Filtered by Topic: Monetary Policy Use setting Monetary Policy
Colombia: will the government deliver? The Colombian government’s fiscal plans due to be published next Friday will receive particular attention (and scrutiny) given the country’s increasingly fragile public finances – the latest monthly figures show that …
6th June 2025
Rapid economic growth ≠ equity outperformance Data released this week suggest the economy has carried its recent momentum into Q2. Although May’s composite PMI output balance fell slightly, it remained firmly in expansionary territory. (See Chart 1.) This …
Tariff scenarios compared Along with its slightly hawkish communications, which we commented on here , the ECB published estimates this week of how US tariffs could affect the economy. In short, they think tariffs of 10% or more would reduce GDP …
CBR delivers dovish surprise as overheating pressures ease The decision by the Central Bank of Russia (CBR) to cut its policy rate by 100bp today, to 20.00%, came as a dovish surprise, and we now think the policy rate will now end this year at 17.00% …
Lingering inflation risks complicate matters There is no sugarcoating the fact that Australia’s economic recovery is struggling to take off. National accounts data released this week showed that real GDP grew by just 0.2% q/q in Q1, well below the 0.45% …
The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by a larger-than-expected 50bps (to 5.50%) while also changing its policy stance from “accommodative” to “neutral” today are clear indications that it has frontloaded the remainder of the …
The ECB’s decision to cut the deposit rate by 25bp to 2.0% was in line with expectations and the messaging in the press conference suggests that a pause at the next meeting in July is most likely. We think the Bank will lower interest rates once more this …
5th June 2025
ECB likely to cut further The ECB’s decision to cut the deposit rate by 25bp to 2.0% and give no clear signals about the future path of monetary policy was in line with expectations. We forecast one more rate cut in the second half of the year with risks …
The Bank of Canada avoided surprising markets by keeping its policy rate at 2.75% today, as it continues to wait to see the full impact of US trade policy on the economy. Nonetheless, the Bank confirmed that its bias remains toward loosening policy …
4th June 2025
Tariffs causing problems for the service sector The surprise fall in the ISM services index for May suggests that tariff effects are weighing on activity outside of the manufacturing sector, but the Fed is likely to be more concerned by the further rise …
Brazil’s monetary tightening cycle is very close to being (or may already be) over, and attention is quickly turning to when and how far Copom will lower interest rates. Historically, the market has tended to underestimate how far rates are lowered – and …
Rate cuts delayed, but still coming The Bank of Canada avoided surprising markets by keeping interest rates unchanged at 2.75% today, as it continues to wait to see what the full impact of uncertain US trade policy on the economy will be. The accompanying …
Rates left on hold, but easing cycle to resume before long The National Bank of Poland (NBP) left its policy rate on hold today, at 5.25%, but this is only likely to mark a short pause in the easing cycle. We think that interest rates will be cut again at …
We'll be discussing the outlook for UK fiscal policy and the wider economy shortly after the Chancellor's Spending Review is released in a 20-minute online Drop-In at 3pm BST on Wednesday 11th June. (Register here .) The strong start to the year shouldn’t …
Jump in inflation to prompt CBE to stick with cautious approach to rate cuts Egypt’s headline inflation rate climbed from 13.9% y/y in April to 16.5% y/y in May, the fastest pace since January, and while we expect the Central Bank of Egypt (CBE) to …
GDP data put RBA between a rock and a hard place Although activity was off to a poor start in 2025, the persistent strength in unit labour cost growth will constrain the RBA’s ability to provide much policy support. The 0.2% q/q rise in real GDP in Q1 was …
Downside inflation surprise re-opens the door to monetary easing The larger-than-expected fall in Turkish inflation in May, to 35.4%, will increase the CBRT’s confidence that it can restart its easing cycle soon. While we had thought the easing cycle …
3rd June 2025
While this year’s minimum wage hike will be only slightly smaller than last year’s, it is unlikely to prevent a further slowdown in wage growth over the coming quarters. That said, with capacity pressures still elevated, we continue to believe that the …
RBA still wary of adopting an expansionary policy stance Although the RBA’s easing cycle has further to run, the Bank is unlikely to cut rates as far as markets are anticipating. The minutes of the RBA’s May meeting confirmed that the Board had considered …
Tariffs may be beginning to take their toll on CEE industry The fall in the manufacturing PMIs out of Central and Eastern Europe (CEE) last month suggest that US tariffs may be holding back the region’s industrial sectors. Elsewhere, inflation pressures …
2nd June 2025
Australian house prices edged up a notch in May, and leading indicators suggest they will gather further momentum over the coming months. However, with debt-servicing costs set to remain onerous despite the RBA’s rate cuts, the cyclical upswing is likely …
Tinubu’s two-year anniversary in power It’s two years since Bola Tinubu became president of Nigeria and with support waning, he’s announced ambitious spending plans funded by foreign loans. But with borrowing costs high, we suspect these plans won’t …
30th May 2025
China Chart Pack (May 25) …
Encouraging signs for the rebalancing process The slowdown in Turkish GDP growth, to 1.0% q/q, in Q1 and, more importantly, the fact that net trade is propping up growth provide positive signs that policymakers’ efforts to rebalance the economy and bring …
