Filtered by Topic: Monetary Policy Use setting Monetary Policy
In response to the deepening economic and political crisis in Brazil we are marking down some of our key forecasts. We now expect interest rates to be raised further, the currency to weaken a little more and the economy to contract again this year. … New …
5th January 2016
December’s weaker-than-expected euro-zone consumer prices figures supported our view that bolder ECB policy action will ultimately be needed to bring inflation back to target on a sustained basis. … Euro-zone Flash CPI …
On the face of it, 2015 has been a decent year for the Indian economy. Admittedly, activity indicators are pointing to a slow and bumpy recovery, but conditions have undoubtedly improved following three years of tepid economic growth. Meanwhile, inflation …
23rd December 2015
The ASEAN Economic Community (AEC) formally takes effect on 31st December and aims to transform ASEAN into a single market and production base, which its supporters hope will one day enable it to rival China as the workshop of the world. ASEAN has already …
The growth rate of our M3 broad money aggregate slowed to 4.6% in November, but M2 growth was still a very healthy 6.2% and, most importantly, the growth rate of bank loans is running at 8.0%. … Monetary Indicators Monitor (Nov. …
22nd December 2015
The Egyptian central bank has found itself in the spotlight this month, as attention has (re-)focussed on the country’s fragile external position. The appointment of Tarek Amer as governor had already sparked speculation that policymakers were gearing …
The decision by the Turkish central bank to keep interest rates on hold, when hikes had been widely anticipated, will probably result in renewed concerns that the MPC’s decisions are being swayed by government pressure. The accompanying statement did …
Inflation is currently being held down by the impact of falling commodity prices and the stronger dollar but, as those deflationary forces fade next year, we expect rising domestic price pressures to push inflation back towards the Fed’s 2% target. …
21st December 2015
We fear that households are utterly unprepared for the normalisation of market interest rates that began with the US Fed’s historic lift-off last week. Canada’s economy has long been overly reliant on household consumption and housing as drivers of …
18th December 2015
If 2015 was the year when interest rates didn’t rise as rapidly as most originally expected, then 2016 is likely to be the opposite, with a bigger than expected rebound in inflation forcing the Fed to abandon its gradual pledge. … What to expect in …
The increase in annual headline inflation to 1.4% in November, from 1.0%, was largely as expected given the diminishing drag from lower energy prices. Meanwhile, core inflation remained close to the 2.0% mid-point of the Bank of Canada’s target range, …
The stronger-than-expected performance of the euro-zone economy in 2015 and the additional policy support recently provided by the ECB might appear to provide the conditions for a further improvement in the currency union’s outlook in 2016. But two of the …
After a slight wobble in the autumn, the UK economy seems to be ending 2015 on a more positive note. Growth this year is on course to have been about 2.4%. While weaker than 2014’s 2.9% growth rate, this is still pretty respectable and broadly in line …
The stronger-than-expected rise in Brazilian inflation, to 10.7% y/y, in the first half of December was driven by an increase in food inflation that should ease by mid-2016. Nonetheless, the risk of further rate hikes are growing. … Brazil IPCA-15 …
Advanced economies are likely to continue their steady recovery during the coming year or two, albeit with the euro-zone and Japan still lagging well behind the US and UK. Tighter labour market conditions should push inflation up rapidly in the US, but …
Last night’s decision by central banks in Mexico and Chile to hike interest rates suggests that the actions of the US Fed still hold sway with policymakers in Latin America. Nonetheless, we suspect that domestic concerns will mean that policy in both …
The policy tweaks the Bank of Japan announced today are mainly aimed at ensuring that the existing volume of asset purchases can be maintained rather than constituting a genuine expansion in stimulus. But we think policymakers will come under pressure to …
Our decent forecasting performance in 2015 means we are not too worried by some of our forecasts for 2016 being very different to the consensus. Our big success this year was accurately forecasting the sharp weakening in both the Australian and New …
Today’s decision by Taiwan’s central bank (the CBC) to cut its main policy rate by 12.5 basis points to 1.625% reflects concern over the current weakness of the economy. Looking ahead, we are optimistic that growth will start to pick up soon, which should …
17th December 2015
Emerging market (EM) growth remained fairly stable in October, as it has for much of the year. Looking ahead, we expect EM growth to pick up a touch in 2016, even as the Fed tightens monetary policy. … EM growth steady as Fed starts to …
It now seems likely that the US will relax its restrictions on oil exports before the end of the year. However, the impact on prices should be negligible given the US’s continuing need to import oil and the still limited opportunities for US producers to …
Bank Indonesia (BI) kept its key policy rate on hold today at 7.50%, but dropped the clearest signal yet that an interest rate cut is not far away. We are maintaining our view that the central bank will cut rates early in 2016. … Bank Indonesia to cut …
The positive reaction of many riskier assets to Fed “lift-off” supports our view that they will perform well in 2016. … Will markets continue to react well to Fed rate …
The US Fed’s decision to finally press ahead and raise interest rates yesterday begged the question ofwhether the MPC will quickly follow suit. However, in the near term, the only British mention of “liftoff” is likely to be in relation to astronaut Tim …
