Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Turkish central bank’s decision to keep interest rates unchanged despite the worsening inflation outlook underlines the extent to which political pressures seem to be bearing on the MPC. The Council may be able to get away with this in the current …
23rd February 2016
JGB yields would have to fall by another 40bp to wipe out the Bank of Japan’s profits, and they would have to remain that negative for many years to erode its capital base. However, that would be a price worth paying to overcome deflation and return the …
The latest data from Central and South Eastern Europe (C&SEE) serve as a timely reminder that, despite widespread pessimism, some parts of the emerging world are faring well. Flash Q4 GDP estimates suggest that aggregate growth in C&SEE came in at around …
22nd February 2016
The dollar’s near 20% rise since mid-2014 has slowed the growth rates of both manufacturing output and employment, but there is no sign of any collapse that could drag down the wider economy. The manufacturing surveys remain particularly downbeat, but …
19th February 2016
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January, from 2.1%, illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. … Consumer Prices …
Consumer prices increased by 0.2% m/m seasonally adjusted in January, as a sharp 0.6% m/m jump in food prices offset the gasoline-related 0.8% m/m decline in transportation prices. Added to some unfavourable base effects, that was enough to push the …
The central bank in Sri Lanka (CBSL) has delivered a surprise by hiking both its policy interest rates by 50bp. Against a backdrop of rapid credit growth, building price pressures and currency weakness, further monetary tightening looks likely. … Sri …
There are good reasons to think that the recession in Brazil – which is now the worst since at least the 1930s – should start to ease this year. But the good news ends here. While growth should return towards the end of 2016, the recovery will be …
18th February 2016
The move by Venezuelan policymakers to devalue the official exchange rates and raise fuel prices will help to ease the pressure on the public finances, but the measures fall chronically short of what is needed to close the country’s huge budget deficit. …
While most developments since November’s Autumn Statement bode poorly for the public finances, lower interest rates should provide an offset. However, the Chancellor would be unwise to spend this windfall as this impact could easily be reversed in …
Bank Indonesia today cut its main policy rate by 25 basis points to 7.00%. We believe that one more cut is likely in this cycle. Today’s statement hints that, as long as the recent market calm persists, it is likely sooner rather than later, before US …
Although Sweden’s headline inflation rate rose by more than expected in January, the upward trend is far from assured. As such, we still see a strong possibility of additional policy easing by the Riksbank later this year. … Swedish Consumer Prices (Jan. …
Expectations of lower inflation have probably played only a minor role in the fall in Treasury inflation compensation – the gap between the nominal yields of conventional Treasuries and the real yields of Treasury Inflation Protected Securities (TIPS) – …
17th February 2016
The inept response by China’s policymakers to the pressures of the last few months has rightly diminished confidence in their ability to handle the structural transition China faces in the years ahead. But there is little evidence that the economy is …
Broad money growth has slowed somewhat in the four major advanced economies in recent months. However, bank lending to the private sector, which is a better guide to economic prospects, has generally held up better. … Credit growth still strong in the …
Talk of a UK interest rate cut has resurfaced in recent weeks, following the deterioration in global market sentiment and the moves by other central banks to cut rates. There is certainly scope for the Bank of England to cut rates further, but we think …
The adverse reaction to the decision by Sweden’s Riksbank to lower its policy rate further below zero illustrates investors’ concerns about the impact of negative interest rates on banks’ profitability. But we doubt this will deter the European Central …
South African inflation accelerated to 6.2% y/y in January in what we believe is the beginning of a food price-driven inflationary spike. Elevated inflation will add to dilemma facing the SARB. … South Africa Consumer Prices …
Although a number of other central banks have now adopted negative policy rates, the chances of the Fed following suit are pretty small. Even if US economic conditions deteriorated, we suspect that the obstacles to setting the fed funds rate below zero in …
16th February 2016
The Bank of Korea (BoK) left its policy rate unchanged at a record low of 1.50% today against a backdrop of heightened financial market volatility. While we can’t rule out a rate cut in the coming months, especially after the BoK took a slightly more …
Today’s data point to a sharp acceleration in credit growth going into 2016. This is consistent with our view that growth is more likely to pick up than slow over the coming quarters. … Bank Lending & Broad Credit …
Eleven years ago, Alan Greenspan described the behaviour of bond markets as a “conundrum” in testimony to the Senate. This was because long-term yields had trended lower, even as the US FOMC had raised the federal funds rate by 150bp. If that was a …
15th February 2016
The idea that the People’s Bank is running out of FX reserves doesn’t stand up to scrutiny. But the fact that many take it seriously is a sign of how far sentiment has swung against China. … PBOC still far from exhausting …
The recent appreciation of the yen, even if sustained for longer, should not have a major impact on external demand nor consumer prices. However, it will lower corporate profits and could reduce firms’ willingness to lift wages, thus further delaying the …
