Filtered by Topic: Monetary Policy Use setting Monetary Policy
Having cut its policy rate by 15bp to 0.90% earlier today, the National Bank of Hungary’s MPC used the accompanying press release to comment that interest rates would now be left unchanged. In contrast, we think today’s interest rate cut in Turkey is …
24th May 2016
While we have consistently been among the most bearish forecasters of EMs over the past 4-5 years, the consensus has moved a long way in our direction over the past 12 months. Over the next year we suspect that it is now more likely that growth surprises …
23rd May 2016
The Central Bank of Kenya’s 100bp rate cut (from 11.50% to 10.50%) signals that the Bank believes that inflation is well-anchored. The wide current account deficit will limit the scope for further cuts. … Kenya: Surprise rate cut sign of reduced …
A US-style collapse in house prices in Australia is unlikely when lending conditions during the good times have not been as loose as in America and Australian banks are better placed to cope with the bad times. Even so, we are more worried than most and …
The central bank in Sri Lanka (CBSL) today held its deposit and lending rates at 6.5% and 8.0%,respectively, for the third straight month. However, we think it is only a matter of time before it isforced to tighten monetary policy again against a backdrop …
20th May 2016
Emerging market policymakers have been in tightening mode over the past year, but this reversed last month. Our EM interest rate diffusion index shows that more EM central banks cut rates than hiked in April – the first time in ten months that this has …
GDP growth in Emerging Asia slowed slightly in the first quarter of the year. However, it is stilldoing much better than other emerging regions, with South East Asia standing out as a rarebright spot in the global economy. … South East Asia continues to …
Our forecasts that interest rates in Australia will remain low for longer than the markets expect while rates in the US will rise further than widely believed are consistent with government bonds in Australia outperforming US Treasuries. While Australian …
Today’s decision to hold rates at 7.00% is only a pause in the SARB’s tightening cycle; we still expect at least two rate hikes later this year. The MPC statement supported our very downbeat view of South Africa’s economy. … South Africa: A pause in the …
19th May 2016
Our central forecast is that US interest rates will be raised twice this year, probably in September and December, but we suspect that the chances of a hike on 15th June are rather higher than the 30% currently priced into the market. What’s more, …
Low commodity prices, slower growth and a string of elections have prompted a move towards reform in a handful of frontier market economies in recent months. But while these governments have made impressive starts, much of the hard work is still to be …
Malaysia and Indonesia both left their main policy rates on hold at scheduled meetings today. But while Malaysia’s central bank (BNM) gave little sign that it was about to shift monetary policy settings anytime soon, Bank Indoensia (BI) appeared to …
We expect the Bank of Canada to hold interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite stronger economic growth at the start of the year and the rebound in oil prices, forward looking indicators on …
18th May 2016
Lower-than-expected inflation and retail sales will probably lead the SARB to leave rates on hold at its meeting tomorrow. Output data suggest that South Africa narrowly avoided a fall in GDP in Q1. … South Africa: Weak economy will prompt SARB …
The pace of job creation improved in March, but was nevertheless low by recent standards. That said, in big picture terms, with vacancies still high and job creation driven by full-time positions, occupier demand looks solid. … UK Commercial Property …
The Central Bank of Chile’s decision to leave its key policy interest rate unchanged at 3.50% reinforces our view that lingering signs of economic weakness, notably the rising unemployment rate, will mean that further tightening is delayed until the final …
Fears of deflation have eased since the beginning of the year as oil prices have rebounded and global growth has stabilised. However, the appreciation of the euro and yen and continued weakness of domestic price pressures suggest that the chances of the …
17th May 2016
The slowdown in Czech GDP in Q1, to 3.1% y/y from 4.0% y/y, confirms that last year’s bumper growth rates were temporary. But the economy is still strong and today’s figures, coming alongside continued improvements in the labour market and rising …
Brazil’s new Finance Minister has unveiled a string of eye-catching market-friendly measures this morning, as part of the first plank of his new economic programme. … Brazil’s Meirelles unveils first steps in economic …
The Philippines central bank’s (BSP’s) shift towards an interest rate corridor system does not amount to a change in its monetary policy stance. With inflation set to stay low, we think monetary policy will remain supportive for some time yet. … …
16th May 2016
Indian wholesale price inflation rose sharply in April and returned to positive territory for the first time in 18 months. This reinforces our view that there is little scope for further monetary loosening. … Wholesale Prices …
The MPC’s attempt to base its forecasts on the UK remaining in the EU suggests that it believes trade-weighted sterling will rise by around 5% on a vote to stay. But it also implies that it doesn’t think that interest rate expectations will be affected. …
13th May 2016
While we didn’t think that the more modest 160,000 increase in payroll employment in April necessarily ruled out the possibility of a June rate hike by the Fed, the increasing probability that employment will be even weaker in May probably does. Under …
Hong Kong’s economy contracted in Q1, with output dragged down by falls in exports and household spending. We don’t expect a major rebound in the quarters ahead as interest rates rise further and the city’s property downturn continues. … Hong Kong GDP …
