Filtered by Topic: Monetary Policy Use setting Monetary Policy
Chinese equities extended their rally in November, hitting the highest since January. The renminbi fell to an eight-year low against the US dollar, but strengthened against the trade-weighted basket. Meanwhile, a rise in interbank rates signals that the …
30th November 2016
With President Trump set to implement a large fiscal stimulus next year, US inflation and interest rates will both rise more rapidly than seemed likely a month ago. This has already had knock-on effects on global exchange rates and bond markets, and has …
Interbank interest rates in Saudi Arabia have edged down over the past month as investor sentiment towards the Kingdom has improved and policy moves have helped to ease liquidity constraints at banks. Nonetheless, with the US Federal Reserve set to hike …
29th November 2016
Chilean activity data for October were slightly worse than expected and suggest that the economy got off to a disappointing start in Q4. They’re probably not enough to convince the central bank to ease policy immediately, but if the data fail to improve …
The Central Bank of Sri Lanka (CBSL) kept rates on hold at its meeting today, but with credit growing at an unsustainable pace, inflationary pressures building, and the US Federal Reserve set to resume its own tightening cycle soon, interest rates are …
The Central Bank of Kenya has paused its loosening cycle for now, but further cuts are likely in 2017. We expect that the bank’s key policy rate will end 2017 at 9.00%. … Kenya: Policy loosening will proceed …
28th November 2016
Frontier financial markets came under pressure in the wake of Donald Trump’s US election victory, with currencies weakening against the dollar and bond yields rising. The losses have been relatively modest and in some cases have already started to …
Interest rates are an important driver of housing demand, but they are not the only factor. And restricted access to mortgage credit, rather than its cost, is currently actin as the biggest drag on housing market activity. Thus, even though demand …
The 50% fall in the Egyptian pound against the US dollar since the central bank floated the currency at the start of November will cause economic growth to slow sharply in the coming quarters. Interest rates have already been hiked by 300bp and we think …
October’s euro-zone money and credit data remain consistent with steady economic growth. But a renewed pick-up in money and lending growth will be needed before the ECB can feel comfortable about hitting its inflation target. … Euro-zone Monetary …
According to both market measures and survey measures, inflation expectations have been rising. Yet both short and longer-term inflation expectations remain undesirably low. And while the recent depreciation of the euro will help to boost inflation, other …
25th November 2016
Regional GDP growth held steady at just under 4% last quarter, with buoyant domestic demand again helping to offset weak exports. With subdued global growth set to continue holding back exports, the onus will be on policymakers to support domestic demand …
A further rise in global government bond yields may put the Bank of Japan’s yield target under pressure but we nonetheless believe the Bank will be able to reduce its asset purchases next year while keeping the yield target unchanged. … BoJ set to taper …
Mexican inflation continued to climb in the first half of November, rising to 3.3% y/y from 3.1% y/y over the whole of October. And, following the sharp depreciation of the peso over recent weeks, we now expect it rise above the top-end of the central …
24th November 2016
Today’s press conference saw the SARB leave rates on hold but take a notably hawkish tone.Policymakers seem to be rowing back their claim that the tighten cycle is coming to an end. … South Africa: Rates on hold, but rhetoric turns …
The government’s shock demonetisation announcement earlier this month was its boldest measure yet to tackle corruption and formalise large parts of the shadow economy, but it is unlikely to be the last. … Anti-corruption drive has further to …
We’ve written lots over the past two weeks about Donald Trump’s victory and the implications for EMs. While much remains uncertain, in this Update we draw out five early takeaways. … Trump and the fallout for EMs in five key …
23rd November 2016
Having slowed in Q3, we expect growth in Emerging Europe to recover over the course of the next year as Russia continues to pull out of recession and investment in the Central European economies rebounds. However, the overall pace of growth will remain …
Political developments have taken centre stage over the past month. Aside from Donald Trump’s election victory, most attention in Asia has focused on Korea, where President Park Geun-hye is clinging to her job with her fingernails following allegations …
Inflation in South Africa picked up from 6.1% y/y in September to 6.4% y/y in October, but we still expect that the SARB will keep its key policy rate on hold this week. … South Africa Consumer Prices …
Today’s decision by Malaysia’s central bank (BNM) to keep interest rates on hold at 3.0% suggests that it is more worried about supporting the weak currency than boosting the sluggish economy. Looking ahead, fears of further currency weakness are likely …
The economy has recovered from the temporary disruption caused by the wildfires earlier this year and the slump in mining-related investment, triggered by the collapse in oil prices last year, is finally fading. Unfortunately, the housing downturn, which …
22nd November 2016
Today’s MPC statement makes it very clear that the CBN is unwilling to hike interest rates in the face of inflation that is more than double the official target. The next move will probably be down. … Nigeria: CBN holds rates in face of …
Swedish inflation is set to rise sharply over the next year. As such, the Riksbank’s intention to loosen monetary policy further seems like a mistake and any additional interest rate cuts will have to be reversed before long. Ultimately, we expect the …
According to our detailed estimates, capital flows out of China last month were the largest since January’s panic over the renminbi. While markets appear more at ease about the trajectory of renminbi this time, growing capital outflows still pose a threat …
