Filtered by Topic: Monetary Policy Use setting Monetary Policy
Although the economy likely grew strongly in the first quarter, beneath the surface we aren’t convinced that the economy is still struggling to adjust to lower energy prices, despite the weaker exchange rate. Growth in the tradable sectors isn’t …
29th April 2016
The statement by the Russian central bank following its decision to leave the one-week repo rate on hold today was dovish, but less so than what the markets seem to have expected. The Council’s evident ongoing concerns about inflation risks mean we remain …
There have been a number of suggestions recently that some central banks in Emerging Asia, namely in Taiwan and Korea, might be about to adopt some of the unconventional policy measures that are being tried by the world’s major central banks. Evidence …
Saudi Arabia’s ambitious plans to overhaul its economy have grabbed the headlines in recent days, but the past month has seen a number of other Gulf countries announce further measures to deal with the fallout from low oil prices. Qatar has followed in …
Today’s GDP figures confirm that Taiwan’s economy is struggling badly, with GDP contracting by 0.8% y/y in the first quarter of the year. Given that policymakers are running out of room to stimulate the economy and that exports are likely to remain …
The Central Bank of Egypt (CBE) kept its overnight deposit rate at 10.75% today as it awaits further evidence of the impact on inflation from last month’s devaluation of the pound. With inflation set to rise and the pound likely to weaken in the coming …
28th April 2016
Negative policy rates have come under attack in recent months, but most of the criticisms look overdone. We still think Japan will cut its policy rate further in June or July, while also stepping up its asset purchases. But those European central banks …
Brazil’s COPOM left its benchmark Selic interest rate unchanged at 14.25% yesterday and, while the case for monetary easing is growing, the accompanying statement reinforced our view that interest rate cuts are still a little way off. As things stand, we …
The Bank of Japan’s decision to forgo additional easing today came as a major disappointment to markets and resulted in a sharp appreciation of the yen. Amid sluggish growth and moderating price pressures, we still think that more monetary stimulus will …
The recent strength of both the Australian and New Zealand dollars means that interest rates will have to fall further than widely expected to solve the twin problems of too slow economic growth and too low underlying inflation. Our forecasts that GDP …
We don’t believe that the slightly more positive tone of the policy statement released after the Reserve Bank of New Zealand left interest rates on hold at 2.25% today will prevent the Bank from cutting rates to 2.0% at the meeting in June. What’s more, …
As universally expected, the FOMC kept the fed funds target range unchanged at between 0.25% and 0.50% today, but left the door open to a second 25 basis point rate hike in June. With core inflation picking up and global risks diminishing, we still …
27th April 2016
Vietnam and Thailand are facing their worst drought in decades, with water levels in the Mekong River at their lowest since 1926. The drought is already having an impact on growth. A decline in agricultural output was the main cause of the slowdown in …
We suspect that news of the sharp fall in underlying inflation in the first quarter will be enough to prompt the Reserve Bank of Australia to cut interest rates from 2.00% to 1.75% at its policy meeting on Tuesday 3rd May. But even if the Bank keeps rates …
The sharp fall in underlying inflation to 1.5% in the first quarter is a game-changer for the Reserve Bank of Australia and supports our long-held view that interest rates will fall from 2.0% now to 1.5%. Rates may even be reduced to 1.75% at next …
The statement accompanying today’s MPC meeting in Hungary was a little more cautious than we had expected, but even so, with inflation likely to stay subdued and growth weakening, we think there’s scope for at least a couple more interest rate cuts in the …
26th April 2016
The central bank in Sri Lanka (CBSL) today held its deposit and lending rates at 6.5% and 8.0%, respectively. But with credit growing rapidly and core inflation high, we expect rate hikes to come back onto the agenda soon. … Sri Lanka holds rates, but …
We believe that public spending financed permanently by central bank transfers would be a viable option to boost demand and lift price pressures. However, until the existing policy measures are exhausted, which will take a few more years, we consider the …
The recent activity data indicate that first-quarter GDP growth slowed to just 0.8% annualised. However, we expect this to prove only a temporary setback rather than the start of a more serious downturn. Employment and incomes have continued to grow at a …
25th April 2016
Indian media has been awash with reports that RBI Governor Raghuram Rajan might not have his contract renewed when his term expires in September. In the unlikely case that this occurs, financial markets in India could come under pressure. The extent of …
Headwinds to the Bank of Japan’s efforts to lift inflation have intensified in recent weeks. We expect the Bank to ease more at the upcoming meeting, most probably by increasing asset purchases and cutting interest rates. … Bank to announce more easing …
This report is only available as a PDF. Click to download. … Will bank worries prevent further ECB rate cuts? …
22nd April 2016
The idea that households and businesses postpone their spending ahead of a Federal election is more fallacy than fact. Admittedly, there is some evidence that the uncertainty generated by an election leads businesses to reduce their investment …
With the three major advanced economy central banks holding policy meetings this week and next, we are sticking to our view that the next year or two will see a lot more divergence between monetary policy in the US and elsewhere than the markets have …
21st April 2016
