Filtered by Topic: Monetary Policy Use setting Monetary Policy
Despite the prevailing gloom about the world economy, we think global growth will pick up from around 2½% last year to 3% in both 2016 and 2017, using our own estimates for China. Growth should be little changed in the US this year and will probably slow …
20th January 2016
While the Central Bank of Kenya held rates on hold today, we expect that the Bank will be forced to tighten policy by around 50bp later this year as inflation remains above target. … Kenya: Rates on hold despite higher …
The latest slump in commodity prices, the renewed market turmoil and the apparent slowdown in fourth-quarter GDP growth are all good reasons why the Fed might ultimately decide against raising interest rates for a second time at the mid-March FOMC …
The fall in CPI inflation to just 0.1% in the fourth quarter of last year, from 0.4% in the third quarter, could prove to be a game-changer for the RBNZ as it leaves the economy uncomfortably close to outright deflation. This may not quite be enough to …
The Turkish central bank’s decision to keep its key interest rates on hold today, despite pressure on the lira and the deteriorating inflation outlook, adds to the impression that monetary policy moves are being swayed by government influence and will …
19th January 2016
Sentiment towards emerging markets has worsened since the start of the year amid mounting worries about the outlook in a number of key economies. Nevertheless, the latest data provide no evidence of a major slump in economic activity over the past few …
Low oil prices are battering Nigeria’s export-dependent economy. But it’s the government’s market-distorting response that risks pushing the country into a Venezuela-style crisis. … Nigeria: Policy response pushes economy towards …
18th January 2016
Swiss exports have performed better than we had feared in the year since the SNB abandoned its currency ceiling. But the franc’s strength has probably yet to take its full toll on exports and the extra deflationary pressure that it has caused could have …
Our key theme for this year, that the two big deflationary shocks of 2015 - the slump in energy prices and the surge in the dollar - will fade, leaving rising domestic price pressures to generate a rebound in inflation has had a particularly inauspicious …
15th January 2016
Broad money and private sector credit have continued expanding steadily in recent months. In advanced economies as a whole, credit has been growing rapidly while in emerging economies it has slowed but only gradually over the past five years. Overall, …
The decision by Peru’s central bank to hike interest rates for a second consecutive month underlines its concerns about above-target inflation and we have brought forward our forecast for 50bp of further hikes to this year, from 2017. Meanwhile, despite …
Today’s data suggest that lending to the real economy remained strong at the end of last year, which should help support economic activity in the coming months. The loose monetary stance currently adopted by the People’s Bank means a further pick-up in …
The Swiss National Bank’s (SNB) shock decision to abandon its ceiling for the franc reflected its judgement that the policy was just not sustainable. Unless it can reverse the franc’s appreciation with other policies, the downward impact on growth and …
After disappointing markets in December, we expect the ECB to indicate at its forthcoming meeting that the door is still open to bolder policy support. The Bank is unlikely to alter policy for now given the firm tone of recent survey data and the damage …
14th January 2016
The renewed concerns about growth in China, which led to a rout in Chinese equities at the start of 2016, hit financial markets worldwide, including the UK. That said, the UK has been relatively sheltered from this storm, with bond yields only falling …
Polish National Bank Governor Marek Belka used this afternoon’s post-meeting press conference to warn incoming MPC members that there was little to warrant looser monetary policy, but with inflation likely to be weaker than expected, we think the …
The MPC’s decision to leave interest rates on hold at 0.5% today, for the 82nd month in a row, was unsurprising given the recent fall-back in the oil price and renewed market concerns about the health of the global economy. Indeed, these risks underline …
Bank Indonesia’s decision to cut interest rates today should provide a long-overdue boost to the struggling economy. But the central bank will take a cautious approach from here. … Indonesia will only cut rates …
South African mining output did not contract as sharply as was predicted in November, but the weakness of the economy will still put pressure on the SARB to slow its hiking cycle. Even so, with the rand under pressure, we expect that the Bank will hike …
The very low rate of inflation in Sweden in December underlines the absence of price pressures and will encourage the Riksbank to follow through on last week’s announcement that it was prepared to intervene in the currency market. … Swedish Consumer …
Bangladesh Bank has today cut its policy rates for the first time since 2013 to give the economy a further lift. Although the central bank has become more confident of meeting its inflation target, there appears to be little scope for further loosening. …
Against a backdrop of global financial market volatility and rising household debt, the Bank of Korea (BoK) left its policy rate unchanged at a record low of 1.50% today. We do not expect any changes in the coming months. … Korea to hold rates in …
Turmoil in China’s financial markets has fuelled concerns that its real economy is also on the brink of a crisis, but we expect continued policy support to drive a recovery over the coming months. Stronger growth in China should in turn provide a boost to …
13th January 2016
We expect the Bank of Canada to cut its key policy rate by 25 basis points to 0.25% next week, which is much sooner than most investors anticipate. The incoming data suggest that the economy contracted in the final quarter of last year, and was therefore …
