Filtered by Topic: Monetary Policy Use setting Monetary Policy
Following the vote for a Brexit, a considerable amount of uncertainty hangs over the UK, which is likely to weigh on activity in the short term. However, we think that the near-term hit to the economy will be somewhat weaker than some of the more …
24th June 2016
The UK’s surprise vote to leave the European Union has put more pressure on the European Central Bank to provide additional policy support. We now expect an acceleration in the pace of the ECB’s asset purchases and perhaps another small cut in interest …
The UK’s vote to leave the EU has pushed the yen to levels last seen when Quantitative and Qualitative Easing was first launched, while the Nikkei has slumped by 8%. These moves increase the chances of direct intervention by Japanese policymakers to …
The ECB’s decision to reinstate a waiver allowing Greek banks to borrow from it at low interest rates will help to ease pressure on the banking sector. But it is very unlikely to generate a lending revival and it could still be some time before Greece …
23rd June 2016
Mexico’s fairly soft mid-month inflation reading for June, of 2.6% y/y, taken together with the recent rebound in the peso, has eased some of the pressure on the MPC to tighten monetary policy next week. Nonetheless, with core price pressures building and …
With the economy growing strongly but inflationary pressures under control, today’s decision by the central bank in the 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 …
The Norges Bank left its key policy rate unchanged today, but with the economy weak and inflation set to fall, we think that further loosening is on the way. … Norges Bank to cut interest rates in …
The yen would presumably jump on safe-haven demand in response to a UK vote to leave the EU, but we would still expect the Japanese currency to end the year much weaker against the dollar. Indeed, even after a vote for Brexit, the yen could soon be …
22nd June 2016
EM growth has shown some signs of life in recent months. GDP data for Q1 showed a rise in aggregate growth for the first time since 2013 and our GDP Tracker suggests that the improvement continued in the early part of Q2. (See Chart.) The turnaround has …
The weaker-than-expected South African inflation reading for May, of 6.1% y/y, will provide welcome relief for the Reserve Bank. Barring a surprising rise in June’s inflation figure, we think the MPC will pause the tightening cycle at next month’s …
A vote by the UK to leave the European Union in tomorrow's referendum would be unlikely to have much impact on India's economy. Indian exports to the UK are equivalent to less than 0.5% of GDP, so even a sharp slowdown in demand from the UK, which we …
Doing away with a specific timeframe for reaching 2% inflation would sow doubts about policymakers’ commitment to the 2%-target and would be a major step backwards. Instead, more stimulus is needed to make more credible policymakers’ efforts to achieving …
The Danish krone would probably face significant upward pressure in the event of a Brexit. But as the Danmarks Nationalbank has scope to loosen policy further, a Brexit is unlikely to break its euro peg. … Would Brexit break Denmark’s currency …
While the Swiss National Bank (SNB) has vowed to limit any impact on the franc if the UK votes to leave the EU tomorrow, we doubt that it has enough ammunition to prevent an appreciation. We think that the currency would rise towards parity with the euro …
Hungary’s MPC made it clear today that further interest rate cuts are unlikely. And while the Council hinted at more “unconventional” policy loosening, we doubt that this would have a significant impact on overall monetary conditions. Elsewhere, following …
21st June 2016
Today’s ruling by the German constitutional court leaves the ECB free to implement its long-awaited OMT programme, if deemed necessary. And a possible trigger for OMTs – Brexit – might be just a few days away. We think the most likely ECB response to a …
Capital flows out of China have stabilised in recent months and policymakers have responded by once again easing restrictions on cross-border flows. But outflows are likely to pick up again if the dollar strengthens in the months ahead. … Capital Flows …
Bank lending rates have fallen sharply since policymakers introduced negative interest rates in January. One consequence is that bank profits have started to moderate from high levels. … Monetary Indicators Monitor …
The decision this month by Russia’s central bank to lower interest rates after a hiatus of close to a year has been followed by fairly hawkish comments from policymakers making clear that this does not necessarily mark the start of a new easing cycle. …
20th June 2016
Saudi inflation edged down for a second consecutive month in May, although it remained elevated due to the energy and water tariff hikes earlier in the year. Further ahead, with economic growth slowing sharply, we think underlying price pressures should …
The announcement from RBI Governor Raghuram Rajan that he will stand down at the end of his current contract in September is likely to put local financial markets under pressure in the near term. However, the long-term market impact will depend on who is …
The key US event this week will be Fed Chair Janet Yellen’s semi-annual testimony to Congress. She will be testifying to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. We expect her to add little to what …
17th June 2016
Following the FOMC meeting earlier this week, we have lowered our forecasts for the fed funds rate at the end of 2017 and 2018. But two key themes remain unchanged: global monetary policy will continue to be very loose, and US monetary policy is likely …
Today’s 100bp rate hike in Egyptian interest rates was larger than even our own above-consensus forecast and, with inflation likely to rise further in the coming months and the central bank willing to tighten policy aggressively, we’ve pencilled in …
