Filtered by Topic: Monetary Policy Use setting Monetary Policy
Today’s rate cut by the Sedlabanki is likely to be a one-off. Indeed, the recent acceleration of economic growth suggests that the risks to the Bank’s new inflation forecasts are tilted to the upside. … Rate cut in Iceland set to be a …
24th August 2016
We continue to expect emerging market (EM) equities to rise further in the next couple of years, even as the Fed tightens monetary policy. But the rally has fizzled out in recent days, and we suspect that equities will be more volatile ahead of upcoming …
Growth across Emerging Europe is likely to pick up in 2017-18, but it will be softer than most anticipate. While the region’s largest economy, Russia, will return to positive growth in the coming quarters, the recovery will be sluggish. In Central Europe, …
While the recent fall in the cash rate to record lows in Australia and New Zealand should help to support household spending, the effect on other areas of the economy may be more limited. For one, we doubt the interest rate cut will do much to boost the …
The statement accompanying the Hungarian MPC’s meeting earlier today, at which the policy rate was left on hold at 0.90%, gave no sign that monetary easing is on the Council’s agenda. But we think growth and inflation are likely to be lower than the MPC …
23rd August 2016
The decision by the Turkish MPC to cut its overnight lending rate by a further 25bp, to 8.5%, provides further evidence that the Council is paying scant regard to its inflation target and more attention to moves in the currency (which has strengthened). …
Over the past month, two key developments in India have given investors reason to cheer. The first is the passage of the long-awaited Goods and Services Tax (GST) bill, which could bring huge benefits to India’s economy in the medium term by simplifying …
The sharp rise in Portugal’s bond yields last week reflected justified concerns about the government’s credit rating. While the Government intends to stick to the EU’s fiscal rules, slow economic growth will leave its credit rating in doubt for some time. …
22nd August 2016
The prospect of a further prolonged period of ultra-loose monetary policy suggests that government bond yields are set to remain markedly low for a long time yet. Admittedly, we think Treasury yields will rise as the US Fed tightens policy sooner and by …
In the last few days there has been a lively debate in the UK media over whether Brexit ‘Armageddon’ has been avoided. Our view is that it is far too early to say for sure and that sterling in particular is still vulnerable to a further reassessment of …
The downturn in Latin America is starting to bottom out and growth should return as we enter 2017. The region’s largest economy – Brazil – is turning the corner and our growth forecasts for the next year are a bit above consensus. Likewise, we expect …
The announcement over the weekend that Dr Urjit Patel, a current deputy governor, will take over as governor of the Reserve Bank of India (RBI) in September points to policy continuity and strengthens our view that the easing cycle is over. … Choice of …
With a few exceptions, commodity prices have trended higher over the past week. A weaker dollar on the back of the July FOMC minutes showing that Fed officials were divided over the timing of the next rate hike was the main factor behind the rise in …
19th August 2016
With the growth rate of our M3 broad money aggregate at a solid 4.4% y/y in July and bank loan growth at an even stronger 7.7% y/y, the economy appears to be in good health. … Monetary Indicators Monitor …
The latest data show that household debt is now close to its 2008 peak in dollar terms. However, the gains in income over the past eight years and the decline in interest rates mean that households are now in a far stronger position to pay down that debt …
Bank Indonesia (BI) left its new policy rate, the seven-day reverse repo, on hold today at 5.25%, but with growth struggling and inflationary pressures low, a rate cut is likely sooner rather than later. … Easing likely to resume in Indonesia …
The term premiums of US government bonds – the parts of their yields that do not capture expectations for short-term interest rates – are unusually low. Indeed, according to the estimates of some Fed staffers, the term premium of 10-year Treasuries is …
The UK’s vote to leave the EU means that consumer spending growth is set to slow on the back of a weakening jobs market and a squeeze on real wage growth. Confidence has already fallen since the vote too. Nonetheless, we don’t think that a collapse is on …
18th August 2016
If the ECB is to accelerate and extend its asset purchases next month as we anticipate, it will need to address the programme’s limitations, particularly relating to German debt. We think that the ECB could buy a higher proportion of the Bunds that are …
After a muted performance over the past 12 months, we expect GDP growth to accelerate in the second half of this year, albeit mainly because the drags from falling investment and inventories will fade. GDP growth should pick up from 1.5% this year to 2.2% …
17th August 2016
Today’s data showed that the labour market was strong prior to the referendum and the leave vote doesn’t appear to have caused any immediate damage. But the solid figures shouldn’t stop the MPC from following through with more monetary easing. … Labour …
Amid rising concerns that the BoJ’s large-scale purchases of Japanese Government Bonds cannot be sustained for much longer, policymakers are mulling the introduction of an explicit target for long-term bond yields. While we believe that a further …
Headline CPI inflation remained unusually low in July and the latest drop in energy prices will keep it below 2% for longer than we first thought. Core consumer prices rose by 0.1% m/m, which was below consensus expectations for a 0.2% m/m rise and will …
16th August 2016
Indian wholesale price inflation recorded another sharp rise in July, and it looks set to accelerate further over the coming months. This supports our view that there is little scope for further monetary loosening. … Wholesale Prices …
