Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Central Bank of Chile’s decision to leave interest rates on hold at 3.50% reflects policymakers concerns about the weakness of the economy and reinforces our view that further rate hikes are unlikely to come until the second half of the year. … …
13th April 2016
We do not share the view that monetary policy has become impotent. However, scope to step up monetary stimulus much beyond current levels is small. The Bank of Japan’s efforts to boost growth and lift price pressures are therefore likely to require …
Kenya’s banking sector is stronger and more resilient than recent headlines might imply. The failure of a few small banks poses little risk to the sector as a whole. Indeed, as we explain in this Watch , the failure of a few smaller banks will probably …
12th April 2016
Despite glimmers of a revival in production, the mood among businesses across most sectors and regions has darkened due to shrinking real incomes and weak domestic demand, with the low level of confidence more consistent with a shrinking economy. This …
8th April 2016
ECB officials appear to be trying to strike a balance between holding the door open to further policy action and yet stressing the limitations of monetary policy in order to pressure governments into taking steps themselves to encourage growth. But there …
The government has tried to talk down the yen down over last week as the currency has climbed to fresh highs against the dollar. While we still consider intervention in the currency markets unlikely, the moves put further pressure on the Bank of Japan to …
Thanks to a markedly weaker gain in consumption than we were previously expecting, it now appears that first-quarter GDP growth was no more than 1% annualised. Following on from the 1.4% gain in the final quarter of last year, that suggests the US economy …
7th April 2016
The fall in Mexican inflation last month, to 2.6% y/y from 2.9% y/y in February, confirms that overall price pressures in the economy remain in check. But the recent steady rise in core inflation suggests that underlying price pressures are building. We …
The recent weakness of wage growth over the past few months is partly explained by a deterioration in the quality of jobs being created, which is also reflected in a surge in low-skilled labour force participation. … Strength of low-paid hiring may be …
Weaker-than-anticipated inflation, lingering uncertainty in global financial markets and concerns about the impact that the EU referendum is having on the real economy means that this month’s interest decision is likely to be another unanimous one to keep …
Receding fears over a sharp renminbi devaluation, along with favourable exchange rate movements, has helped end the recent string of declines in the value of China’s FX reserves. … FX Reserves …
The Polish MPC made it clear once again at this afternoon’s post-meeting press conference that it’s not likely to loosen monetary policy in the near future. Although inflation will remain subdued, so long as the economy holds up well – as we expect – we …
6th April 2016
Despite a small rise in mortgage interest rates the strong labour market, high consumer confidence and historically favourable mortgage affordability all combined to ensure that mortgage applications for home purchase rose in March. … Mortgage …
Business surveys edged up in March but still point to global economic growth of only around 2%. In the US, jobs growth remained strong and, with core inflation pressures building, we think the Fed will raise rates three times this year, beginning in June. …
We expect the Bank of Canada to keep interest rates at 0.50% next week and maintain a neutral outlook for future policy changes. Despite the strong start to the year, policymakers indicated recently that they believe the economy isn’t out of the woods …
Having now cut its repo rate by 150bp since January 2015, the RBI yesterday re-emphasised the need for commercial banks to boost lending by passing on rate reductions to borrowers. In truth, high levels of bad debt mean that the banking system needs …
The region’s original tiger economies, Hong Kong, Singapore, Taiwan and Korea, are likely to struggle over the next couple of years against a backdrop of cooling credit growth, bursting property bubbles and mounting structural problems. The outlook is …
The sense of panic about emerging economies that gripped financial markets at the start of this year has eased. This is justified. There are few signs that the emerging world is on the brink of a crisis. Nonetheless, we should not expect a major …
5th April 2016
Uncertainty regarding who will take over at the helm of the Turkish central bank when the current governor’s term expires this month has raised concerns that a government loyalist could be put in place, resulting in aggressive (and reckless) policy …
The Reserve Bank of India (RBI) reduced its repo rate by 25bp to 6.50% today but, given the difficulties it faces in meeting its inflation targets for March 2017 and 2018, we think that rates will now stay on hold for a prolonged period. … RBI cuts repo …
We were right to suggest that, while leaving interest rates on hold at 2.0% today, the Reserve Bank of Australia would use the policy statement to try to talk the dollar down. Whether or not this will work is another matter. In the financial markets, …
The Bank of Uganda is unlikely to follow today’s surprise rate cut with much more monetary easing this year. A variety of factors will force the Bank to keep policy tight. … Uganda: Bank seizes fleeting opportunity for rate …
4th April 2016
The sharp decline in Turkish inflation in March, to a seven-month low of 7.5% y/y, was driven by a drop in food inflation, and masked the fact that core inflation remains extremely strong. Even so, today’s data make it more likely that the central bank …
The Bank of Canada's first-quarter survey on business intentions suggests that the worst might be over for Canada’s struggling economy, but we don’t anticipate any significant improvement this year. Indeed, we suspect that the economy will lose momentum, …
1st April 2016
Despite the recent resurgence in economic growth, we still expect the Bank of Canada to cut interest rates again, albeit not until much later this year. While widening interest rate differentials between Canada and the US would normally push the Canadian …
