Filtered by Topic: Monetary Policy Use setting Monetary Policy
On Friday, commodity prices dipped in the wake of the second consecutive strong US non-farm payrolls reading, the subsequent appreciation of the dollar and the implication that rate hikes could come sooner rather than later. That said, we think that Fed …
5th August 2016
The first set of post-referendum housing market data is consistent with our expectations of a slump in transactions over the next 6 to 12 months. That said, while the picture painted by the main house indices has been benign, the collapse in house price …
The MPC’s decision to announce a package of stimulus measures yesterday was no doubt influenced by the thoroughly downbeat tone of this week’s survey data. While it’s clear that growth is set to slow, policy stimulus should help the economy do better than …
The Bank of England’s policy action last week added to the pressure on the ECB to do more. At the moment, the ECB’s self-imposed restrictions would prevent a large expansion of its asset purchase programme. But those limitations can be amended, so should …
The Reserve Bank of Australia hasn’t done itself any favours by providing no real hints that interest rates will fall below 1.5%, as the resulting strengthening in the dollar will make it even harder for it to raise inflation back to the 2-3% target. The …
The Reserve Bank of Australia used its new Statement on Monetary Policy to suggest that it hasn’t got much appetite for cutting interest rates below 1.5%, although its own inflation forecasts suggest it might have to. We suspect that the RBA’s hand will …
Further gains in emerging markets (EMs) seem likely as the Fed shies away from hiking rates again and other major central banks loosen monetary policy. But while that may cause some concerns that the rally has gone too far, valuations suggest otherwise. … …
4th August 2016
The initial evidence suggests that the UK’s vote to leave the EU has caused its economy to slow sharply. That has already prompted the Bank of England to ease policy, and we suspect it will cut rates again in the coming months. However, activity …
Today’s measures from the MPC met our expectations. And while mortgage interest rates are now likely to fall a little further, uncertainty amongst buyers means that this is unlikely to give lending volumes and transactions a material boost. … Will the MPC …
The larger-than-expected fall in Russian inflation to 7.2% y/y in July suggests that – barring an upside surprise in this month’s CPI figure – the central bank will resume its easing cycle at the next MPC meeting in mid-September. … Russia CPI …
The Romanian MPC’s press conference was a little more dovish than we had anticipated, but robust domestic demand and rising inflation mean gradual interest rate hikes still seem more likely than not over the next 12 months. Elsewhere, the Czech MPC’s …
The Bank of England’s Monetary Policy Committee (MPC) today made good on its pledge at July’s meeting to implement a package of policy measures to cushion the economy from the adverse effects of the Brexit vote and held the door wide open to further …
Concerns about growing credit risks mean that the People’s Bank has good reason to hold off from another round of broad easing measures until clear signs of a renewed downturn emerge. … PBOC probably won’t cut rates or the RRR anytime …
July’s consumer price inflation data is likely to show that the headline rate edged down but remained some way above the Reserve Bank’s 5.0% target for March 2017. Suggestions from many commentators that a strong monsoon this year would lead to a …
When the Reserve Bank of New Zealand meets on Thursday 11 th August, we expect it to cut interest rates from 2.25% to 2.00% and to confirm that it is willing to reduce rates further. A stubbornly high exchange rate, low inflation expectations and subdued …
The Bank of Thailand’s (BoT) decision to keep its policy rate unchanged at 1.5% today came as no surprise. However, with price pressures benign and growth likely to slow later this year, we think a rate cut is more likely than not in the coming months. …
3rd August 2016
The US stock market shrugged off some renewed appreciation of the dollarafter the UK’s vote for Brexit – indeed, the S&P 500 rose to a record high inJuly. However, we expect further strength in the US currency to take some tollon the index, given the …
2nd August 2016
The package of policy options the MPC will unveil on 4th August could include rate cuts, the purchase of gilts and corporate bonds, an expansion of the Funding for Lending Scheme (FLS), forward guidance and an adjustment to its policy horizon. While we …
The fiscal stimulus package approved by the Cabinet today will boost growth by much less than the headline figure suggests. As such, the Bank of Japan still has more work to do reach its 2% inflation target. … Stimulus package doesn’t let the BoJ off …
If it is going to weaken the Australian dollar to help solve its low inflation problem, the Reserve Bank of Australia may have to follow today’s 0.25% interest rate cut to a new record low of 1.5% with more cuts to 1.0% sometime next year. The dollar may …
Governor Raghuram Rajan has had a penchant for shocking financial markets during his three years at the helm of the Reserve Bank of India (RBI), but we doubt that there are any surprises in store when he delivers his final policy announcement on 9 th …
The rally in emerging market (EM) equities has been given another leg up as it has become less likely that the Fed will hike interest rates any time soon, and China’s economy has shown signs of improvement. While these props may begin to crumble before …
1st August 2016
We believe that a new era of stubbornly low underlying inflation will prompt policymakers to cut interest rates in Australia from 1.75% now to 1.00% next year and to reduce rates in New Zealand from 2.25% to 1.50%. The problem is that hardly any inflation …
We have scaled back our forecasts for rate hikes in the US, but still expect the Fed to raise interest rates further than is priced in by financial markets during the coming two years. At the same time, a lot more central banks are likely to reduce …
29th July 2016
Despite the more hawkish language in last week’s FOMC statement, the GDP data have significantly reduced the chances of a near-term rate hike. The economy has been growing at around 1% annualised for almost a year now and we suspect that Fed officials …
