Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, but with growth likely to slow further and inflation benign, we expect a rate cut later this year. … Korea holds rates, but easing in 2017 …
13th January 2017
Most countries in Emerging Asia should continue to grow at a decent pace over the next couple of years as loose monetary policy helps support demand. The key exception is China, where growth looks set to slow as policy stimulus is withdrawn. Overall, we …
The ECB will not announce any policy changes next week after last month’s pledge to buy at least €60bn of assets per month until the end of 2017. President Draghi is likely to restate the Governing Council’s commitment to the plan despite the recent sharp …
12th January 2017
The motives behind the Argentine government’s decision to oust finance minister Alfonso Prat-Gay in December are unclear, but at this stage two key points are worth emphasising. First, despite legislative elections in October, a significant shift in …
Today’s minutes confirmed that only half of the Riksbank’s Executive Board supported the extension of its QE programme. And with inflation surpassing expectations in December, there is little cause for further monetary policy loosening – we expect the …
The unexpected decline in monthly GDP in October, together with the moderation in the new measures of core CPI inflation, might have prompted the Bank of Canada to reconsider cutting interest rates at next week’s policy meeting. But the recent strength of …
Mexico’s central bank has sufficient ammunition to intervene on an intermittent basis in FX markets to counter sharp selloffs in the peso. But the bigger picture is that interest rate hikes will remain policymakers’ main defence against a weaker peso (and …
11th January 2017
Dovish comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference suggest that the MPC is as focused on growth as it is on inflation. We continue to think that growth is unlikely to strengthen as much as the …
The further drop in Brazilian inflation in December seals the deal for a larger cut in the Selic interest rate at today’s COPOM meeting (decision due 18.20 local time). A 75bp cut is possible, but we still think a 50bp reduction (to 13.25%) is the most …
A drop in food inflation pulled down headline consumer price inflation in December. We expect it to leap in January, but the increase is unlikely to be a major concern for policymakers. … Consumer & Producer Prices …
10th January 2017
On past form, the latest fall in the Turkish lira appears to be sufficiently large to trigger an interest rate hike at this month’s MPC meeting. If the Council doesn’t act, that will only reinforce concerns about central bank independence and might force …
9th January 2017
Recent hard data for the euro-zone have generally been encouraging. Despite falling in November, the level of retail sales remains fairly high after a strong rise in October. And while industrial production edged down in October, timelier national data …
The world economy is entering 2017 with stronger growth and rising inflation, but prospects for the rest of the year are more mixed. Activity has picked up in unison across the major economies in recent months, and the recent rise in energy prices will …
6th January 2017
The accompanying statement to today’s MPC meeting in Romania was less hawkish than we had expected. Nonetheless, with further fiscal stimulus in the pipeline and economic slack now exhausted, inflation is likely to rise sharply over the coming months. …
The larger-than-expected drop in Chilean inflation to a three-year low of 2.7% y/y, taking it further below the central bank’s 3% target, probably seals the deal for a 25bp interest rate cut (to 3.25%) at this month’s policy meeting. … Chile Consumer …
Consumer price inflation is likely to have edged down in December as price discounting continued following demonetisation. However, further ahead, demonetisation could push inflation up by leading to supply disruptions and boosting liquidity in the …
The recent weakening in the Australian dollar to a seven-month low against the US dollar won’t boost activity and inflation by as much as you may think as it has not been matched by a weakening in the broader dollar trade-weighted index. What’s more, if …
Following a host of central bank meetings last month, most of the Swiss and Nordic currencies fell against the US dollar. While there were few major changes for bond yields, equities in most countries recorded impressive gains. … Currencies depreciating …
4th January 2017
In our first Watch of 2017, we outline the prospects for India’s economy over the coming 12 months. The government’s demonetisation measures will lead to some weakness at the beginning of the year, but we expect growth to recover due to a rebound in …
3rd January 2017
Q4 GDP figures for Vietnam, which are due to be published sometime over the next couple of weeks, are likely to show the economy is continuing to expand at a rapid rate. However, the risks facing the country are building. Growth is unlikely to slow …
23rd December 2016
We expect Japan’s economy to grow by 1% next year. Given how low potential growth is, this should be enough to drive a further decline in spare capacity and to add to price pressures. The Bank of Japan is therefore unlikely to introduce further easing. …
Despite mounting speculation that the Czech MPC would hint at removing the koruna cap earlier than previously suggested, today’s MPC press statement was surprisingly dovish. We remain of the view that the cap is most likely to be lifted in mid-2017. And …
22nd December 2016
In 2016, weak inflation resulted in strong real disposable income growth for consumers, which in turn helped to support better-than-expected real GDP growth. The decent pace of growth, combined with worries about the strength of growth and political …
The switch to a so-called ‘border adjustment’ system of corporate tax, which was included in the House Republicans’ ‘Better Way’ proposals earlier this year, is beginning to draw more attention in the markets because of the scope for some very big winners …
China is ending 2016 on a stronger footing economically but with growing strains in its financial markets. A slight tightening of monetary conditions has snowballed into a bond market sell-off, with stresses compounded by official efforts to support the …