16th June 2016
Headline CPI inflation remained well below the Fed’s target in May, but base effects will push it well above 2% by early next year. Both headline and core consumer prices increased by a solid 0.2% m/m in May. Annual headline inflation fell back slightly …
The MPC today repeated its warnings about the potential adverse effects on the economy of a Brexit , but reiterated that the policy implications of a Brexit would not be clear-cut. Meanwhile, if the UK votes to stay, we still think that a rate rise …
Both the Nigerian and South African economies contracted in Q1, and the latest activity figures suggest that things remained very grim going into Q2. In Nigeria, disruptions to oil output in Q2 have dealt a heavy blow to an industry that was already …
The Swiss National Bank (SNB) left interest rates on hold as expected today, but it will continue to intervene in FX markets if needed, as is likely in the run-up to the UK referendum. An actual Brexit would most probably prompt the SNB to cut interest …
The Bank of Japan still sees downside risks to its inflation forecasts, and we believe that policymakers will respond by stepping up the pace of easing next month. … Bank of Japan to provide more easing next …
May’s data suggest that the labour market is not too strong to prevent the Reserve Bank of Australia from cutting interest rates to 1.5% at its August meeting and not too weak to prompt it to become any more worried about the health of the economy. … …
Despite leaving its economic projections largely unchanged today (GDP growth expectations were revised down slightly, inflation forecasts were revised up slightly) the FOMC nevertheless cut its interest rate projections quite sharply, suggesting it has …
15th June 2016
Michel Temer’s first month as interim president of Brazil has been a mix of the good (eye-catching economic reforms) and the bad (three members of government, including the transparency minister, have already been forced to resign due to allegations of …
GDP figures published today showed growth in Sri Lanka picked up in the first quarter of 2016. However, we are wary of reading too much into the data, given the serious doubts that remain over the reliability of the rebased GDP figures. The big picture is …
Private consumption growth in Hong Kong is at the weakest since 2009, even though the labour market is tight and real wages are growing strongly. The downturn in the city’s housing market and a slump in stock prices are largely to blame. … Wealth effect …
After accelerating since mid-2015, credit growth now appears to be stabilising. It may start to slow before long given that policymakers have in recent months refrained from further monetary easing. … Bank Lending & Broad Credit …
Speculation has mounted in recent weeks that Saudi Arabia will devalue the riyal. For our part, we have long argued that policymakers would be loath to abandon the dollar peg. And, as we explain in this Watch , there are strong economic reasons to expect …
14th June 2016
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices …
The sharp rise in wholesale price inflation in May reinforces our view that there is little scope for further monetary loosening. … Wholesale Prices …
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices (May …
Pedro Pablo Kuczynski’s (PPK) victory in Peru’s presidential election is likely to mean the continuation of the current government’s market-friendly economic policy. While there is a risk that his party’s weak position in congress will undermine his …
13th June 2016
The decline in long-term inflation expectations to a record low in the University of Michigan’s June consumer confidence survey won’t prevent the Fed from raising interest rates, not least because most other measures show that inflation expectations …
The rise in India’s consumer price inflation last month pushes it further above the RBI’s target for March 2017. This supports our view that there is no further scope for policy loosening. … Consumer Prices …
The government’s decision to postpone the sales tax hike to 2019 has improved the economic outlook. However, we still believe that the Bank will respond to the recent moderation in underlying inflation by stepping up the pace of monetary easing, probably …
There are one or two genuine reasons to worry about the strength of the labour market. But the deeper we dig, the more we’re convinced the spring slowdown in payroll employment growth is a temporary hangover after the record warm fall and winter. The last …
10th June 2016
The decision by Russia’s central bank to cut its benchmark one-week repo rate by 50bp to 10.50% today was a close one but, having decided to start easing policy once again we think that interest rates will now fall further than the consensus is currently …
If the housing markets in both Australia and New Zealand remain strong, then our forecasts that interest rates will fall to 1.0% in Australia and to 1.75% in New Zealand would look out of reach. However, we suspect that tighter lending standards will take …
Inflation looks set to rise in most of Emerging Asia over the coming year, but probably not by enough to worry policy makers, who will look to keep interest rates low to support growth. … Inflation set to rise, but central banks in no hurry to hike …
The modest rise in Mexican inflation in May, to 2.6% y/y from 2.5% y/y in April, in itself is unlikely to have much of a bearing on the central bank’s rate setting meeting later this month given that it was in line with expectations. But we think the drop …
9th June 2016
With even overseas central banks citing the EU referendum as a reason not to raise rates this month, the chances of anything from the Bank of England are nil. If the UK votes to stay in the EU, we don’t think that it will be too long before the MPC …