We think new Chancellor Philip Hammond’s fiscal policy “reset” resulting from Brexit will involve some discretionary loosening. This will come on top of automatic stabilisers which will lower receipts growth and increase welfare spending in response to …
Nigeria’s self-proclaimed move to a more “flexible” exchange rate last month was initially a disappointment, with the Central Bank of Nigeria reasserting its grip at N282/US$. Over the last week, however, the bank has belatedly allowed the currency to …
Stock markets in China have had a volatile end to the month. Meanwhile, the PBOC appears to have stepped up its foreign currency interventions in order to prevent the renminbi from weakening further. Market interest rates remain near record lows. … PBOC …
Slightly stronger-than-expected inflation figures, coupled with the renewed fall in the ruble, prompted the Russian central bank to pause its easing cycle today, but we think inflation should resume its downwards trend in the current quarter, clearing the …
We doubt that spreads on US corporate bonds are set to widen, even though we expect the yields of Treasuries to rise as the Fed tightens policy faster than investors currently anticipate. Past form suggeststhat credit spreads are fairly insensitive to the …
One widely-held view is that the Bank of Japan has refrained from stepping up its purchases of Japanese Government Bonds in recent months because the pool of available securities is drying up quickly. By contrast, we believe that QQE can continue at least …
Pakistan’s three-year arrangement with the IMF comes to an end next month. An improvement in the external position means it is unlikely that there will be any immediate problems, but the IMF does appear to have had a positive influence on policymaking, …
The Bank of Japan’s decision to refrain from meaningful easing once again today has disappointedinvestors and resulted in a renewed strengthening of the yen. While we still expect the Bank to domore, it seems that Governor Kuroda has now adopted the …
Australia’s inflation data for the second quarter provided something for everyone, but the bigger picture is that there is very little price pressure anywhere in the economy. This is why we believe the RBA will cut interest rates to 1.5% on Tuesday and …
News that Egypt is on the brink of receiving an IMF deal (and the subsequent easing of pressure on the pound) provided the central bank with a window of opportunity to pause its tightening cycle today, but we still think further interest rate hikes are …
28th July 2016
With market participants having been disappointed by the Monetary Policy Committee’s inaction in July, expectations of a bolder and broader package of measures at next week’s meeting have grown. With recent activity data showing a slowdown underway and …
Inflation in a number of EM commodity producers has remained stubbornly high over the past few months. Accordingly, consensus expectations for monetary policy in these countries have moved towards our more hawkish forecasts. … Inflation in EM commodity …
We expect the ECB and Bank of Japan to step up their asset purchases a bit in the coming months and the Bank of England (BoE) to resume its QE programme after a four-year break. Indeed, “global QE” will probably be as large in the coming twelve months as …
The central bank in Sri Lanka (CBSL) today raised its deposit and lending rates by 50bp each in whatwas Indrajit Coomaraswamy’s first monetary policy meeting as governor. With credit growing at anunsustainable pace, inflation rising and the currency …
After dipping in the wake of the UK’s vote to leave the EU (Brexit), the prices of most industrial metals have rallied strongly since. They have shrugged off disappointing economic news out of China, the increased likelihood of interest rate rises in the …
While the second-quarter inflation figures were somewhat mixed, we still expect that the most likely outcome at the Reserve Bank of Australia’s policy meeting on Tuesday 2nd August is an interest rate cut from 1.75% to 1.50%. The Statement on Monetary …
The Fed was never going to provide a definitive steer on future rate decisions at this week's FOMC meeting, particularly not when Chair Janet Yellen is due to speak at the Jackson Hole symposium in late August. Nevertheless, the language added to today's …
27th July 2016
The downturn in Latin America appears to have bottomed out in the second quarter of this year. Our GDP Tracker suggests that the region’s economy contracted by 1.2% y/y in Q2, compared to 1.5% y/y in Q1. This was due in large part to Brazil, where …
June’s data suggest that euro-zone money and credit growth are still too weak to provide much support to the economy. While the full effects of ECB stimulus introduced in June are yet to be felt, we think that credit growth will remain weak. … Euro-zone …
The CPI inflation data for the second quarter makes next Tuesday’s RBA policy meeting a closer call than had looked likely, but we still think the RBA will pull the trigger and cut interest rates to 1.5%. In fact, continued low inflation may mean that …
The Central Bank of Nigeria’s latest rate hike is a belated attempt to regain control over the country’s weakening currency. We expect that the bank will tighten by at least another 200bps later this year. … Nigeria: CBN hikes rates despite threat to …
26th July 2016
The Hungarian MPC seemed to pour cold water on the prospect of additional monetary policy easing in the statement accompanying today’s rate-setting meeting. However, we think the Council is still too optimistic about the economy’s growth prospects as well …
Korea’s growth picked up in the second quarter of 2016, but we expect the economy to lose momentum over the coming quarters against a backdrop of mounting cyclical and structural headwinds. … Korea GDP (Q2 …
An imminent shift from fiscal tightening to loosening has reduced the pressure on the Bank of Japan to provide more stimulus. However, the sharp appreciation of the exchange rate since the start of the year is threatening to derail the Bank’s efforts to …
It is early days, but the limited data released since the EU referendum, as well as the reaction in financial markets, support our view that the economic implications of Brexit outside the UK will be negligible. … Global fallout from Brexit: one month …
25th July 2016