Japan’s economy shrank last quarter for the second time over the past year. While activity is set to pick up in coming months ahead of next year’s sales tax hike, the bigger picture is that spare capacity is not shrinking fast enough to reach the Bank of …
Futures markets now expect the Fed to leave rates unchanged for all of this year and anticipate a single 25 basis point hike next year. In contrast, we expect the Fed to begin raising rates again in June, as it becomes clear that neither China nor the US …
12th February 2016
There are ominous signs that the turmoil in financial markets is starting to have bigger effects on the euro-zone. While Q4’s GDP figures showed growth maintained its pace at the end of last year, the concerns over euro-zone banks have added to the …
In principle, cutting policy rates into negative territory should boost growth and inflation. But central banks have not communicated these benefits clearly, and the hesitant way in which they have been introduced has undermined confidence, raising the …
January’s consumer prices figures should show a continuing movement away from deflation. While falling oil prices are being passed through to lower fuel prices at the pump, fuel price deflation will continue to ease due to larger falls a year ago. … …
The Peruvian central bank’s decision to hike interest rates by 25bp for the third consecutive month, to 4.25%, as well as the more hawkish tone of the accompanying statement, point to concerns that price pressures are building. As a result, we have raised …
The fact that euro-zone GDP growth did not slow in Q4 last year provides little comfort in the current environment of global market turmoil and does not preclude the need for further decisive policy action from the European Central Bank. … Euro-zone GDP …
The Bank of Japan unveiled a negative interest rate policy two weeks ago because it concluded that more forceful action was needed to lift inflation. Now, with equities slumping and the yen soaring to a 15-month high, policymakers are under even greater …
While some recent survey evidence has hinted that loan growth in the US may be about to slow, money and credit data in the four major advanced economies as a whole so far provide little support for the view that the world is on the verge of a broad-based …
11th February 2016
Today’s decision by Sweden’s Riksbank to cut its repo rate further below zero demonstrated that it is prepared to set aside its worries about a housing market bubble and strong domestic demand in order to respond to very low inflation and policy easing by …
The decision by the central bank of the Philippines (BSP) to keep its main policy rate on hold at 4.0% came as no surprise. With growth picking up but inflation low, we doubt the central bank will be in any rush to raise rates. We expect the policy rate …
Nothing illustrates the regional divergence in Canada’s economy like housing. While house prices continue to surge in the already most over-valued markets in Vancouver and Toronto, Calgary and other areas most affected by the collapse in commodity prices …
10th February 2016
Fed Chair Janet Yellen’s testimony to Congress today revealed that, while the FOMC might not be ready to raise interest rates for a second time in March, she still anticipates a “gradual” series of rate hikes over the next couple of years. That view is …
The Bank of Japan’s decision to cut the interest rate on some excess reserves below zero initially delivered a slide in the exchange rate and a rise in equities. But these shifts soon reversed and the yen is now at its strongest level relative to the …
Although Iceland’s central bank decided today to keep its key interest rates unchanged again, upward inflation pressures and domestic economic strength mean that rate hikes are likely later this year. … Icelandic rates on hold but more policy tightening …
Our full analysis of the prospects for the Australian and New Zealand economies is contained in our Australia & New Zealand Economic Outlook (sent to clients on 27th January), but in this note we highlight our most important non-consensus calls and …
The Zika virus has hit the headlines in recent weeks due to its rapid spread across Latin America and the suspected link with thousands of cases of serious birth defects in Brazil. But, while it is clearly an important public health issue and there is …
9th February 2016
Experience since 2009 shows that the current crop of central bankers do not hesitate to change course if they think that is the right thing to do. Indeed, central banks in numerous advanced economies have tightened policy since the global financial crisis …
The surge in Chilean inflation in January was largely due to planned tax increases and had been anticipated. As such, we don’t expect it to a trigger a policy response from the central bank and interest rates are likely to be left unchanged on Thursday. …
8th February 2016
While negative interest rate policies are being adopted by some major central banks, economic growth and inflation in Canada will be buffered by fiscal policy stimulus and the past depreciation of the Canadian dollar. Accordingly, we don’t foresee the …
5th February 2016
In her semi-annual testimony to Congress this week (to the House on Wednesday and the Senate on Thursday), Fed Chair Janet Yellen is unlikely to say that a March rate hike is completely off the table, even though it is effectively. She will stick to the …
The draft EU deal published last week has left the “Brexit” referendum looking likely to occur in June this year. What’s more, on the basis of the latest polls, it looks set to be a close vote. That said, we doubt that Mr Cameron’s deal changes either the …
Euro-zone consumer price inflation looks likely to pick up later this year, driven by the fading direct effect of lower oil prices and the feed-through of previous falls in the euro to consumer prices. But these effects should be temporary. The indirect …
