Filtered by Topic: Monetary Policy Use setting Monetary Policy
The conventional wisdom is that the collapse in bond yields since the launch of QQE is undermining bank profits. In reality, though they reached a fresh high last year. Unfortunately this is bad news for the Bank of Japan, as the resilience of bank …
24th March 2016
A combination of improving investor sentiment and a pick-up in global commodity prices has underpinned a recovery in frontier financial markets in recent weeks. Since reaching a two-year low in early January, the MSCI Frontier Markets Index has risen by …
Loose monetary policy increases the appeal of “risky” assets. This is a positive thing when their valuations are low, as they were in the aftermath of the financial crisis. It is, however, a potentially dangerous thing when their valuations are high. The …
23rd March 2016
Data released over the past month have provided further evidence that regional growth strengthened at the start to the year. Admittedly, the region’s largest economy, Russia, remains in recession. But the slump in output there is clearly easing. Indeed, …
Nigerian officials unexpectedly abandoned two key economic policies yesterday by tightening monetary policy and re-instating a partial ban on rice imports. The immediate economic effects will be mixed, but investors may see the decisions as another sign …
The larger-than-expected fall in Brazilian inflation in the first half of this month, to 10.0% y/y from 10.4% y/y over February as a whole, is encouraging. We expect inflation to continue to fall back over the course of this year, but it will be a slow …
The last month has seen EM financial markets recover from their poor start to 2016. Our Synthetic EM Exchange Rate Index has rallied to its strongest level since November. Almost all EM currencies have strengthened against the US dollar over the past …
The storm created by low oil prices will finally make its presence felt in the Gulf this year and we expect this to be the start of an extended period of slow growth. A wave of devaluations is highly unlikely and, although the Gulf countries have agreed …
The Bank of Thailand (BoT) unsurprisingly kept its policy rate unchanged at 1.50% today. With the government stepping up efforts to support growth, we expect rates to be left on hold throughout 2016. … Fiscal policy to take lead over monetary policy …
Today’s surprisingly high South African inflation figure will probably lead the SARB to accelerate its programme of rate hikes. This will be very painful for an economy that is struggling to avoid recession. … South Africa Consumer Prices …
With the economy steadily gaining momentum but inflation very low, today’s decision by the central bank of the Philippines (BSP) to keep its key policy rate on hold at 4.0% came as no surprise. Looking ahead, we think the central bank will be in little …
Greece and its creditors have reached some compromises that might allow the first bailout review to be concluded next month and negotiations over debt relief to begin. But the growing financial and political costs of the refugee crisis are another …
22nd March 2016
The fall in Mexican headline inflation in the first half of March, to 2.7% y/y from 2.9% y/y over February as a whole, confirms that overall price pressures remain in check for now. However, the rise in core inflation suggests that underlying price …
The Central Bank of Nigeria hiking its key policy rate from 11.00% to 12.00% is, in many ways, a positive sign. But this flip-flop on rates will raise yet more questions about the unpredictable and confusing direction of Nigerian monetary policy. … …
The weak inflation outlook and prospects for slower growth mean Hungary’s easing cycle, which resumed today, has further to run – we anticipate a few more small rate reductions in the coming months. Meanwhile, the Bank became the first EM central bank to …
Given that Brazil’s growing debt burden is denominated overwhelmingly in local currency there is little need for the foreign currency financing that an IMF bailout would provide. Instead, the main benefit of calling in the IMF would be to add much-needed …
February’s disappointing public finances figures were yet another blow for the Chancellor by suggesting the OBR’s new forecasts published in last week’s Budget already look too optimstic . Meanwhile, the unchanged inflation rate of 0.3% in February …
President Mauricio Macri’s first 100 days in office have seen an impressive range of measures to put Argentina’s fragile balance of payments position on a more sustainable footing. By any reasonable yardstick the early days of his presidency must …
21st March 2016
Helicopter money may be the next big thing as policymakers reach the limits of standard unconventional policies. In theory, it can fund an unlimited increase in both public spending and the money supply. In practice, though, it need not be as radical as …
Today’s statements from the Ghanaian and Kenyan Central Banks were more dovish than we had anticipated. This supports our view that the Ghanaian authorities will cut rates later this year, and we have now pencilled in a 50bp cut in Kenya. … Kenya & …
Property prices in Singapore have fallen for ten consecutive quarters and we expect the slide to continue. The gradual deflation of what had looked like a potential housing bubble has left the economy in much better shape to cope with rising interest …
18th March 2016
The statement by Russia’s central bank following its decision to leave its one-week repo rate unchanged earlier today was decidedly cautious and reinforces our view that any policy easing is only likely to come towards the end of the year. And even then, …