Taiwan’s central bank (CBC) kept its policy rate on hold today at 1.375%, but with growth likely to struggle over the coming year and inflationary pressures very weak, we think it will resume its easing cycle soon. … Taiwan to resume easing cycle next …
The EM world is now growing at its fastest pace in nearly two years. According to our GDP tracker, EM GDP growth in October reached 3.5% y/y, which is the strongest since January 2015. China has been driving the rebound, with our China Activity Proxy …
21st December 2016
While the Riksbank extended QE today, a number of the Executive Board dissented, suggesting that today’s announcement marks the beginning of the end for policy loosening in Sweden. Indeed, despite its dovish rhetoric, we think that the Riksbank will be …
The Bank of Thailand (BoT) left its policy rate on hold at 1.50% today, and with fiscal policy taking the lead in boosting growth but inflationary pressures benign, the BoT is likely to keep rates unchanged throughout 2017. … Thailand to keep rates on …
2016 will be remembered as the year that Prime Minister Modi finally began to deliver on promises of much-needed economic reform. However, with a number of state elections due to take place over the next 12 months, the Modi government will face a more …
We expect growth in the US to pick up next year as a result of Donald Trump’s planned fiscal stimulus, but in several other advanced economies it is likely to slow. Although headline inflation is set to rise almost everywhere, core inflation should remain …
20th December 2016
The press release accompanying the Hungarian MPC’s meeting earlier today suggests that the Council thinks the need for additional monetary easing has diminished. As a result, we have taken the very modest policy easing that we had previously expected out …
The underlying momentum in the economy remains sluggish and circumstances aren’t likely to improve next year, mainly because of a worsening downturn in housing investment. We expect GDP growth to be only 1.2% in 2017, down slightly from an already muted …
As a result of the recent falls in the peso, Mexico’s headline inflation rate is on course to break through the top end of the central bank’s 2-4% target range next year. While this should prove to be temporary, we think policymakers will react by hiking …
A huge rise in manufacturing confidence, to within touching distance of a record high, pushed the Swedish Economic Tendency Indicator higher still in December. This calls into question the Riksbank’s commitment to loosen policy further and supports our …
The Bank of Japan left policy settings unchanged today. As expected, it upgraded its assessment of the health of the economy, which points to policy remaining on hold for the foreseeable future. … Bank of Japan on hold for foreseeable …
The Bank of Japan’s yield target has kept JGB prices anchored over recent weeks against the backdrop of a sell-off in bond markets overseas. The volume of the Bank’s bond purchases has also remained stable. With the yield target likely to be unchanged …
19th December 2016
The lack of a sustained acceleration in wage growth suggests the Fed will be in no rush to hike rates again early next year. The stagnation in productivity, however, means that even the current level of hourly wage growth could soon feed through into …
16th December 2016
While it continues to warn about growing housing imbalances and risky mortgage lending, the Bank of Canada still believes there is only a low probability of a major housing correction happening anytime soon. That assessment looks very odd now, considering …
The MPC has not surprisingly emphasised the importance of inflation expectations in determining the degree to which it is prepared to tolerate an overshoot of the inflation target. After all, low inflation expectations appear to have helped to keep wage …
The Russian central bank’s post-meeting press conference provided the firmest signs yet that the easing cycle will resume next year. Governor Nabiullina’s comment that Q2 was the most likely time for this suggests that the initial rate cut may come a …
Peru’s central bank kept interest rates on hold at 4.25% for a tenth consecutive month last night, but with the risks to inflation firmly skewed to the upside, we expect policy tightening to resume next year. … Peru holds interest rates, but hikes likely …
Donald Trump’s surprise win in the Presidential election has introduced uncertainty across a number of policy dimensions, but the likelihood of a significant fiscal stimulus next year points to a pick-up in GDP growth and inflation. That stimulus will …
15th December 2016
At its last meeting, the Bank of Japan sounded the alarm over a decline in price pressures. However, the economy has continued to grow faster than potential and the recent sharp weakening of the yen should have soothed nerves. We expect the Bank to leave …
The unanimous decision by the Monetary Policy Committee (MPC) to leave interest rates on hold and the scale of its asset purchases unchanged, at the same time as the US Fed has resumed tightening policy, highlights the likely divergence in policy rates …
Yesterday’s US rate hike was widely anticipated, which probably explains the relatively muted responses in commodity markets. We expect the Fed to accelerate the pace of tightening in 2017, which would represent a headwind for commodity prices, notably …
Bank Indonesia’s (BI) decision to keep its policy rate on hold at 4.75% today demonstrates the central bank’s focus remains on supporting the rupiah. With interest rates in the US likely to rise further next year, we think that BI’s easing cycle has now …
The Norges Bank’s decision to leave interest rates unchanged came despite a deterioration in the outlook for growth and inflation. While policymakers remain concerned about the impact of loose monetary policy on house price inflation, we suspect that they …
The Swiss National Bank’s decision to leave interest rates on hold and pledge continued currency intervention was as expected. The Bank may have drawn some comfort from the franc’s recent decline against the US dollar. But the currency’s strength against …
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, but with the growth outlook deteriorating and inflation benign, we expect a rate cut in 2017. … Korea holds rates, but cut in 2017 …
