Filtered by Topic: Monetary Policy Use setting Monetary Policy
Donald Trump’s surprise election victory has created a great deal of uncertainty for the region. In this Weekly, we answer five key questions. … Five questions (and answers) about Trump and …
11th November 2016
Despite the drop in the sol in recent days and the rising inflation rate, Peru’s central bank left interest rates on hold at 4.25% once again. Nonetheless, we expect hikes to resume next year and the scale of tightening is likely to take most forecasters …
While Trump’s election win is still causing some uncertainty in financial markets, attention in New Zealand has swiftly moved to the kiwi dollar following comments by Governor Wheeler that the RBNZ has an “open mind” to the possibility of using foreign …
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today and, while subdued growth and low inflation mean the BoK will keep monetary policy loose for the foreseeable future, a high level of household debt is likely to deter further rate cuts. …
The central bank in the Philippines (BSP) surprised nobody with its decision to leave its main policy rate on hold earlier today at 3.0%. Looking ahead, with inflation set to remain low and growth likely to stay strong, we expect interest rates to remain …
10th November 2016
In October, the Norges Bank’s favoured measure of inflation was unchanged at a joint 14-month low. We think that it will fall sharply next year, prompting the Bank to cut its key policy rate from 0.5% to zero. … Norwegian and Danish Consumer Prices …
The Reserve Bank of New Zealand showed that business carries on as usual with Trump as US President as today it met its previous pledge to cut interest rates from 2.00% to 1.75%. What’s more, yesterday’s financial market volatility didn’t stop it from …
We think that the sharp appreciation of the króna over recent months will prompt the Central Bank of Iceland to cut its inflation forecasts next week. As a result, although the Bank has previously stated that it would act cautiously in monetary policy …
Polish National Bank governor, Adam Glapinski, used this afternoon’s post-meeting press conference to indicate that interest rates are most likely to remain unchanged over the course of next year. But his view seems to be based on somewhat optimistic …
9th November 2016
The rebound in the peso over the last few hours appears to have dissuaded Mexico’s central bank from raising interest rates at a press conference this morning. However, with the situation in markets still uncertain, our sense is that the central bank will …
Today’s minutes showed broad support for an extension of the Riksbank’s government bond purchase programme. Combined with the uncertainty created by Donald Trump’s victory in the US, an extension of bond purchases by the Riksbank now seems all but …
The sharp fall in Brazilian inflation in October is likely to be followed up by further declines over the coming months. Accordingly, barring a sustained drop in the real – the currency is down by 2.5% against the dollar in the aftermath of the US …
We suspect that the Nordic and Swiss economies will see limited effects from Mr Trump’s victory. Butit makes monetary policy divergence between Switzerland and Sweden next year slightly more likely. … Trump win could widen policy divergence next …
The Bank of Thailand (BoT) left interest rates unchanged at 1.50% today and is likely to be in little hurry to adjust monetary policy over the coming year. Elsewhere in the region, the increase in uncertainty and volatility following Donald Trump’s …
The sell-off in EM financial markets in the wake of Donald Trump’s victory in the US election has been swift but policymakers in most countries will look through the initial volatility – only central banks in Mexico and (possibly) Turkey are likely to be …
Consumer price inflation is likely to have edged up in October, as the recent sharp slowdown in food inflation appears to have bottomed out. But with the central bank focused on supporting growth, the pick-up we are expecting won’t be large enough to …
7th November 2016
If Donald Trump prevails in tomorrow’s US presidential election, our sense is that Mexican policymakers’ initial response would be to hike interest rates by 100-200bp at an emergency central bank meeting in an effort to support the peso. This may also be …
Investor concerns about the outcome of the US presidential election have caused substantial currency and equity market movements in the past few weeks. However, the Vix “fear gauge” has not yet risen as far as it did in the immediate aftermath of the UK …
The biggest decline in the value of China’s foreign exchange reserves since the start of the year has more to do with movements in exchange rates and asset prices than sales by the People’s Bank. Capital outflows remain substantial but probably eased last …
The Central Bank of Egypt’s decision to float the pound last week, coming alongside a raft of subsidy cuts, means inflation is likely to climb to more than 20% in the coming months. The impact is likely to be temporary and inflation should start to ease …
We think that the upward revision to the MPC’s inflation forecast was about the right magnitude. But for the Committee to respond to this – or a greater – overshoot of the target, domestic costs pressures would also have to rise. We think that GDP growth …
4th November 2016
Should Donald Trump pull off a surprise victory in Tuesday’s US Presidential election, equities, bond yields, commodity prices and the Australian and New Zealand dollars would probably all fall. But those moves would probably be reversed before long as it …
While the forecasts published in the RBA’s latest Statement on Monetary Policy have hardly changed since the August edition, the tone is much more balanced and could probably even be described as upbeat. In other words, the RBA is increasingly thinking …
The unanimous decision by the MPC to leave interest rates and its asset purchases on hold in November did not come as a surprise given the continued run of upbeat news on the health of the economy. And while the MPC will be watching closely for any …
3rd November 2016
Russian inflation once again surprised on the downside, falling to 6.1% y/y in October. This is unlikely to cause the central bank to change its mind, and interest rates will almost definitely be kept on hold at the MPC meeting in December. But today’s …