Financial markets across the emerging world have stabilised following an initial sell-off in the wake of Donald Trump’s victory in the US presidential election earlier this month. This partly reflects a more conciliatory tone from the president-elect, …
Donald Trump’s surprise victory in the US election has led to a rash of sizeable downgrades to growth forecasts for Mexico, including several predictions of a recession. But we think the impact over the next couple of years will be less severe than most …
21st November 2016
Although the tightening of financial conditions has persuaded the Fed to hold off from tightening monetary policy on several occasions over the past couple of years, we doubt that the recent surge in the dollar and Treasury yields will prove to be an …
Although the Canadian dollar has weakened further lately, financial conditions overall appear to be tightening now because of rising market interest rates and new stricter mortgage rules. Given the significant imbalances in the household sector that pose …
18th November 2016
The continued softness in core consumer prices in October suggests that the downside risk to the Bank of Canada’s core inflation rate projection is growing, which is consistent with our view that an interest rate cut is coming in the first half of next …
The Malaysian central bank confirmed today that it has been intervening in foreign exchange markets to support the ringgit, which is now close to its lowest level since the Asian financial crisis. Despite weak economic growth and subdued inflationary …
Chile’s central bank kept interest rates on hold at 3.50% and, while GDP data released this morning showed that economic growth remained sluggish in Q3 at 1.6% y/y, we still think it would take a further weakening of the economy – which seems unlikely – …
One of the key drivers of the economic turnaround this year, the property market,is starting to cool. Growth in the prices of new residential properties slumped inOctober in the largest (tier 1 and tier 2) cities, where local officials have put infresh …
With the yen weakening dramatically since the US election and incoming data showing GDP growth strong last quarter, there is now little pressure on the Bank of Japan to ease further. Less positively from the Bank’s perspective, underlying inflation looks …
Inflation is set to continue rising across Emerging Asia as the effects of past falls in oil prices drop out of the annual comparison. However, we doubt the increase will be large enough to worry most of the region’s central banks. … Inflation to rise, …
The 50bp increase in Mexican interest rates (to 5.25%) at today’s meeting was aimed at supporting the peso in the aftermath of the US election and it’s clear that further hikes are on the cards. We expect another half-point increase at December’s meeting, …
Financial markets look to have jumped the gun by concluding that the chance of a further interest rate cut in Australia has all but vanished. We think that the weak outlook for wage growth may yet prompt the central bank to cut rates further. … Wage …
Chair Janet Yellen’s remarkably bland prepared congressional testimony today did nothing to change our view that the Fed will hike interest rates at the upcoming mid-December FOMC meeting. Despite Donald Trump’s unexpected victory in last week’s …
17th November 2016
Bank Indonesia (BI) today left interest rates on hold at 4.75% and made clear that its focus is currently on maintaining a stable exchange rate rather than supporting the economy. With rate hikes in the US now looking more likely, we think BI’s easing …
With its first fixed-rate operation today in support of the new target for 10-year Japanese Government Bond yields, the Bank of Japan has moved closer to full-fledged helicopter money. There are already some indications that the government is responding …
The Swiss National Bank’s (SNB’s) pledge to intervene in foreign exchange markets appears to havealleviated upward pressure on the franc in the wake of the US election. But experience has shown itspolicy limitations and we suspect that the franc will …
16th November 2016
The Central Bank of Iceland’s decision to keep interest rates unchanged rests on overly cautious assumptions for the króna and on fears about fiscal policy and capital controls that will probably not be realised. As such, interest rates may yet be cut …
Amid falling profitability and sluggish loan demand at home, banks continue to expand overseas lending. … Monetary Indicators Monitor …
The further fall in India’s consumer price inflation last month, along with the likely shock to demand from the government’s withdrawal of most bank notes, is likely to increase the clamour for further rate cuts. But if the RBI pulls the trigger and …
15th November 2016
Indian wholesale price inflation edged down in October, but we expect it to resume accelerating over the coming months. The big picture is that there is still little room for further policy loosening. … Wholesale Prices …
The recent leap in the prices of the main commodity exports of Australia and New Zealand will boost domestic demand in both economies, but it is unlikely to lead to much faster wage growth and much higher underlying inflation. That’s because businesses …
In the wake of Donald Trump’s victory in the US presidential election, we are nudging up our forecasts for government bond yields in Europe. But we still don’t expect that they will rise as fast as in the US. … Will European bonds fare better than US …
14th November 2016
Donald Trump’s victory has exacerbated the upward movement in Treasury yields, pushing 10-year UK gilt yields higher too. Meanwhile, market participants have revised up their expectations for official interest rates in the UK further over the past month …
The 0.5% q/q rise in GDP last quarter implies that the output gap was the smallest since 2014’s sales tax hike. Combined with the recent weakening of the yen, today’s figures therefore reduce the pressure on the Bank of Japan to introduce more easing. … …
The sell-off in EM markets following Donald Trump’s victory appears to have been driven by a general rise in investor risk aversion, rather than specific concerns over a shift towards greater trade protection in the US or expectations of tighter Fed …
11th November 2016