The Bank of Japan has eased its collateral rules to free up additional JGBs. However, a shift in the composition of government debt away from Treasury bills and loans towards JGBs is providing a bigger boost to the pool of available JGBs. … Monetary …
The renewed fall in oil prices in recent months is a further blow to Malaysia’s economy. Moreover, there is very little scope for policymakers to support growth with fiscal or monetary loosening. We now expect a deeper slowdown in 2016. … Oil price fall …
Although France’s headline inflation rate edged up in December, the big picture is that price pressures in the euro-zone’s second-largest economy remain very weak. … French Consumer Prices …
The recent flood of capital leaving China has been driven primarily by increased scepticism that the People’s Bank will hold to its pledge to keep the renminbi stable. The fact that the PBOC has ended up in this position despite its massive foreign …
12th January 2016
Mauricio Macri has made a strong start to his term as president of Argentina, tackling some of the country’s biggest macroeconomic distortions in his first month in office. There’s work still to do – fiscal policy is yet to be tightened, and we’re no …
Based on our new oil price forecasts we expect inflation in advanced economies to rise more gradually this year than previously anticipated. This will add to pressure for further policy loosening in the euro-zone and Japan, but it should have less impact …
The fall in Russian inflation in December to 12.9% y/y provided the first clear sign that the impact of the 2014 ruble crisis has started to unwind. And we think that inflation is likely to decline further over the coming months. Nonetheless, the latest …
Many parts of the emerging world are facing a tough year in 2016. But the outlook is not as uniformly bleak as many assume and some important emerging economies could spring positive surprises. … Crisis or recovery: what next for emerging …
11th January 2016
2016 won’t be an easy year for the UK economy, given the renewed fiscal squeeze and probable EU referendum in particular. Nonetheless, we expect it to weather these clouds relatively well and anticipate GDP growth of about 2.2%, close to last year’s rate. …
While the majority of investors expect another interest rate cut from the Bank of Canada by the middle of this year, most of them don’t realise just how weak the economy is right now and the urgency for additional policy stimulus. With signs warning that …
8th January 2016
The latest incoming monthly data suggest that fourth-quarter GDP growth slowed to between 1.0% and 1.5% annualised. Added to the widening in corporate credit spreads, the renewed weakness in stock markets and the news that the ISM manufacturing index fell …
The 292,000 surge in non-farm payroll employment, together with the 50,000 upward revision to the gains earlier months should put paid to any fears that, even if fourth-quarter GDP growth ends up being lacklustre, the US recovery is in serious difficulty. …
Fears that Brazil’s government will respond to a deepening recession by resorting to populist economic policies have surfaced over the past week. As things stand, we don’t think there is much evidence of any such shift at this stage. But if it …
The further rise in Brazilian inflation in December, to a 12-year high of 10.7% y/y, now means that anything less than a 50bp rate hike at this month’s COPOM meeting is likely to see financial markets come under further pressure. Meanwhile, inflation in …
The Bank of Japan will probably lower its inflation forecasts and push back the timing for reaching its 2% target yet again later this month. With cheaper energy keeping a lid on inflation, the recent slide in expectations of future price gains may …
The further decline in Mexican inflation in December, to 2.1% y/y, underscores the lack of price pressures in the economy. Against this backdrop, we expect only modest monetary tightening in 2016, even if the Fed hikes rates more aggressively. … Mexico …
7th January 2016
Romanian National Bank Governor Mugur Isarescu gave little away at this afternoon’s post-meeting press conference, but the tone of the accompanying statement suggested that the MPC is concerned about both deteriorating sentiment towards emerging markets …
The fall in oil prices, a souring in global market sentiment, weaker wage data and some unfavourable revisions to GDP growth suggest that the chances of rates not rising until the second half of the year have risen. Indeed, we now only expect one hike …
Inflation is likely to have risen in December on account of accelerating food inflation and the government’s incremental hiking of fuel duties even as global oil prices continue to slump. Further ahead, a potentially large rise in public sector wages …
The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental …
Sweden’s Riksbank is likely to have to follow through on its pledge to intervene in the foreign exchange market. But the strength of the domestic economy and the likelihood of more ECB QE means that it will probably only be able to stem the krona’s …
Renewed intervention by the authorities in China may not be enough to prevent further falls in local equity markets, but even in the event of a sell-off the macroeconomic consequences should be small and any related losses in global markets quickly …
6th January 2016
In our first India Watch of 2016, we outline the prospects for India’s economy over the coming year. The lagged effect of earlier policy loosening and weakness in global commodity prices should provide a small boost to economic growth this year. However, …
December’s euro-zone consumer price inflation rate of +0.2% left an average inflation rate for 2015 as a whole of zero – the lowest rate since the single currency was formed. Headline inflation will almost certainly rise during 2016 as negative energy …
5th January 2016