Japan’s economy stagnated in the second quarter, so spare capacity didn’t shrink any further. Adding in the deflationary impact of the stronger yen, underlying inflation should moderate further in coming months, increasing the pressure on the BoJ to …
15th August 2016
The conventional wisdom is that the Bank of Japan’s large-scale bond purchases will soon dry up the pool of available assets. By contrast, we believe that QQE can continue for several more years. One reason is that the government is funding the entire …
12th August 2016
Right now it is hard to find anything positive to say about Canada’s economy. Around the start of this year things seemed to be going in the right direction; with non-energy exports on a tear and the new Liberal government committing to a modest fiscal …
This week’s data provided more evidence that business investment and the property market will be hit hard by the leave vote. But with signs of resilience in consumer spending, and the Bank of England’s monetary stimulus already having some effect, we …
Whereas the collapse in Chinese equity prices sent global markets into meltdown last summer, they have begun to drive the outperformance of the MSCI Emerging Markets Index in recent weeks. A shift in expectations for US monetary policy, or renewed fears …
Broad credit is still expanding at a faster pace than during most of the past couple ofyears. But the impact of earlier monetary easing is now waning and after peaking in May, credit growth is starting to cool. … Bank Lending & Broad Credit …
Having left interest rates unchanged last night, the Chilean and Peruvian central banks both removed the reference to a tightening bias in their accompanying statements. However, with inflation likely to remain higher than policymakers expect over the …
Given the current backdrop of weak growth, low inflation and a stable currency, Bank Indonesia is likely to cut its new policy rate, the seven-day reverse repo rate, at its upcoming meeting. But more important for the economy will be what happens to …
Lower interest rates will do little to help frustrated first-time buyers get onto the housing ladder. But they will ensure that the income returns offered by BTL investments continue to be relatively attractive. As a result, we think investor demand for …
We don’t currently believe that the RBA or RBNZ will have to resort to unconventional monetary policy to boost inflation, but one lesson of the past decade is that we should be prepared for the unexpected. In this Economics Weekly we consider what would …
While some of the forces recently putting strong downward pressure on gilt yields may ease a bit in the coming months, the prospect of a further prolonged period of ultra-loose monetary policy suggests that very low yields are here to stay for some time …
11th August 2016
With the economy in good shape and inflation under control, today’s decision by the central bank inthe Philippines (BSP) to keep its main policy rate on hold at 3.0% came as no surprise. Looking ahead, we think the central bank will be in little hurry to …
Swedish inflation unexpectedly reached a fresh four-year high in July. But inflation is still below the Riksbank’s target and it is too soon to rule out further policy action. … Swedish Consumer Prices …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.25%. With fiscal stimulus in the pipeline, we think it will take another downturn in the growth outlook to convince the BoK to deliver additional rate cuts. … Bank of …
Not only did the Reserve Bank of New Zealand today cut interest rates by 0.25% to a new record low of 2.00%, but it also suggested that rates will soon be cut again to 1.75%. In order to weaken the dollar and boost underlying inflation, we expect the RBNZ …
Swedish inflation unexpectedly reached a fresh four-year high in July. But inflation is still below the Riksbank’s target and it is too soon to rule out further policy action. … Swedish Consumer Prices (Jul. …
The latest JOLT survey suggests that labour market conditions continue to tighten, which should generate an acceleration in wage growth later this year. … JOLT survey points to tightening labour …
10th August 2016
This report is only available as a PDF. Click to download. … Brazil Consumer Prices (Jul.) …
While the uncertainty generated by the EU referendum result clearly means that business investment is likely to fall in the near term, the Bank of England’s corporate bond buying scheme should help to cushion the blow at least a little by lowering firms’ …
July’s high inflation reading in Egypt, of 14.0% y/y (the same as in June) confirmed that March’s devaluation of the pound is continuing to pass through into higher consumer prices. Against this backdrop, we still think it’s likely that the central bank …
Inflation in Norway has been much stronger than the central bank forecast in June, so an interest rate cut in September looks unlikely. But we still expect inflation to fall sharply over the next 12 months. So policy loosening should come back on the …
The increase in Mexican inflation in July, to 2.7% y/y from 2.5% y/y in June, is unlikely to prompt the central bank to raise interest rates again at Thursday’s MPC meeting. But with inflation likely to breach the central bank’s target over the coming …
9th August 2016
The prospect – and subsequent delivery – of monetary policy stimulus from the Bank of England in August has helped UK assets to continue their recovery from the shock of the vote to leave the EU. Admittedly, expectations that interest rates will stay …
The fall in Chilean inflation in July, coming on the back of a recent weakening in the economy, means that interest rate hikes this year are now looking unlikely. … Chile Consumer Prices …
8th August 2016
Fund managers have reported that they are lowering their return targets in response to the lower interest rate environment and increased competition for commercial property assets. This suggests that they will be willing to pay lower yields than would …
Weak survey evidence notwithstanding, the economy likely continued to recover in the second quarter, while the labour market has rarely been tighter. However, wage growth remains anaemic and the past strengthening of the exchange rate will likely dampen …