The Central Bank of Chile’s decision to keep interest rates on hold at 3.50% for the third consecutive month reinforces our view that the weakness of the economy will ensure the pace of further tightening remains gradual. We expect just one 25bp hike over …
The Central Bank of Egypt’s larger-than-expected 150bp in its overnight deposit rate, to 10.75%, was a pre-emptive move to limit the inflationary impact from the recent devaluation of the pound. We think the pound is likely to weaken further over the …
17th March 2016
The growing unease over the potential impact of negative interest rates suggests that Sweden’s Riksbank will think twice about cutting the repo rate further below zero. It can draw on other policy measures so it is not yet out of options. But its …
Today’s interest rate hike in South Africa will be followed with further tightening later this year in response to the deteriorating inflation outlook. … South Africa: Inflation, rand weakness force painful …
The MPC’s decision to leave interest rates on hold at 0.5% today – marking the 7th anniversary of rates being at this record low – was unsurprising given the softness of recent activity indicators and heightened uncertainty about the economic outlook. The …
A rebounding currency, subdued economic growth and inflation, and the Fed’s dovishness yesterday all fed into Bank Indonesia’s decision to cut its main policy rate for the third time in as many months. But we believe the balance of risks will shift in …
The lack of upward pressure on the franc following the last ECB meeting has allowed the Swiss National Bank (SNB) to leave policy on hold for now. But deflation dangers are particularly severe in Switzerland and we suspect that the Bank has more work to …
We think that today’s interest rate cut by the Norges Bank will be followed by another 25bp reduction in June. But concerns about household debt will prevent further loosening beyond that. … Norges Bank cuts rates, but concerns about debt …
Three months after the People’s Bank hinted that it would in future manage the renminbi relative to a currency basket rather than the dollar the jury is still out on what this means in practice. Contrary to many fears, the renminbi has not weakened …
The Fed opted to leave its key policy rate unchanged at 0.25% to 0.50% today, while also lowering its projections for the pace of future rate hikes. Nevertheless, as inflation continues to rise and global risks diminish further, we expect the Fed will …
16th March 2016
Despite its latest policy loosening, the ECB’s behaviour over recent years has been consistent with an inflation objective of closer to 1% than 2%. This has depressed economic growth and increased the risk of the euro-zone sliding into a deflationary …
Despite lower gasoline prices weighing on headline CPI inflation, the much bigger story is the surge in core inflation to a four-year high of 2.3% in February, which illustrates that the Fed can’t stay on the sidelines for much longer. … Consumer Prices …
Iceland’s central bank decided today to keep its key interest rates unchanged for the third meeting in a row, citing low global inflation and a strengthening currency. But with inflationary pressures building and the economy growing strongly, more rate …
The National People’s Congress has ended today leaving us still feeling confident in our relatively upbeat view of the immediate outlook for the economy. But the leadership’s continued tentative approach to structural reform raises doubts about growth …
Sri Lanka’s request for an IMF loan should ease fears about a potential balance of payments crisis, but the mistakes that put the country in this position will need to be addressed. Most importantly, policy will need to be tightened, which will weigh on …
While the distribution of helicopter money in the euro-zone is not a likely near-term measure, the lesson of recent years is that seemingly unimaginable policies can become reality. And it may suit the ECB to keep the idea hovering. … Is the ECB about …
15th March 2016
2016 is shaping up to be a better year for investors in Latin America than 2015. With global commodity prices now at a bottom and set to edge up this year, we expect most equity markets in the region to perform well and most currencies to stabilise. …
The March FOMC meeting is likely to conclude tomorrow with US interest rates left on hold but clear signals that hikes will resume soon. However, the timing will remain dependent both on future US economic data and on global sentiment. For the latter at …
Today’s GDP figures suggest Sri Lanka’s economy slowed sharply in the fourth quarter of 2015. However, we would be wary of reading too much into the data, given the serious doubts that remain over the reliability of the rebased GDP figures. The big …
The Bank of Japan did not announce additional monetary easing at today’s meeting, but dropped some strong hints that it believes more stimulus will eventually be needed. We now expect policymakers to step up the pace of asset purchases and lower the …
The renewed fall in Sweden’s inflation rate in February was largely down to movements in energy prices. But with underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices (Feb. …
Indian consumer price inflation dropped in February as food price pressures abated. However, the RBI still faces a difficult task in meeting its inflation targets for the next two years. … Consumer Prices …
14th March 2016
The decision this morning by the Central Bank of Egypt to devalue the pound and move to a more flexible exchange rate regime is a positive step and should help to improve the country’s balance of payments position. There will inevitably be some short-term …
