central bank’s inflation forecasts suggest that the Romanian MPC is increasingly concerned about the prospect of loose fiscal policy feeding into stronger core price pressures. …
7th February 2017
We believe that the Reserve Bank of Australia is being too complacent in expecting GDP growth to be close to 3% over the next couple of years and underlying inflation to rise to 2.0%. So while the RBA today left interest rates at 1.5%, we suspect it may …
The Central Bank of Sri Lanka (CBSL) kept rates on hold at its meeting today, but against a backdrop of rapid credit growth, rising inflation and a weakening currency, we think it is only a matter of time before the CBSL is forced to resume its tightening …
The further fall in Russian inflation last month, to 5.0% y/y, supports our view that, despite the central bank’s recent hawkish rhetoric, interest rates will be lowered substantially this year. … Russia CPI …
6th February 2017
Following a strong end to 2016, the economy appears to have carried a decent amount of momentum over into 2017. Despite a slight fall in the Markit/CIPS all-sector PMI in January, it is still at a level consistent with quarterly GDP growth of around 0.5%. …
The recent appreciation of the Swiss franc suggests that the Swiss National Bank (SNB) may now be willing to tolerate a (slightly) stronger currency. But we see the franc rising even further to reach parity with the euro later this year. Given the seismic …
Indonesia recorded another quarter of disappointing growth in the final quarter of last year. With commodity prices likely to remain depressed and policymakers running out of scope to stimulate the economy further, we expect growth to remain stuck at …
The statement released after last week’s FOMC meeting suggests that the Fed will remain in wait and see mode until it gets more clarity on the size, composition and timing of the fiscal stimulus being planned by the Trump administration. Until that time, …
3rd February 2017
