Filtered by Topic: Monetary Policy Use setting Monetary Policy
As universally expected, the Fed today raised interest rates for the second time in this economic cycle, with that hike coming a full year after the first increase and more than seven years after the current expansion began. With the economy much closer …
14th December 2016
The continued rally in sterling over the past month or so means that it is now around 10% lower on a trade-weighted basis relative to where it stood on the eve of the EU referendum, rather than the 15% that had been the case when talks of a “hard” Brexit …
The Malaysian central bank (BNM) has introduced a range of measures to stabilise the ringgit, which has been the region’s worst performing currency over the past month. The most significant step it has taken so far is a requirement for exporters to …
The Central Bank of Iceland’s (CBI’s) decision to cut interest rates before the next phase of capital account liberalisation came as a surprise. While the strong economy calls for policy tightening in the long term, a further sharp appreciation of the …
The jump in new lending last month was largely seasonal. Broad credit growth did pick up slightly but the increase was small and is unlikely to elicit a major policy response. … Bank Lending & Broad Credit …
As inflation was a touch weaker in November than the Riksbank anticipated, monetary policy is set to be loosened further. While we expect the Riksbank to announce an extension of QE, the already-weak level of the krona suggests that it will hold back from …
13th December 2016
Even before the latest rise in oil prices, the average inflation rate in the G7 was set to rebound to over 2% early next year. In the US, Donald Trump’s planned fiscal stimulus should boost US demand at a time when the economy is already near full …
The Swiss National Bank will stress after its meeting on 15th December that it is prepared to act decisively to prevent any significant appreciation of the Swiss franc in the coming months. Indeed, the Bank has already increased its intervention in …
The Middle East & North Africa region will struggle again next year, recording its weakest economic growth since the global financial crisis in 2009. Fiscal policy will have to be tightened in most places in order to rein in twin budget and current …
12th December 2016
While the ECB opted to extend its Asset Purchase Programme (APP) at a slower monthly pace than anticipated, there is no immediate end in sight in terms of its duration. Indeed, we think that the ECB will continue purchases far beyond 2017 and it will be …
9th December 2016
Signs that Brazil’s economy was turning a corner around the middle of this year have been extinguished by a recent run of awful data and – more ominously – renewed political strife. There are still reasons to expect growth to return next year but this …
The larger-than-expected decline in Brazilian inflation in November, coming on the back of less hawkish communications from policymakers in recent weeks, make it more likely that COPOM will step up the pace of easing at its January meeting. … Brazil …
Our Tracker shows that total capital outflows from the emerging world reached a ten-month high of $75bn last month. This was driven mainly by an acceleration in outflows from China, but it seems that Donald Trump’s election victory has also triggered a …
The Norges Bank is almost certain to leave monetary policy unchanged at its meeting on 15th December. Indeed, in October, the Bank repeated its message that “the key policy rate would most likely remain at [0.50%] in the period ahead”. However, we think …
For most countries in Emerging Asia an increase in US interest rates is not a major cause for concern. However, aggressive Fed tightening could cause problems in Hong Kong, Malaysia and Indonesia. … Asia well-placed to weather Fed rate …
We think that consumer price inflation dropped in November as the government’s demonetisation measures are likely to have led to some price discounting. However, demonetisation could boost inflation over the longer term if it leads to supply disruptions …
China defied the bears this year with an economic turnaround that took many by surprise. But the current strength cannot be sustained and the risk now is that many don’t appreciate how soon growth will slow again. In particular, we think it is wrong to …
Little has changed since the Central Bank of Iceland (CBI) last met and so, like last month, policy will be unchanged next week. As political and exchange rate uncertainty fades next year, concerns that the CBI will continue to miss its inflation target …
8th December 2016
The uncertainty surrounding next week’s Fed meeting is not about the out come of that meeting – a 25 basis point rate hike is all but guaranteed – but over President-elect Donald Trump’s potential reaction to that decision. Trump has said little about the …
The Monetary Policy Committee (MPC) will take some comfort from recent data suggesting that the economy has maintained its momentum in Q4, while sterling’s recovery may have lessened the extent to which inflation will overshoot the MPC’s target. …
While the ECB announced today that it would slow the pace of its asset purchases from next April, it also committed to buying for longer than anticipated. What’s more, it expressed a clear bias towards increasing the degree of support in future if …
Mexican inflation rose to 3.3% y/y in November, from 3.1% y/y in October, and it’s unlikely to stop there. We expect the headline rate to climb above the top-end of the central bank’s 2-4% target range by the middle of next year. As such, the central bank …
The euro-zone economy still seems to be weathering the effects of political upsets and uncertainty at home and abroad well. The PMI and EC survey indicators rose in November, consistent with an acceleration in GDP growth from Q3’s modest 0.3% q/q. …
Comments by Polish National Bank Governor, Adam Glapinski, at this afternoon’s post-meeting conference support our view that interest rates will be left unchanged next year, not hiked as the markets are pricing in. Moreover, with GDP growth likely to …
7th December 2016
After seriously considering an interest rate cut back in October, the Bank of Canada gave no strong indication in today’s policy statement that it was considering a rate cut in the near term. There were a few dovish hints, however, that suggest it is …