The most noteworthy market developments last month were prompted by expectations of further policy loosening from Sweden’s Riksbank, with the krona depreciating sharply last month as a result. Meanwhile, bond yields increased inmost countries while equity …
The decision this morning by the Central Bank of Egypt (CBE) to finally adopt a floating exchange rate regime is a positive step and moves the government closer to securing a US$12bn financing package from the IMF. There will inevitably be fresh pain for …
We expect that the Reserve Bank of New Zealand will follow through on its commitment for further policy easing by cutting interest rates from 2.00% to 1.75% at its policy meeting on Thursday 10 th November, particularly if the outcome of Tuesday’s US …
As widely expected, the Fed left interest rates unchanged at this week’s FOMC meeting, but it appears to be intent on hiking interest rates at the upcoming December meeting. Nevertheless, next week’s election could still throw a spanner into the works, …
2nd November 2016
The euro-zone’s consumer sector appears to have had another poor quarter in Q3. Retail sales volumes were flat in August, while timelier national data point to a contraction in sales in September. Combined with data on car registrations, that suggests …
1st November 2016
The Bank of Japan today pushed back the timing for hitting its inflation target and sounded alarmed about the recent moderation in price pressures, but nonetheless refrained from providing more stimulus. While we still think that further cuts in the …
The decision by the Reserve Bank of Australia to leave interest rates at 1.5% today may fuel some speculation that the next move in rates will be up, although not for a long time. That possibility shouldn’t be ignored, but we’re not convinced that the low …
The renminbi dropped to a six-year low against the US dollar this month but it strengthened against most other currencies in the official currency basket. Meanwhile, although a jump in interbank rates at the end of October has triggered talk of policy …
31st October 2016
It is often argued that asset prices have been driven up by exceptionally loose monetary policy and that they are bound to come crashing down once central banks start to raise real interest rates back towards their historical levels. However, we are not …
We estimate that world GDP growth accelerated slightly in the third quarter, due to the ongoing policyled rebound in China and a pick-up in activity in the US. However, the expansion will probably slow a bit in the next few quarters, in part because …
Mexico’s economy grew by an impressive 1.0% q/q in Q3, the strongest rate since 2014. However, with growth being driven largely by the services sector and monetary policy set to tighten further, such a rapid pace of growth is unlikely to be sustained. … …
Emerging market (EM) currencies have been stable in recent months, even as the likelihood that the Fed will tighten policy in December has grown. This supports our view that EM currencies will take higher US rates in their stride. … How will EM currencies …
Central banks in several countries in Latin America are turning increasingly dovish. Policymakers in Brazil cut interest rates this month on the back of another drop in inflation and further (gradual) progress by the government on fiscal reforms. The …
The markets are convinced that the Fed will stand pat at this week’s FOMC meeting, which concludes on Wednesday, and will instead raise interest rates at the final policy meeting of the year in mid-December. We broadly agree with that view, but wouldn’t …
28th October 2016
The mixed messages coming from Bank of Canada Governor Stephen Poloz last week, which caused a stir in financial markets and the media, makes us wonder if, like most other major central banks, the Bank should publish policy meeting minutes. Releasing …
The bigger than expected 2.9% annualised gain in third-quarter GDP confirms that the economic recovery has regained some of the momentum lost within the last year. As such, this leaves the Fed firmly on track to raise interest rates in December and a hike …
The Central Bank of Russia’s statement accompanying its decision to keep the policy rate at 10.0% today was predictably hawkish and supports our view that monetary easing will be gradual. But the markets are underestimating the extent to which inflation …
Politicians have made increasingly strident attacks on central banks in many countries recently. But we doubt that these criticisms will lead to significant revisions to monetary policy regimes because no workable alternative has been proposed. Moreover, …
The Bank of Japan recently abandoned its target for expansion of the monetary base but said that it would continue to buy assets at around the same rate as before. This pace of asset purchases will increasingly become inconsistent with the Bank’s new …
Both headline and underlying inflation in Australia will probably rise over the next year and, by boosting economic growth and reducing spare capacity, the recent leap in commodity prices raises the chances of underlying inflation returning to the 2-3% …
At its upcoming meeting, the Bank of Japan is set to slash its inflation forecasts for the coming fiscal year and may push also back the timeframe for hitting the 2% inflation target yet again. While the failure to hit the target can be blamed in part on …
The resilience of the economy in Q3, combined with a stronger inflation outlook, will probably be enough to persuade a majority of MPC members to leave rates unchanged at next week’s meeting. What’s more, while we would not rule out the possibility of …
27th October 2016
September’s euro-zone money and credit data continued the positive trend of recentmonths, consistent with a further steady expansion of the economy. Nevertheless,the data suggest that inflation will remain well below the ECB’s target. … Euro-zone Monetary …
It seems very likely that the Riksbank will extend its bond purchase programme after it stepped up its dovish rhetoric and suggested that it might even cut the repo rate further. But given our expectation for growth and inflation to surpass the Riksbank’s …
The Norges Bank left its key policy rate on hold today and reiterated that no change was likely in the near future. But we think that more monetary loosening will be needed in 2017. … Norges Bank leaves policy unchanged, but rate cuts to …