The muted responses in commodity markets to the first hike in US interest rates since 2006 are atribute to the clear communications of the Fed and, in our view, largely justified. Looking forward, though, we continue to expect rates to rise further in …
The recent resurgence in activity in both Australia and New Zealand is not the start of a sustained period of strong GDP growth. While the near-term outlook has improved, GDP growth in both economies won’t accelerate in 2016 from about 2.3% in 2015. The …
The Norges Bank left monetary policy unchanged today, but with growth slowing and inflation set to fall, interest rate cuts look highly likely next year, starting at the next policy meeting in March. … Norges Bank signals rate cuts next …
Flash manufacturing PMIs for December show continued steady growth in the eurozone and Japan, but they also underline how much the US manufacturing sector is struggling. That said, we doubt that this will prevent the Fed from hiking later today. … Flash …
16th December 2015
The Czech National Bank’s MPC once again struck a dovish note in the post-meeting statement and, although the Council didn’t extend its commitment to the koruna cap beyond next year (as we thought might happen), we still expect monetary conditions to …
There are reasons to think that the advent of tighter monetary policy in the US will not have a materially negative impact on the currency union. But there is no room for euro-zone policymakers to be complacent. … Will the Fed’s lift-off cause a euro-zone …
The Bank of Thailand (BoT) unsurprisingly kept its policy rate on hold at 1.50% today ahead of the upcoming US rate decision and amid signs of a stabilising domestic economy. With price pressures benign and the economic recovery likely to be modest, we …
We have of course addressed the potential impact of higher US interest rates on global commodity markets before. But with the Fed almost certain to hike tomorrow for the first time since 2006, now is an obvious opportunity to revisit the key points. In …
15th December 2015
The accompanying press release to today’s MPC decision in Hungary, at which the deposit rate was left unchanged at 1.35%, was dovish and suggested that unconventional measures to loosen policy will be taken. As a result, although we don’t expect cuts in …
The latest consumer prices figures confirmed that the UK’s brief flirt with deflation came to an end in November. But price pressures look set to remain subdued for a long while yet. Accordingly, the MPC is in no rush to follow the Fed in hiking rates. … …
The ECB’s timidity and strong domestic demand has allowed Sweden’s Riksbank to leave monetary policy unchanged today. But with headline inflation in Sweden still close to zero and policy likely to be loosened further in the euro-zone, the Riksbank will be …
The decision by the Treasurer to use the Mid-Year Economic and Fiscal Outlook (MYEFO) to draw attention to the deterioration in the fiscal position triggered by the weak economic backdrop is one that could come back to haunt him. While it conveniently …
With economic activity recovering and underlying inflation holding up, there is little immediate pressure on the Bank to step up the pace of easing. However, we still believe that price pressures will moderate before long, so the odds are still tilted …
A recent series of unexpected cabinet reshuffles – in which South Africa had three finance ministers in four days – has dented the political and economic credibility of President Jacob Zuma. The rand fell by over 5% when respected finance minister …
14th December 2015
The likelihood that the Fed will begin to raise interest rates this week has sparked fresh concerns about the knock-on impact on emerging markets. However, we think that most EMs are now well placed to withstand Fed tightening. Countries with large …
Wholesale price inflation picked up in November and, looking ahead, we think that it will rise further over the coming months and return to positive territory by Q1 2016. … Wholesale Prices …
At this stage, it is almost universally expected that, after a seven-year period at near-zero, the Fed will raise interest rates this Wednesday. Like everybody else, we anticipate a 25 basis point increase in the target range for the fed funds rate, …
11th December 2015
While we have long argued that the fallout from the oil shock would be disruptive and that hopes for an export revival were misplaced, we doubt that the Bank of Canada will need to resort to negative interest rates or quantitative easing anytime soon. …
The surprise removal of South Africa’s respected finance minister has caused investors to reassess their views of South Africa’s struggling economy. Talk of an emergency rate hike is probably overdone, but it does look like inflation and interest rates …
The unexpected slide in oil prices last week, to a six-year low of about $40pb, has left most forecasters once again pulling down their CPI inflation projections and has led some to speculate that this could delay the first rate hike. The fall in oil …
The accompanying statement to today’s MPC meeting in Russia, at which the repo rate was left unchanged, was decidedly cautious and it’s clear that policymakers are waiting for firmer signs that inflation is easing. CPI figures published over the coming …
For most of Emerging Asia an increase in US interest rates is not a major cause for concern. Only in Malaysia, Hong Kong and Singapore do we think Fed tightening could cause some problems. … No need to panic about Fed …
The Central Reserve Bank of Peru’s decision to follow up September’s surprise interest rate hike with a second 25bp hike, to 3.75%, shows that policymakers are still concerned about the persistence of above-target inflation. We suspect it is just another …
Relative calm in most EM currencies over the past month (the Colombian peso and Russian ruble being the obvious exceptions) supports our view that emerging markets are generally well placed to withstand the onset of Fed tightening. Admittedly, countries …
10th December 2015
The MPC’s decision to leave interest rates on hold again today highlights how the UK is set to tread the middle path between a loosening ECB and a tightening US Fed. A further fall in oil prices and a flattening in wage growth – which should keep …