We don’t share concerns that the Bank of Japan will soon run into trouble acquiring the ¥80 trillion worth of Japanese Government Bonds it has pledged to buy every year. Admittedly, insurance companies have yet to reduce their bloated JGB holdings. But …
The Central Reserve Bank of Peru kept interest rates on hold at 4.25% for a third consecutive month, but we suspect that further rate hikes are still on the way in the second half of the year. Indeed, if a June rate hike in the US sparks another leg down …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50%, but with growth still sluggish and government pressure for monetary policy easing rising, we think it is only a matter of time before the BoK cuts rates. … Korea likely …
In its latest Inflation Report, the MPC sounded a stark warning about the potential adverse effects on the economy of a Brexit, but nonetheless continued to indicate that, if the UK votes to stay in the EU, markets’ interest rate expectations are too low. …
12th May 2016
Indian consumer price inflation rose above the Reserve Bank’s target for March 2017 last month, supporting our view that the scope for further loosening is very limited. … Consumer Prices (Apr.) & Industrial Production …
With the economy growing at a decent pace 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 4.0% came as no surprise. Looking ahead, a move to an interest rate …
The Norges Bank left its key policy rate unchanged today, but with the economy weak and inflation set to fall this year, we think that further loosening is on the way. … Norges Bank policy unchanged, but rate cut on the …
Iceland’s central bank kept its interest rates unchanged for the fourth consecutive meeting. But with price pressures set to pick up in the second half of the year, further tightening will be needed. … Iceland holds rates but further tightening will be …
11th May 2016
The Bank of Thailand’s (BoT) decision to keep its policy rate unchanged at 1.50% today came as no surprise. With the economy exiting deflation and growth still on track to come in around 3% in 2016, we expect rates to be kept on hold for the remainder of …
The weaker-than-expected Mexican inflation figure for April, of 2.5% y/y, down from 2.6% y/y in March, means that the MPC is unlikely to raise interest rates at the next few policy meetings. But with inflation still likely to edge up over the second half …
9th May 2016
The modest decline of 2,100 in employment in suggests that the economy is still struggling to cope with lower oil prices. The unemployment rate was unchanged at 7.1%. We still believe that the worst isn’t over and expect the Bank of Canada eventually to …
6th May 2016
The economy seems to be on a worrying downward trajectory. But if activity were about to fall off a cliff, we might expect forward-looking measures of confidence and expectations to be tumbling and this does not seem to be the case. Although there was …
Last week’s EC Spring forecasts presented a pretty uninspiring picture of the euro-zone economy’s prospects. Despite the unprecedented degree of monetary policy support, growth is expected to slow this year and inflation to remain well below the ECB’s …
The Reserve Bank of Australia’s new forecast that underlying inflation will remain below the 2-3% target range until mid-2018 supports our view that interest rates will soon be cut by a further 0.25% to our long-held forecast of 1.5%. Governor-in-waiting …
We think that consumer price inflation held steady April as the recent slowdown in food inflation appears to have run its course. With inflation only just below the RBI's 5.0% target for March 2017 and likely to edge up over the coming months, there …
5th May 2016
A policy change looks very unlikely this month. Not only will the MPC not want to rock the boat ahead of the EU referendum, but the economy still does not look strong enough to warrant a tightening of policy. But if the UK votes to stay in the EU, we …
The Romanian MPC once again sounded relatively hawkish at this afternoon’s press conference, and we remain comfortable with our view that monetary policy will be tightened later this year to take some of the steam out of the recent consumer boom. In …
The persistent depth of deflation in Poland, particularly when compared with the rest of Central Europe, appears to be due largely to measurement issues, rather than significantly weaker domestic price pressures. The “true” rate of inflation, while weak, …
We think that consumer price inflation held steady April as the recent slowdown in food inflation appears to have run its course. With inflation only just below the RBI's 5.0% target for March 2017 and likely to edge up over the coming months, there is …
With the Fed leaving the door open to another interest rate hike at June’s FOMC meeting, focus is starting to shift once again to financial vulnerabilities in EMs. A handful of countries are likely to come under pressure as interest rates in the US move …
4th May 2016
We doubt that the MPC will model separate ‘remain’ and ‘leave’ scenarios in its Inflation Report next week. But Brexit uncertainty will still affect its forecasts via its assumptions about the exchange rate and interest rates. As this uncertainty will …
Although the annual growth rate of our own M3 measure was a still muted 3.8% in March, the strength of M2 growth, at 6.2%, and bank loan growth, at 7.8%, underscores that there is nothing in the monetary indicators to suggest the economy is in any danger …
A larger-than-expected hike in interest rates last week, coupled with the fact that inflation should soon peak, means that we suspect that Colombia’s tightening cycle is now nearing an end. We are pencilling just one more 25bp hike this year, which would …
3rd May 2016
Today’s decision by the Reserve Bank of Australia to cut interest rates from 2.0% to 1.75% will help solve the economy’s twin problems of too slow growth and too low underlying inflation. It also vindicates our decision to forecast that rates would fall …
