Filtered by Topic: Monetary Policy Use setting Monetary Policy
Wholesale price inflation held steady in February, but we think that it will return to positive territory over the next couple of months. … Wholesale Prices …
14th March 2016
A wide range of commodities benefited from improving sentiment towards the sector in the past week, even those – notably iron ore – where the underlying fundamentals remain distinctly bearish. Expectations of additional policy stimulus in China offset …
11th March 2016
It is questionable whether the surge in commercial property prices can be sustained. The rise in multi-family apartment prices, which explains a large part of the overall increase in commercial property values, is partly explained by the low vacancy rate, …
The weaker than expected 2,300 decline in employment in February and further uptick in the unemployment rate to a three-year high of 7.3% from 7.2%, provides more evidence that the economy is struggling to cope with the oil price shock. As the fallout …
The two main events this week – the Budget and MPC decision – will highlight the divergence between monetary and fiscal policy stances. With Bank Rate likely to be held at 0.5%, marking seven full years at a record low, monetary policy is doing a great …
The adverse market reaction to the ECB’s bolder-than-expected package of policy measures unveiled on Thursday reflected concerns, partly prompted by comments from President Mario Draghi , that the central bank is running out of policy ammunition. Those …
The Central Reserve Bank of Peru’s decision to leave interest rates unchanged at 4.25% is unlikely to mark the end of the tightening cycle and we expect further rate hikes over the coming months. … Peru holds rates, but the tightening cycle has further …
We expect the economies of Central Europe (Poland, Hungary, Slovakia and the Czech Republic) to perform well over 2016-17. Consumer spending looks set to stay strong, while export sectors will register reasonable rates of growth. Deflation pressures will …
At first glance, a write-off of the Bank of Japan’s huge JGB holdings offers a simple solution to the country’s debt problem. But it is not clear that such a drastic step would actually help significantly. We still think that higher inflation rather than …
The recent interest rate cut in New Zealand and the dovish comments by the RBNZ now mean it is easy to imagine a scenario where interest rates in New Zealand fall below those in Australia. That would result in the New Zealand dollar weakening further …
Low oil prices mean that budget deficits will persist for some time in the GCC and we think these countries will shift away from a reliance on savings towards issuing debt to plug the gap this year. We estimate that more than US$85bn of debt will be …
10th March 2016
Recent developments are unlikely to have caused Monetary Policy Committee (MPC) members to fundamentally change their view since they voted unanimously to leave rates on hold in February. Indeed, there is nothing in the data that should push the more …
Colombia’s economy grew by a respectable 3.3% y/y in the final quarter of 2015, but we expect the economy to slow this year as the impact of lower oil prices continues to bite and economic policy tightens further. … Colombia GDP …
We are often characterised as being “bullish” on the US economy, but our economic growth forecasts are hardly upbeat. Instead, where we really differ from the consensus is in believing that even moderate economic growth will be enough to generate a marked …
While the ECB today delivered a package of measures which exceeded market expectations, there is no guarantee that it will revive the euro-zone’s flagging economic recovery and eliminate the threat of deflation in the currency union. … ECB belatedly …
The Bank of Korea (BoK) today left its policy rate unchanged at a record low of 1.50%. The pressure for a rate cut is building against a backdrop of softening economic data, but we are sticking with our forecast for rates to be left on hold for now. … …
Corporate bond yields have collapsed since the Bank of Japan adopted negative interest rates. However, with bonds only accounting for a quarter of corporate debt, bank lending rates would also have to fall to ensure a noticeable decline in corporate …
Today’s 0.25% cut in interest rates in New Zealand, to 2.25% from 2.50%, will have been a surprise to most analysts and the financial markets. But as early as July last year we forecast that rates would be cut to 2.0% this year and in the RBNZ Watch we …
Brazil’s financial markets rallied after news broke last week that former President Lula had been detained (and later released) in relation to the ongoing corruption probe at Petrobras. But this reaction is difficult to square with the reality that the …
9th March 2016
The Bank of Canada’s decision to hold its key policy rate at 0.50% today doesn’t mean that further rate cuts are off the table, as it depends on the details of the forthcoming Federal stimulus budget due later this month. If that budget doesn’t rejuvenate …
Despite the clear improvement in the incoming economic data over the past month, which has triggered a reversal of the earlier tightening in financial conditions, the chance of the Fed raising interest rates at next week’s FOMC meeting, which concludes on …
The fall in Brazilian inflation in February, to 10.4% y/y from 10.7% y/y in January, was driven entirely by the unwinding of the impact of regulated price hikes implemented in the same period last year. However, with inflation likely to be slow to fall …
Malaysia’s central bank (BNM) today kept its policy rate on hold at 3.25% at a monetary policy meeting that will be Governor Zeti’s last after 16 years at the helm. We continue to think rates will be kept unchanged this year, but uncertainty around the …
Japan’s economy is struggling to regain momentum and the recent strengthening of the yen is providing a further headwind to efforts to raise inflation. The Bank of Japan will therefore have to step up the pace of easing soon – we suspect as early as next …
The latest rise in Portuguese bond yields reflects fears that its debt will soon be classified as junk by all four major ratings agencies, leading the country to be excluded from the ECB’s asset purchases. These fears seem justified, suggesting that …
8th March 2016