Firms upbeat about production outlook The latest activity data suggest that if anything, Japan is benefitting from trade tensions. To be sure, industrial production declined in April, but output of motor vehicles rose despite the 25% US tariff on auto …
RBNZ will loosen policy further still As virtually everyone had expected, the RBNZ cut its Official Cash Rate from 3.5% to 3.25% at its meeting this Wednesday. However, the revelation that one member voted to leave rates unchanged came as a surprise to …
The latest data confirm that the world economy got off to a weak start this year. World trade has been one bright spot, as firms attempt to front-run tariffs. But business surveys have softened, and falling consumer confidence bodes ill for domestic …
29th May 2025
Strong, but not unanimous support for June cut. Opinion is divided on what to do next. An early exit by Lagarde would not cause sudden shift in policy. A 25bp interest rate cut next week, taking the deposit rate to 2.0%, looks very likely. But divisions …
The South African Reserve bank resumed its interest rate easing cycle today, with a 25bp cut to 7.25%, and there was a marked dovish shift among the MPC, suggesting – as we have long thought – that the repo rate will decline further over this year. The …
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
Falling inflation, downside risks to growth to prompt another cut to repo rate next week Another 25bp cut to 5.75% seems most likely Consensus has caught up to our long-held view of 100bps of cuts in this cycle With headline inflation now at a …
Although continued trade tensions have heightened economic uncertainty, they have had only a modest impact on consumer and business sentiment in the Antipodes. Indeed, we think the Australian economy will grow at around its trend rate over the coming …
The dovish tone adopted by the Bank of Korea today, alongside what we think will be continued weakness of the economy suggest that further interest rate cuts are likely in the coming months. The decision to lower the policy rate by 25bps to 2.50% – the …
Further easing coming With the economy set to struggle and concerns about inflation unlikely to resurface anytime soon, we expect the Bank of Korea to remain in easing mode after today’s 25bp cut. The decision to lower the policy rate to 2.50% – the …
Officials worried that tariff inflation boost could become persistent The minutes of the Fed’s early-May policy meeting were, on balance, slightly hawkish. In particular, “almost all participants commented on the risk that inflation could prove to be more …
28th May 2025
Summary of Deliberations from April meeting struck a dovish note despite Bank’s pause Labour market is weakening while upside risks to inflation have eased Bank set to cut policy rate to 2.5% despite market pricing to the contrary We suspect the Bank …
This report is part of our Future of Europe series. Read more analysis, explore the supporting data, and learn about our broader European coverage on the dedicated Future of Europe page. The ECB’s forthcoming assessment of its 2021 strategy review won’t …
The early evidence suggests that EM exports have held up well, despite higher US tariffs. That’s partly because exporters have front-loaded shipments to the US or have avoided high tariffs via third countries. So long as this remains the case, we expect …
Africa Chart Pack (May. 2025) …
As was widely expected, the RBNZ cut its Official Cash rate by 25bp, to 3.25%, today. The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets. However, we would put more emphasis on the …
RBNZ cuts by 25bp, signals further easing is likely With the RBNZ clearly concerned about the health of the economy, we continue to believe that its easing cycle has much further to run. The RBNZ’s decision to cut rates by 25bp, to 3.25%, at its meeting …
Hot CPI print will give the RBA pause for thought With underlying price pressures proving somewhat persistent, we're sticking to our view that the RBA won't cut rates as far as markets are anticipating. According to the monthly CPI indicator, headline …
For most of the time since the euro was established, the ECB’s “one size fits all” interest rate policy was a major problem for the single currency area. It contributed to imbalances between countries in the 2000s and to a prolonged downturn in peripheral …
27th May 2025
We doubt that the region’s strong start to the year will be sustained given the backdrop of lower commodity prices, tight policy and, in Mexico’s case in particular, uncertainty around US trade policy. Despite the recent dovish shift by many of the …
Easing inflation increases chances of a hold at Copom’s June meeting The fall in Brazil’s headline inflation rate to 5.4% y/y in the first half of May means that the risks to our forecast for a final hike in June are skewed to the downside. But if the Q1 …
Easing cycle to remain on pause, but tariff risks grow larger The Hungarian central bank (MNB) left its base rate on hold again today, at 6.50%, and we think it is likely that above-target inflation will prevent interest rate cuts being delivered this …
Regional growth resilient (for now) despite tariffs The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) suggest that pockets of the region are starting to feel the bite from US tariffs, but that overall regional …
Economy weak, inflation expectations eased May’s euro-zone business and consumer survey from the European Commission shows a small improvement in sentiment, but the data are still consistent with the economy struggling. And the price expectations indices …
The well-known quality issues with the UK’s labour market data might well extend to some of the other UK economic data. This matters as it could have a critical bearing on policy decisions and lead to economic growth and inflation that is either too high …
BoI leaves rates on hold, timeline for easing slipping back The Bank of Israel (BoI) left its policy rate unchanged as expected at 4.50% again today, but the accompanying communications took a slightly more hawkish tone on inflation. We think the easing …
26th May 2025