After two years of falling output, Latin America’s economy finally looks set to return to growth next year. Brazil and Argentina should exit recessions, while the downturns in Colombia and Chile are likely to bottom out. Investment should start to recover …
The small uptick in Chilean inflation in November is likely to prove temporary and we expect the headline rate to fall further below the central bank’s target by early next year. Following more disappointing news on the economy, we now expect the central …
Having previously shown that it was willing to prioritise growth even at the risk of missing targets for inflation, the RBI’s decision today to keep interest rates on hold despite the downside risks created by demonetisation comes as a surprise. … RBI …
Since Donald Trump won the race to the White House, investors have had to adjust to the prospect of looser fiscal and tighter monetary policy. Not surprisingly, the prospect has caused the dollar to strengthen, but Treasuries to come under fire. Looking …
6th December 2016
After accelerating a little in Q3, business surveys suggest that the world economy has continued growing at a fairly rapid pace in the final months of 2016. Labour market data for the US have been encouraging, the eurozone and Japan are doing better than …
The further fall in Russian inflation last month, to 5.8% y/y, won’t be enough to prompt the central bank to resume its easing cycle at the rate-setting meeting next week. Nonetheless, we think the decline in inflation will continue into 2017, ultimately …
While November’s fall in Swiss inflation was mainly due to energy effects, the weakness of core inflation will do little to ease fears that the economy may be experiencing a sustained bout of damaging deflation and keeps the onus on the Swiss National …
After leaving interest rates on hold at 1.5% today, the Reserve Bank of Australia remained fairly optimistic on the outlook for activity even though the economy may have contracted in the third quarter. We’re not too concerned about the outlook either, …
Far from being the catastrophe that many had expected 2016 was – as we anticipated – a year of stabilisation and recovery for many emerging markets. In this Focus we outline the ten key issues that we think will shape the outlook for EM investors in 2017. …
5th December 2016
Donald Trump’s unexpected election victory means that we are likely to see a major fiscal stimulus enacted in the first half of next year. As a result, we now expect GDP growth to accelerate to 2.7% in 2017, before slowing to a still healthy 2.2% in 2018. …
Both households and businesses appear to have been undeterred by Brexit uncertainty in Q3. What’s more, the latest business surveys suggest that the economy will turn in another solid performance in Q4. Gains in both the Markit/CIPS services and …
The latest data show that global monetary conditions remain exceptionally accommodative. Monetary aggregates and bank lending to the private sector are rising at a steady pace, and although government bond yields have risen since the US presidential …
The rebound in third-quarter GDP mainly reflects volatility in energy production rather than any fundamental improvement in the economy. Excluding energy, GDP has been growing at less than 1% annualised over the past two quarters and we aren’t optimistic …
2nd December 2016
A rejection of Matteo Renzi’s proposed constitutional reforms in Sunday’s referendum could plausibly set Italy on a path towards an eventual exit from the euro-zone, an outcome not remotely priced in to financial markets. … Crunch time for …
The recent weakening of the yen will lift headline inflation by around 0.5 percentage points in coming months and further gains are likely if, as we have been forecasting for a while, the yen weakens towards 120 against the dollar by the end of next year. …
The liquidity-draining measures that were eventually introduced by the Reserve Bank of India (RBI) to deal with the rush of cash entering the banking system after the demonetisation announcement have led to suggestions that the central bank may now …
The election of Donald Trump in the US drove large moves in Nordic and Swiss financial markets last month, with currencies generally depreciating against the US dollar while long-term bond yields increased. … External market drivers Trump domestic …
1st December 2016
Amid heightened political and economic uncertainty, President Mario Draghi seems set to announce another six-month extension to the ECB’s Asset Purchase Programme this month. We expect purchases to continue at the current pace of €80bn per month. The Bank …
Don’t draw too much comfort from the markets’ muted response to political risks in the euro-zone. It may not tell us much about the scale of the threats facing the currency union and it may not last. … Are markets under-estimating political …
30th November 2016
While the Bank of England’s Financial Stability Report (FSR) suggested that the UK financial system has fared well during recent uncertainty, it highlighted lingering risks. Nonetheless, we think that some of these risks could have a positive element to …
Inflation in most commodity-producing EMs will continue to edge down over the coming months as the effects of previous currency falls unwind. This will allow policymakers in almost all of these countries to loosen monetary conditions. … Inflation in EM …
The surprise acceleration of inflation in Kenya and Uganda raises a risk to our view that both countries central banks will loosen policy. But we expect that rates will still fall. … Kenyan & Ugandan Consumer Prices …
The Reserve Bank of Australia is unlikely to play either Santa or Scrooge at its meeting on Tuesday 6th December, as it will almost certainly leave interest rates on hold at 1.5%. And we believe that the markets have got ahead of themselves by starting to …
The renminbi’s depreciation against the US dollar quickened in November, with the Chinese currency reaching fresh multi-year lows against its US counterpart. We expect it to breach 7.0 against the US dollar before long, and to reach 7.3 by the end of next …
The rebound in third-quarter GDP likely means that the Bank of Canada will leave its economic projections and policy interest rate unchanged next Wednesday. But policymakers will still have doubts about the underlying strength of the economy, especially …