We can’t rule it out completely, but recent suggestions that Australia is the second most likely country in the world to suffer a debt crisis and recession in the next one to three years seem overblown. The level of household debt isn’t as high as it …
The Romanian MPC’s press conference this afternoon reinforced our view that concerns about loose fiscal policy will prompt a move towards tighter monetary conditions. This might happen as soon as the next meeting in May. In contrast, the Czech MPC …
31st March 2016
The recent surge in labour force participation has been concentrated among low-skilled workers, which may be artificially depressing average hourly earnings. But with this trend unlikely to last and the unemployment rate close to its natural level, we …
The Norges Bank has clearly become more concerned about threats to financial stability, but we do not think that this will prevent it from cutting the policy rate to zero by the end of the year. … Will financial stability concerns prevent Norges Bank …
30th March 2016
Despite the dovish spin put on Janet Yellen’s latest remarks, global markets will probably still have to contend with more Fed tightening this year. However, the prices of many commodities, including gold, should at least benefit from rising inflation …
The biggest policy change over the past month came from Nigeria, where the Central Bank unexpectedly hiked its key interest rate from 11.00% to 12.00%. This move partially reversed the Bank’s rate cut last year, and may signal a return to more orthodox …
Our China Activity Proxy (CAP) suggests that growth held up at the start of 2016, but did not rebound as we had hoped. Nonetheless, we still think that a looser policy stance means the data is more likely to get better than worse over the coming months. …
Today’s handover from military to civilian rule in Myanmar marks another welcome step forward in the country’s political development. But the new government must overcome a number of major challenges if the economy is to meet its full potential. A key …
Broad money and credit have continued to grow at a steady pace since the start of the year while government and corporate bond yields have dropped back. The prospect of further easing from the ECB and Bank of Japan should ensure that global monetary …
We are not overly concerned by the slowdown in the annual growth rate of our broad M3 money measure to a five-year low of 3.5% in February, particularly not when bank loans are still expanding at more than 8% per year. … Monetary Indicators Monitor …
While the Reserve Bank of Australia will almost certainly leave interest rates at 2.0% at the policy meeting on Tuesday 5th April, it may try to give activity and inflation a boost by attempting to talk down the Australian dollar. In any case, we believe …
The Egyptian central bank’s decision to devalue the pound this month ended months of growing speculation that a move in the currency was on the cards. In the near term, this will bring some pain. The central bank has already jacked up interest rates in an …
The Norges Bank has clearly become more concerned about threats to financial stability, but we do not think that this will prevent it from cutting the policy rate to zero by the end of the year. … Will financial stability concerns prevent Norges Bank rate …
The 11.5% decline in corporate profits last year, which included a 7.8% decline in the fourth quarter alone, doesn’t necessarily mean that a recession is imminent. Admittedly, profits usually begin to decline in the latter stages of the economic cycle, …
29th March 2016
Fed Chair Janet Yellen’s speech later today will, of course, be keenly watched for hints on the outlook for US interest rates. However, there have already been signs that the markets are reassessing their initially (very) dovish interpretation of the …
Despite mounting concerns over rapid credit growth, rising inflation and a weakening currency, the central bank in Sri Lanka (CBSL) opted to keep its key policy interest rates unchanged at its meeting today. We don’t think it will be long before the …
We expect the Central Bank of Brazil to shift its bias towards looser policy over the coming months, but both the timing and the size of any cuts in interest rates will be determined by what happens to the real. If the currency maintains its recent …
February’s euro-zone monetary data suggest that December’s interest rate cut by the ECB had only a small effect. While the Bank has since increased its stimulus, we doubt that this will boost money and lending growth significantly. … Euro-zone Monetary …
It's not a done deal yet, but the balance appears to be tipped towards the Reserve Bank of India (RBI) deliver ing another interest rate cut in next week's policy meeting . This is due to a number of recent developments, including the finance ministry 's …
It is becoming increasingly apparent that many Fed officials are underestimating the degree to which inflation will rise in the second half of the year. Fed officials expect core PCE inflation will fall back to 1.6% by the fourth quarter, but it remained …
28th March 2016
The Financial Policy Committee (FPC) had a lot on its plate at last week’s meeting, with concerns about the impact of a Brexit only adding to the long list of existing risks to financial stability. Even if the FPC chooses to stand pat again at this …
24th March 2016
Labour markets in all the major advanced economies have been tightening for several years, and in many cases they are now close to full employment. At face value this suggests that the world may be on the verge of a broad-based pickup in wage inflation. …
The downward revision to the Fed’s interest rate projections at the March FOMC meeting, despite little change in the economic projections, has prompted plenty of speculation that its “reaction function” has shifted. We’re sceptical that the Fed is now …
The Turkish central bank’s surprise decision to reduce its overnight lending rate by 25bp to 10.5% today was dressed up as a move to simplify the monetary setup, but it appears to be a result of sustained pressure from the government to lower interest …
Taiwan’s central bank (CBC) cut its discount rate by 12.5 basis points to 1.50% today against a backdrop of very weak growth and low inflationary pressures. Further cuts to the discount rate are likely if the economy fails to recover, but the CBC is …
