Filtered by Topic: Monetary Policy Use setting Monetary Policy
While the third quarter inflation data suggest that there is an outside chance that the Reserve Bank of Australia will cut interest rates from 1.50% to 1.25% at its policy meeting on Tuesday 1 st November, we expect that the Bank will leave rates on hold. …
27th October 2016
Broad money and credit have been growing at a steady pace, against the backdrop of exceptionally loose global monetary conditions. In advanced economies, growth in lending to the private sector has stabilised at around 5% in the last year, while in …
26th October 2016
The Egyptian government has inched closer to an IMF financing package over the past month after securing a US$2bn deposit from Saudi Arabia. This makes up a third of the bilateral financing that the Fund has demanded as a prerequisite of the deal. The …
EM GDP is currently growing at its fastest pace in 18 months, with the recovery being driven mainly bystronger growth in commodity producers as well as an upturn in China. According to our GDP tracker,EM GDP growth reached 3.2% y/y in August – the fastest …
The markets are convinced that the Fed will stand pat at the upcoming FOMC meeting, which concludes next 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 …
Emerging market (EM) currencies have decoupled from broader movements in the US dollar in recent months despite a growing sense that the Fed will hike rates again before year-end. A realisation that the Fed will tighten further than is currently …
Ignore the larger-than-expected rise in headline CPI inflation in the third quarter, what really matters is that underlying inflation was weaker than the RBA expected. It probably wasn’t weak enough to prompt the Bank to cut interest rates from 1.5% at …
The rally in emerging market (EM) “junk” bonds has continued unabated in recent days, but we think that this year’s strong gains may soon go into reverse. That alone would probably be enough to cause the stripped spread of the JP Morgan EMBI Global to …
25th October 2016
Much of the focus both before and after the RBI’s decision to cut the repo rate by 25bp (to 6.25%) in early October has been on the sharp fall in headline inflation over the past couple of months. But this has been due in large part to a drop in food …
Although the Bank of Canada gave no indication in last week’s policy statement that it was considering an interest rate cut, Governor Stephen Poloz freely admitted in his press conference that an immediate reduction was considered at the meeting. That …
21st October 2016
The recent softness in core CPI inflation could become a major concern for the Bank of Canada. The Bank was forced to cut its projection for inflation earlier this week in its new Monetary Policy Report and September’s data suggest the risks to that lower …
Data to mid-October show that inflation in Brazil is continuing to ease, which should provide room for another cut in interest rates at November’s COPOM meeting. … Brazil IPCA-15 …
The Norges Bank is almost certain to leave monetary policy unchanged at its meeting on 27th October. Indeed, at its last meeting in September the Bank changed the wording in its policy statement from “the key policy rate may be reduced in the course of …
While the Reserve Bank of Australia would do well to ignore the recent falls in employment, it will be getting more concerned that the rising share of employees working part-time will keep wage growth lower for longer. That would mean the RBA’s low …
Inflation has undershot the Riksbank’s forecastssince it last met to set policy in September. Butwe expect inflation to rise again before long, andwith economic conditions strong there is lesspressure to respond to temporary setbacks inhitting the …
20th October 2016
President Draghi did not explicitly promise imminent policy action today. But he signalled that assetpurchases would not end abruptly. And as tapering has apparently still not been discussed, we expectthe ECB to announce a six-month extension to its asset …
The Turkish MPC didn’t rule out a resumption of its easing cycle following the surprise decision to leave interest rates unchanged today, but for our part we think that further falls in the lira and the worsening inflation outlook mean the next big move …
Today’s decision by Bank Indonesia (BI) to reduce its main policy rate by 25 basis points to 4.75% is unlikely to mark the end of its rate cutting cycle. However, further loosening is likely to be gradual. … Further easing set to be gradual as Bank …
The recent strengthening in the dollar and rise in Treasury yields are unlikely to prevent the Fed from raising rates in December. The moves seen so far have been small, and with a December rate hike now at least partly priced in, the prospect of further …
The decision by Brazil’s COPOM to cut the benchmark Selic interest rate by only 25bp (rather than 50bp), combined with a slightly less dovish accompanying statement than some had expected, reinforces our view that easing over the next 6-9 months will be …
The Bank of Canada gave no indication in today’s policy statement that it was considering an interest rate cut, even though it lowered its projections for GDP growth and now doesn’t expect the economy to return to full employment until mid-2018, which is …
19th October 2016
While the RBI is probably correct in suggesting that global neutral interest rates have fallen, this does not necessarily mean that India’s own neutral rate has fallen too, as the RBI suggested when it recently cut policy rates. As such, there is a risk …
Chile’s central bank left interest rates on hold at 3.50%, although the MPC appears to be divided over whether to flag rate cuts or not. For now, we expect signs that the economy is recovering keep the balance in favour of leaving policy on hold for a …
Apparent concerns in the bond market that the Monetary Policy Committee (MPC) has gone soft on inflation look overdone. We expect the forthcoming rise in inflation to be transitory. But if it isn’t, the Committee will take the action needed to meet its …
18th October 2016
Although headline CPI inflation increased to a two-year high of 1.5% in September, the more modest gain in core consumer prices suggests that underlying price pressures are building only very gradually. In this context, the Fed won’t be in any immediate …