It is possible that an out vote in the EU referendum could push up mortgage interest rates. But if it did, we suspect any rise would be modest and that the drivers of that rise would not be those outlined by the Chancellor. … Would Brexit raise mortgage …
President Draghi struck a dovish tone following the ECB’s April policy meeting and stressed that the Governing Council was prepared to offer more policy support if needed. But while we expect the asset purchase programme to be extended in time, the Bank …
The worst looks to be over for many EM commodity producers. Their currencies have again been among the best performers this month, helped by a continued recovery in commodity prices. The slump in their exports also eased considerably in February. What’s …
With Bank Indonesia (BI) having announced on Friday that it is planning to replace its main policy rate because the current rate has little influence over commercial banks’ lending rates, a fourth rate cut in as many months at today’s meeting never looked …
Sweden’s Riksbank expanded its QE programme and kept its options open for easing later in the year. While the economy is growing strongly and inflation has picked up recently, a rising currency and fairly weak inflation outlook might prompt further …
The Russian government’s use of its oil funds to finance the budget deficit will cause the monetary base to expand and is likely to push the banking sector from having a deficit of liquidity to a surplus in the near future. This has raised concerns about …
We expect the Reserve Bank of New Zealand to cut interest rates by 0.25% to 2.00% at the meeting in early June rather than at the meeting on Thursday 28th April, although we wouldn’t completely rule out a cut next week. Either way, in a change to our …
The Turkish MPC’s 50bp cut in the overnight lending rate today, to 10.0%, was pinned on the recent improvement in inflation (although political pressure no doubt played a role) and with the headline rate likely to edge down further in the coming months, …
20th April 2016
Despite the marked improvement in financial conditions and fading fears over China’s economic outlook, the Fed is very unlikely to raise interest rates at the upcoming FOMC meeting, which concludes on Wednesday 27th April. Nevertheless, we expect the Fed …
A combination of tighter monetary and fiscal policy will offset the benefits of a weaker peso and keep the brakes on Mexico’s economy over the coming years. Nonetheless, we don’t think it’s time to throw in the towel just yet. The structural reform …
The recent rise of the Australian and New Zealand dollars will prevent GDP growth from strengthening this year and will keep core inflation at uncomfortably low levels. This is particularly true in Australia, where the dollar has reached a 10-month high …
Global growth was sluggish in the first quarter, but it is likely to pick up a bit during the rest of the year. A policy-induced rebound in China and recovery in the prices of key commodities should result in slightly faster growth in emerging economies. …
19th April 2016
Inflation is going to overshoot the Fed’s 2% target, let’s be clear. While we expect Fed officials to be fairly relaxed about that, however, we don’t think it means interest rates won’t rise at all, only that they will remain well below the neutral rate …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50% , b ut with the economy still in a fragile state, monetary policy loosening looks to be on the cards in the coming months. The replacement of four of the BoK's seven …
Recent concerns over a potential market sell-off when the Reserve Bank‘s FX swap facilities, unveiled during the 2013 “taper tantrum”, mature have been overstated. For a start, the RBI has already confirmed that maturing swaps have been covered by …
18th April 2016
Wholesale price inflation was virtually unchanged in March but, looking ahead, we think that it will return to positive territory over the next couple of months. … Wholesale Prices …
Bank Indonesia today unveiled some adjustments to its policy regime which it hopes will prompt commercial banks to lower their lending rates. If the moves are a success, they should lead to an acceleration in credit growth and provide an important boost …
15th April 2016
The decision by Peru’s central bank to hold interest rates at 4.25% for a second consecutive month suggests that policymakers believe inflationary risks are now waning. But we doubt inflation will fall back as quickly as the central bank expects and the …
President Draghi will respond to German politicians’ recent criticism of the ECB’s ultra-loose policy at the meeting on 21st April by reiterating the Bank’s independence and stressing that more support is still possible. But it seems clear that it is …
If the government presses ahead with the sales tax hike next year, the chances of hitting 2% inflation on a sustainable basis anytime soon are very slim. Even if the tax hike is postponed, our best guess is that it will take at least three years before …
The euro-zone’s gradual recovery appears to be slowing as we had warned as boosts from the euro’s depreciation and falling oil prices fade. However, the ECB has hinted at limits to its future policy support and the euro-zone region will continue to suffer …
14th April 2016
We are not convinced that negative policy rates will prompt households to save more, in aggregate, even though some may step up their savings for retirement. There are many other drivers of savings rates, and lower interest rates will tend to boost …
The MPC’s unanimous decision to leave Bank Rate on hold at 0.5% today was unsurprising given recent signs of a slowdown in economic activity and heightened uncertainty surrounding the EU referendum. These factors will contribute to the MPC leaving rates …
The Monetary Authority of Singapore (MAS) today moved to flatten the slope of its nominal effective exchange rate policy band, a decision that amounts to a loosening of its policy stance. But with inflation likely to rise over the coming months, we doubt …
The Bank of Canada’s decision to hold interest rates at 0.50% and to remain neutral on the rate outlook was largely in response to the improvement in economic growth early this year, fiscal stimulus measures and the rebound in oil prices. We still think …
13th April 2016