Negative interest rates have come under attack recently, but in our view most of the criticisms are over-stated. In particular, the costs of negative rates for commercial banks appear to be very small, and, despite the recent comments by the Bank for …
The second estimate of Q4 GDP confirmed that Japan’s economy contracted last quarter. With the early indications for Q1 not looking promising, we retain our view that the Bank of Japan will announce more easing next week. … GDP (Q4 …
Hungary’s National Bank has radically reorganised its monetary policy framework over the past couple of years, in the process moving away from interest rate cuts and turning to increasingly unorthodox tools to loosen policy. However, these measures have …
7th March 2016
Official statements at the National People’s Congress have signalled, as expected, that the immediate economic priority is to support growth including with a looser fiscal stance and more monetary support. This should help drive a cyclical recovery, even …
The smallest fall in the value of China’s foreign exchange reserves in four months suggests that capital outflows have eased, allowing the People’s Bank (PBOC) to slow the pace of its intervention. … FX reserves …
The hysterical response to the news that the Federal budget deficit might increase to as much as $30bn next year left us shaking our heads in dismay. Canadian economists are still stuck in the Paul Martin inspired 1990s mind-set that any deficit is a …
4th March 2016
With employment rising at a rapid pace and labour market slack still shrinking, we think the Fed will resume raising interest rates in June. A marked pick-up in wage growth is still notably absent, but that won’t matter to the Fed when there are clear …
The ECB has signalled a further loosening of monetary policy at its forthcoming meeting on 10 th March. And while December’s under-deliverance highlights the risk of another disappointment, the deteriorating economic outlook should persuade the Governing …
3rd March 2016
The much weaker-than-expected Turkish inflation figure for February, of 8.8% y/y, adds to reasons to think that the central bank will continue to resist hiking interest rates. But the key point is that price pressures remain extremely strong – indeed, …
Although we suspect that the Reserve Bank of New Zealand will want to keep its powder dry for a little longer, there’s a real chance it will surprise the markets and cut interest rates by 0.25% at the policy meeting on Thursday 10th March. If it does …
China’s annual National People’s Congress starts on Saturday. Among the headline announcements are likely to be GDP growth targets for this year and beyond that are unrealistically high and will do nothing for policymaking credibility. More positively, …
2nd March 2016
The Bank of Canada is unlikely to cut interest rates at the upcoming policy meeting on 9th March. But we still anticipate that the ongoing economic slump, triggered by the collapse in commodity prices, will force it to lower its key policy rate to only …
The limited supply of eligible government bonds need not prevent the ECB from delivering the significant increase in asset purchases that is needed to impress investors. We see it buying the debt of a bigger range of quasi-public companies and maybe …
Q4’s rise in Swiss GDP came as a relief given the uncertain global environment ands trength of the franc. But with persistent deflation posing a serious threat to the economy, we still see the SNB increasing its policy support this month. … Swiss GDP (Q4 …
The Reserve Bank of Australia today once again decided to leave interest rates at 2.0%, but we don’t think it will be long before a weakening in the economic outlook and a further fall in underlying inflation forces it to cut rates to 1.5%. When other …
1st March 2016
Stock markets in China slumped at the end of February, erasing nearly all of the gains they had made since the late-January low. Meanwhile, market interest rates have remained near record lows. The PBOC’s decision today to cut the required reserve ratio …
29th February 2016
The People’s Bank paused monetary loosening in recent weeks apparently on concerns that it would worsen capital outflows. The government stepped up fiscal support instead. Today’s cut to the required reserve ratio (RRR) is therefore both confirmation that …
Political campaigning in the Philippines ahead of presidential elections due on 9 th May is now well underway. Grace Poe, an independent candidate and adopted daughter of Fernando Poe, a defeated presidential candidate from 2004, is currently ahead in the …
26th February 2016
The latest deal between two Spanish political parties does not guarantee the formation of a government and new elections may take place before long. While the economy has weathered the uncertainty well so far, there are early signs of a hit to confidence …
25th February 2016
There is undoubtedly less scope for policy easing than there was a few years ago, but the charge that central banks are now powerless is, in our view, exaggerated. For a start, policymakers still have room to cut deposit rates further and expand their QE …
Our econometric model points to a more muted 180,000 gain in non-farm payrolls in February. We estimate that the unemployment rate was unchanged at 4.9%, with the growth rate of average hourly earnings edging back up to 2.6%. … Pace of employment gains …
Policymakers in Mexico and Colombia this month responded to the sharp falls in their currencies by hiking interest rates and stepping up intervention in foreign exchange markets. These moves appear to have succeeded in supporting their currencies over the …
There has been some recent talk of froth returning to Japan’s housing market but prices, other than for condominiums, are not rising at a rapid rate. With debt levels also stable, there are no signs of a bubble. Indeed, policymakers would probably welcome …
The turmoil in financial markets, the stagnation in employment growth and the recent rises in bank lending rates to businesses are unlikely to have spooked the Reserve Bank of Australia by enough to prompt it to cut interest rates at the policy meeting on …
24th February 2016
The Norwegian economy looks much weaker than the Norges Bank had anticipated at its last meeting in December. With the outlook for GDP and inflation having deteriorated, we think that the Bank will cut its policy rate by at least 50 basis points this …