The rise in CPI inflation in September – to its highest level in almost two years – is likely to fuel market concerns about the upward impact of the pound’s fall on prices. However, we don’t think that it will trouble the MPC too much. … Consumer Prices & …
The fall in CPI inflation to 0.2% in the third quarter from 0.4% in the second quarter is in line with the RBNZ’s forecast and means the Bank will follow through on its suggestion that interest rates will need to be cut from 2.00% to 1.75% at the November …
The Nordic and Swiss economies’ reasonable economic performance, low public debt and stable political backdrop should help to maintain their safe haven status. But there will be some marked economic and policy divergences. Slow growth and low inflation in …
17th October 2016
Bank lending picked up in September and a broader measure of private sector credit expanded at the fastest pace since the launch of QQE in Q2. Meanwhile, low returns at home have encouraged Japanese investors to buy record amounts of foreign bonds. … …
Fears that domestic price pressures might prompt the Swiss National Bank to tighten monetary policy proved unfounded today as it left its interest rate target at 0.25%. The Bank’s tone was gloomier than expected and its low inflation forecast supports our …
16th October 2016
The marked slowdown in the rate at which the remaining slack in the labour market is being absorbed poses a big dilemma for the Fed. The standard unemployment rate has now been broadly unchanged at 5.0% for a full 12 months. The Fed needs to know why …
14th October 2016
Recent official activity data for the euro-zone have been fairly encouraging. Coupled with the unofficial survey evidence, they suggest that the region’s GDP growth might have maintained its pace or even picked up slightly in Q3. But it will still have …
The Peruvian central bank’s decision to keep interest rates on hold at 4.25% didn’t come as a surprise, but we expect a pick-up in inflation next year to trigger more rate hikes than the consensus expects. … Peru: Interest rates to rise by more than most …
The Bank of Canada is unlikely to announce any major changes to either its economic projections or policy stance next Wednesday. The apparent rebound in third-quarter GDP and the surge in employment in September will provide some comfort that the economy …
The Malaysian government is likely to prioritise maintaining fiscal discipline over supportingthe weak economy at its upcoming budget. … Malaysia to signal continued commitment to fiscal …
Indian wholesale price inflation edged down in September, 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 Monetary Authority of Singapore (MAS) today left its monetary policy settings unchanged, having loosened policy at its last meeting in April. With the economy set to exit deflation over the coming months, we expect monetary policy to stay on hold, …
The ECB’s Governing Council is unlikely to unveil any policy changes at its forthcoming meeting on 20th October. But we expect it to prepare the ground for an extension of its Asset Purchase Programme (APP) to be announced at its following meeting in …
13th October 2016
The Bank of Korea (BoK) kept its policy rate unchanged at 1.25% today, and while the consensus expects another rate cut in the coming months, we think rising concerns about Korea’s high household debt are likely to deter the central bank from lowering …
Clinton’s housing proposals will not give homeownership much of a boost. The focus on down payments ignores the fact that it is the need for a high credit score which is preventing many Americans from buying. And even if the proposals do help more people …
12th October 2016
The inflation figures for the third quarter would need to be much weaker than the Reserve Bank of Australia expects in order to prompt a cut in interest rates to 1.25% at November’s policy meeting. While we don’t think inflation was weak enough in the …
11th October 2016
The People’s Bank has taken a major step towards a more orthodox approach to monetary policy by adopting a de facto target for the interbank rate. Although this shift has taken place with little fanfare, it has important implications for how monetary …
10th October 2016
Recent data suggest that the economic recovery may be a touch stronger than we had been expecting. However, there are no signs that the tight labour market is fuelling price pressures. While the Bank of Japan can blame the stronger yen for a sharp fall in …
There is mounting evidence that the Turkish central bank’s pursuit of loose monetary policy has caused inflation expectations to become unanchored, risking an upward wage-price spiral. As we explain in this Focus, higher inflation is likely to be …
5th October 2016
Progress in implementing the Goods and Services Tax (GST) since the bill was passed in parliament in early August has so far been fairly smooth. However, there are still a number of sticking points that need to be addressed before the GST can be rolled …
21st September 2016
The Swiss National Bank’s decision to leave policy on hold came as no surprise as easing Brexit fearsand the ECB’s inaction have led upward pressure on the franc to abate. But the SNB made clear that itwill renew its currency interventions if needed. With …
15th September 2016
The Swiss National Bank’s decision to leave policy on hold came as no surprise as easing Brexit fears and the ECB’s inaction have led upward pressure on the franc to abate. But the SNB made clear that itwill renew its currency interventions if needed. …
It is always possible that the Fed could surprise us with an unexpected rate hike next week, but we very much doubt that will happen, it just doesn’t fit Chair Janet Yellen’s more cautious style. At this stage it would also be a big shock too, with the …
14th September 2016
A renewed pick-up in credit growth last month will add to the growing sense among investors that the near-term outlook for China’s economy is fairly bright. Credit growth is still likely to slow over the coming months as the PBOC refrains from further …
The Bank of Thailand (BoT) left its policy rate unchanged at 1.50% today, but with growth set to slowand inflationary pressures very low, further easing is likely in the coming quarters. … Thailand holds policy rate, but easing can’t be ruled …
