Filtered by Topic: Monetary Policy Use setting Monetary Policy
A policy pivot is imminent If the RBNZ had any doubts that it had broken the back of inflation, they will have been quashed by the slew of weaker-than-expected data releases this week. Accordingly, we’re bringing forward our forecast for the Bank’s first …
19th July 2024
The South African Reserve Bank’s decision to leave its repo rate unchanged at 8.25% was of little surprise but there was increased optimism on the MPC that inflation is moving towards the 4.5% mid-point of the target and that inflation expectations are …
18th July 2024
Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were in line with expectations. The overall tone was arguably slightly dovish, making a September cut more likely. But the risks to our …
SARB holds interest rates but cut now likely in September The South African Reserve Bank decision to leave its repo rate unchanged at 8.25% was of little surprise but there was increased optimism that inflation is moving towards the 4.5% mid-point of the …
No cut, no guidance Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates was in line with expectations. A cut in September still seems more likely than not, but it will depend on whether …
EM recoveries have been stronger than expected this year, but growth in aggregate will slow over the coming quarters. Within this there will be regional variation, with Emerging Asia the outperformer and Latin America the laggard. While we still expect …
The latest data out of Emerging Europe suggest that economic growth in Central Europe strengthened further in Q2, while Russia’s economy continued to overheat. In Turkey there are signs that demand may be beginning to moderate in response to policy …
While the global monetary policy loosening cycle is now well underway, there is more nuance than you might assume. Recent data have made us more confident that cuts (or further cuts) are to come in the US and Canada. But in Australia, the UK and large …
DM central banks may not be done raising rates – a too-hot Australian Q2 inflation report on 31 st July could push the RBA to hike at its meeting the following week. Our ANZ and Markets teams still think there’s a case for the Bank to hold, and they …
This page has been updated with additional analysis since first publication. Encouraging, but interest rates may not be cut in August While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it …
This page has been updated with additional analysis since first publication. A loosening labour market should forestall further rate hikes Although job growth remained healthy last month, it didn’t prevent the unemployment rate from rising anew. And we …
Totality of the data supports another cut Downside risks to activity rising, upside risks to inflation falling Bank to cut interest rates by 25bp at each meeting until 2.50% Despite stronger core price pressures in May and June, the totality of the data …
17th July 2024
BI hints at rate cuts in Q4 Bank Indonesia today left its policy rate unchanged at 6.25%, but the central bank’s dovish commentary supports our view that rates will be cut in Q4. Today’s decision was correctly predicted by all 35 analysts polled by …
In the latest episode of The Weekly Briefing from Capital Economics, Chief North America Economist Paul Ashworth reflects on a couple of crucial inflation reports, explaining how they’ve shifted the disinflation narrative and could even lead to even more …
This page has been updated with additional analysis since first publication. With inflation falling rapidly, the RBNZ’s August meeting is now “live” Today’s CPI release confirms that inflation is all but certain to return to the RBNZ’s 1-3% target by Q3. …
The upside surprise to headline consumer price inflation last month has all but ended hopes of a rate cut at the RBI’s August policy meeting. But we think that the conditions will be in place for policy loosening to begin in December. To recap, headline …
16th July 2024
The Bank of Canada’s business and consumer surveys point to weak GDP growth, show that firms’ wage expectations are now lower than their pre-pandemic peak, and suggest that consumers are increasingly concerned about the health of the labour market. All …
15th July 2024
Inflation at a peak Nigeria’s headline inflation rate edged up to 34.2% y/y in June on the back of the pass-through from previous naira falls. But we think this marks the peak and inflation should start to decline. If right, that’s likely to lend more …
Global Economics Chart Pack (July 2024) …
The latest data indicate that capacity pressures have continued to ease, a trend that should continue over the coming quarters. However, it will be a while before policymakers can be confident that they have broken the back of inflation. Accordingly, we …
While higher interest rates will make owner-occupied housing less affordable, the Bank of Japan will only tighten policy gradually so detached house prices will probably hold up well. By contrast, there’s a risk of a sizeable correction in apartment …
CBN hints at rate cuts but inflation risks linger Nigeria’s central bank governor this week hinted that rate cuts may soon be on the cards but there are still upside inflation risks that could scupper those plans. Governor Cardoso’s remarks at an event in …
12th July 2024
"More good data" needed There were mixed messages from Fed Chair Jerome Powell this week in his semi-annual testimony to Congress. Powell said in his opening remarks that the “economy continues to expand at a solid pace” and the unemployment rate is …
Inflation data not as bad as headline rates suggest At first sight, the raft of inflation data out of Latin America this week made for worrying reading. Inflation rebounded in most countries last month, with the headline rate in Mexico reaching 5.0% y/y …
Disinflation in the services sector seems to have stalled in several advanced economies this year. That’s partly because the easiest wins related to food and energy effects are behind us and also reflects some temporary factors. Much now depends on the …
