Filtered by Topic: Monetary Policy Use setting Monetary Policy
In contrast to the prevailing view that tight credit conditions have been a constraint on Mexican growth, the debt ratio has actually increased at a reasonably sharp pace over the past five years. This does not yet pose an imminent threat to financial …
25th July 2016
The Central Bank of Kenya decided to hold its key rate at 10.50% today, but we expect that the bank will cut rates later this year as inflation remains within target and Kenya’s external vulnerabilities ease. … Kenya: Rates on hold, cuts still in the …
Our calculations indicate that second-quarter GDP growth accelerated to 2.5% annualised, thanks primarily to a massive 4.5% surge in real consumption. The latter would mark the biggest quarterly gain in a decade. Although we expect consumption growth to …
Speculation has mounted in recent weeks that the Egyptian pound could be on the cusp of (another) devaluation. The initial rumours were sparked by the central bank governor, Tarek Amer, who suggested that his predecessors’ decision to keep the pound …
The recent experience of the Reserve Bank of New Zealand provides two lessons for the Reserve Bank of Australia. First, don’t dither when it comes to making decisions otherwise you’ll be punished by a stronger currency. Second, getting interest rates low …
22nd July 2016
The economy has clearly taken a hit from the vote to leave the EU last month. Granted, sales values have held up well according to John Lewis, and the latest Bank of England Agents’ Scores were surprisingly upbeat. But consumer confidence has tumbled and …
Our calculations indicate that second-quarter GDP growth accelerated to a more respectable 2.5% annualised, following a disappointing 1.1% gain in the first quarter. But be aware that the BEA will also be releasing its annual revisions this week, which …
Almost a month on from the historic vote to leave the EU, some of the first indicators of the state of the economy appear to point to a marked slowdown in growth. But the prospect of policy support to come has helped financial markets to retain their …
We expect the rise in Mexican inflation in the first half of this month, to 2.7% y/y from 2.5% y/y over June as a whole, to be the start of an upward trend that will ultimately force the central bank to tighten monetary policy further. The MPC is unlikely …
The failed military coup in Turkey and subsequent government backlash have dominated investors’ concerns over the past week and triggered a sell-off in local financial markets. Policymakers have already taken steps to try to diminish financial stress and …
For the world as a whole, the economic impact of the UK’s vote to leave the European Union should be negligible. Nonetheless, growth looks set to remain lacklustre in advanced economies. And with inflation below target, central banks in the euro-zone and …
The government’s announcement this week that it will inject more capital into local banks is a positive step, but the amount is still too limited to revive the ailing sector. … Capital injections too small to revive banking …
The weakness of South Africa’s economy prompted the MPC to hold off hiking interest rates today, but we still think there is room for additional monetary tightening later in the year. For now, we think it’s most likely that the MPC will raise its policy …
21st July 2016
After leaving policy on hold today, the ECB also stopped short of promising imminent policy easing. But President Draghi reiterated that the Bank is ready to act and we believe that it will up the pace of asset purchases and possibly cut interest rates at …
The uptick in Brazilian inflation in the first half of this month was modest but it will reinforce the hawkish tone set by last night’s COPOM statement. Our base case is that interest rate cuts will commence in October but it’s possible that policymakers …
Bank Indonesia (BI) left interest rates on hold today, but further loosening is likely sooner rather than later. We think the shift to a new policy rate, which formally comes into effect next month, will be the trigger for more easing. … Bank Indonesia …
Oil prices have been low for some time now, but the past month has brought further evidence that this new reality is starting to hit home in energy-exporting frontier markets. Recently-released data showed that growth in Saudi Arabia’s economy slowed to …
Indian bond yields have recently fallen to their lowest levels since 2013, in large part due to anticipation that the successor to Governor Raghuram Rajan at the RBI will be more dovish. But with the RBI facing a tough challenge in meeting its inflation …
The early evidence suggests that businesses and households in Australia have not been ruffled by the UK’s vote to leave the EU and Australia’s close Federal election result. Admittedly, consumer confidence did fall in July. But that decline was small and …
The Reserve Bank of New Zealand used its unusual inter-meeting “economic update” to all-but guarantee that it will cut rates from 2.25% to 2.00% at the meeting on 11 August and that it wants the dollar to weaken substantially. To achieve the latter, we …
Some investors in Japan have responded to the introduction of negative interest ratesby acquiring more overseas securities. Meanwhile, bank lending rates have fallen butthe availability of cheaper loans has not led households and firms to borrow more. … …
20th July 2016
The Fed is very unlikely to spring any surprises at the upcoming FOMC meeting, which concludes next Wednesday 27th July, but a September rate hike is a distinct possibility. The statement next week should acknowledge the apparent pick-up in second-quarter …
Most EM central banks look set to maintain a loosening bias over the next couple of years. Nonetheless, there are a handful of emerging economies where inflationary pressures mean that interest rate hikes are on the cards. … What next for EM monetary …
Upside risks to Colombian inflation over the next few months mean that we now expect the central bank to raise interest rates by 25bp this month, to 7.75%, with a further hike in August likely. Nonetheless, the bigger picture is that inflation is close to …