Surprise inflation jump scuppers August rate cut hopes The surprise jump in headline consumer price inflation last month will be enough to convince any MPC members who may have been leaning toward rate cuts at the August policy meeting that conditions are …
We presume there isn’t a statistical relationship between economic performance and success on the football pitch (although we haven’t tested it). But perhaps comparing the economic performance of Spain and England (we use the UK as a proxy) over the next …
PBOC tweaks policy framework The PBOC expanded its toolkit this week to help strengthen its day-to-day management of interbank rates. In addition to the repo operations it conducts each morning, mostly at 7-day maturities, the bank will also perform …
Korea strike highlights inflexible labour market A trade union representing approximately 30,000 workers at Samsung Electronics this week urged its members to take part in an indefinite strike. The announcement was made on Wednesday, which was supposed …
RBA will be content to play the waiting game Financial markets have increasingly been paring back their interest rate expectations for the RBA. They are now pricing in a roughly 20% chance that the Bank will hike rates by 25bp this year, down sharply from …
Goods inflation set to remain strong Data released this week showed that producer price inflation has jumped from 0.3% in January to 2.9% in June, though the bulk of that increase is due to a rebound in electricity & gas inflation. Producer prices of …
It is not clear that Donald Trump, if elected, would gain much from trying to force Fed Chair Jerome Powell out of the role only a year before his term expires anyway. Trump might instead focus his efforts on securing Senate approval for future …
11th July 2024
No change in interest rates and no new guidance. Emphasis will be on continued strength of underlying inflation. Rate cut in September still likely, but isn’t nailed on. The ECB is likely to leave the deposit rate on hold at 3.75% next week and refrain …
The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
With shifting Japanese inflation dynamics likely to shrink the Bank of Japan’s opportunity to tighten policy in the coming months, we think its July meeting will end with a decision to raise interest rates for the second – and final – time this year. But …
On hold, central bank in no rush to cut rates Bank Negara Malaysia (BNM) left its overnight policy rate (OPR) on hold (at 3.00%) today, and the tone of the statement supports our view that rates will be left unchanged throughout 2024. The decision was …
The Bank of Korea left its policy rate unchanged today at 3.5%, but dropped clear hints that interest rate cuts would be coming soon. With growth set to struggle and inflation likely to fall further, we are maintaining our view the central bank will cut …
Interest rates left unchanged, but easing likely before year-end The decision by the Bank of Korea to leave interest rates unchanged (at 3.5%) today came as no surprise, but of more interest will be the tone of Governor Rhee’s press conference and the …
At first sight, the latest CPI data out of Central and Eastern Europe (CEE) might seem to provide central banks reason for comfort. But a look under the surface paints a more worrying picture: underlying core price pressures in some countries have re …
10th July 2024
Inflation increases again, Copom in no mood to restart easing The rise in Brazil’s headline inflation rate to 4.2% y/y in June was a little softer than expected but the recent weakness in the real and mounting fiscal concerns means that there is no chance …
This page has been updated with additional analysis since first publication. Inflation falls further than Norges Bank predicted The continued decline in inflation in Norway supports our view that Norges Bank will start cutting interest rates before the …
RBNZ strikes some dovish notes Although it left the Official Cash Rate unchanged at 5.50%, the RBNZ sounded rather dovish in its commentary. The Committee’s messaging gives us greater confidence that the Bank will commence its easing cycle in November. …
Powell leaves all options open Fed Chair Jerome Powell’s opening statement for his congressional testimony today offers few clues about the potential timing of interest rate cuts, with the key line that the Fed is still looking for “more good data” to …
9th July 2024
We’ve reassessed our expectations for the start of Bank of England rate cuts in light of the latest UK CPI and employment data. Our UK team was online shortly after the latter report to brief clients on our latest forecasts and to answer their questions …
Inflation rise doesn’t rule out August rate cut The larger-than-expected rise in Mexico’s headline inflation rate, to 5.0% y/y in June, was mainly due to a surge in agricultural inflation; core inflation edged down last month. While there’s still a lot of …
Brazil’s President Lula has renewed his attacks on the central bank and high interest rates in recent weeks, raising fears that there could be more political influence on monetary policy from next year after he has appointed three new Copom members. …
8th July 2024
This page has been updated with additional analysis since first publication. Rates on hold amid elevated risks Israel’s central bank (BoI) left its policy rate on hold at 4.50% as expected today and interest rates are likely to remain on hold for the time …
Rise in inflation makes pause in easing cycle likely The fourth consecutive increase in Chilean inflation, to 4.2% y/y, in June means that interest rates are likely to be left unchanged at 5.75% at the central bank’s meeting at the end of the month. We …
The Monthly Household Spending Indicator is often revised several months later so the plunge in spending in May won’t deter the Reserve Bank of Australia from hiking rates next month if inflation remains hot. According to the Monthly Household Spending …