Last month’s rise in South African inflation, to 6.3% y/y, took the headline rate further above the Reserve Bank’s target range, and both we and the Bank expect it to edge higher over the rest of this year. Nonetheless, the weakness of the economy, …
The Turkish MPC’s decision to cut its overnight lending rate by a further 25bp today suggests the Council views the market volatility stemming from Friday night’s attempted coup (and growing concerns about political risk) as short-lived. And given today’s …
19th July 2016
A string of positive trade figures released over the past few months has raised hopes that South Africa’s balance of payments position might finally improve. In this Watch, however, we explain why the country’s large investment income deficit means that …
The Riksbank minutes confirm a readiness to act if conditions deteriorate in the wake of the UK’s Brexit vote. But there are signs of diminishing appetite for further measures from some members. … Riksbank finds positives despite Brexit …
The Egyptian pound has been held steady since March’s devaluation, but persistent strains in the balance of payments mean that it needs to fall further. Recent shifts towards more orthodox policymaking suggest that this is likely to happen sooner rather …
June’s rise should be the start of an upward trend in inflation in the wake of sterling’s referendum-related slide. But while inflation will probably breach the 2% target in a year’s time, this shouldn’t stop the MPC from loosening policy in August. … …
Today’s announcement by the Reserve Bank of New Zealand that it intends to tighten existing loan-to-value restrictions will not only go some way to addressing the risks to financial stability posed by the booming housing market, but will also allow the …
Despite the sharp rise in Nigerian inflation last month, we think it will still be some time before the headline rate peaks. This will force the central bank to tighten monetary policy even in the face of a very weak economy. … Nigeria: Rise in inflation …
18th July 2016
Low interest rates should continue to support economic growth in Emerging Asia for the rest of the year. Further ahead, however, we expect regional growth to slow. Much of this slowdown will be driven by China, where reduced policy stimulus and excess …
The Monetary Policy Committee’s surprise decision to leave policy on hold at Thursday’s meeting appears primarily to have reflected a desire to combine its remaining policy ammunition into a potentially more powerful package of measures in August. … The …
Speculation that the Bank of Japan has already embarked on “helicopter money” are wide off the mark. While we believe the measure would provide a solution to the country’s debt woes, the helicopter will remain grounded until other options have been …
The weak tone of the CPI inflation data for the second quarter probably means that at Thursday’s unusual inter-meeting economic update the RBNZ will hint that it intends to use tighter lending restrictions to control the housing market and further …
The decline in the unemployment rate to an 11-month low of 6.8% in June, from 7.1% as recently as April, is not as good as it looks. It went down primarily because people gave up looking for work not because they found jobs. As a result, the participation …
15th July 2016
What little data we have had so far suggest that the economy has weakened following the vote to leave the EU. Although this wasn’t enough to persuade the MPC to loosen policy in July, easing is by no means off the table – we will probably only have to …
Loose monetary policy should help to limit downside risks to economic growth over the coming months across most of Emerging Asia, but further ahead we expect regional growth to slow. Much of this slowdown will be driven by China, with growth around the …
The ECB is set to loosen policy in the coming months. But there is a limit to how much more monetary policy alone can do for growth. In the wake of the UK’s Brexit vote, Mario Draghi’s calls for fiscal support are thus set to grow. Unfortunately, …
The UK’s surprise vote to leave the EU sent a shockwave through global markets – but parts of the subsequent post-referendum response have been more muted than previously feared. Clearly, sterling was the biggest casualty, plummeting to its lowest since …
The decisions by the Chilean and Peruvian central banks to leave monetary policy unchanged didn’t come as a surprise as, for now, the inflation picture in both economies is improving. But with inflation unlikely to fall as far as policy makers expect, …
The UK’s vote to leave the EU has weakened the outlook for the European Economy. Admittedly, the financial market reaction has been muted and we think that the UK will ultimately fare well outside the EU. But there will be a near-term hit to UK demand, …
14th July 2016
The European Central Bank (ECB) may refrain from loosening policy this month following the Bank of England’s inaction. But the Brexit vote has increased what were already significant downside risks to the euro-zone economy and the inflation outlook …
The Monetary Policy Committee’s inaction today will probably delay a policy response to the UK’s vote to leave the EU by only three weeks. But with market confidence fragile, it is now vitally important that it meets expectations, and preferably exceeds …
Following its move last month to cut rates in response to rising downside risks to growth, the Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.25%. We think it will take a severe deterioration in the growth outlook to …
The Bank of Canada shocked no-one with its decision to leave its key policy rate unchanged at 0.50% today, but we still anticipate that it will eventually be forced to cut rates again, probably in the first half of next year, as the lacklustre performance …
13th July 2016
Malaysia's central bank (BNM) today unexpectedly lowered its policy rate by 25bp to 3.0%, adding to the list of Asian central banks that have cut rates this year. But with growth still on track to meet BNM's forecast of 4.0-4.5% in 2016, we doubt this …
Financial markets in the emerging world have sailed through recent headwinds stemming from a continued depreciation of the renminbi and the UK’s vote to leave the European Union. And the rally may not yet be over, given that one consequence of …
12th July 2016
