Filtered by Topic: Monetary Policy Use setting Monetary Policy
Chile’s economy losing momentum Having made a very strong start to the year , the latest activity data suggest that Chile’s economy struggled in Q2. The monthly activity index (Imacec) contracted by 0.4% m/m in May – the third consecutive monthly decline. …
5th July 2024
Hawks rule the roost Inflation data out of the region this week as well as comments from central banks strengthen the view in our recent Outlook that interest rates are likely to be hiked again in some places (Russia) and kept on hold for longer than most …
Ruto revisits fiscal plans After being forced to withdraw the 2024/25 Budget, Kenya’s President Ruto outlined new fiscal plans today that will go some way towards easing concerns among investors and the IMF. Protests in Kenya have rumbled on this week. …
Easing cycle underway, but expect it to be gradual Romania’s central bank (NBR) started its easing cycle at today’s meeting with a 25bp rate cut, to 6.75%. But with inflation and fiscal risks still high, this is likely to be a slow and gradual cycle and …
The latest polls ahead of Sunday’s second round of French parliamentary elections suggest that the far-right National Rally (RN) will win the most seats but fall well short of an absolute majority. (See Chart 1.) This will make it very difficult to form a …
A strong case for an August hold The minutes of the RBA’s June meeting revealed that the Board hasn’t yet shut the door on another rate hike. In our view, the Bank’s tightening bias is not unwarranted. After all, data published this week showed that …
Drop in long-term yields has made PBOC uneasy On Monday, the PBOC announced that it would start borrowing Chinese government bonds (CGBs) from primary market dealers (i.e. the major banks). While it didn’t elaborate further, the aim is clearly to shore up …
Minutes feel dated given subsequent signs of economic slowdown The minutes of the Fed’s mid-June policy meeting reveal that, not surprisingly given the split in the interest rate projections released at that time, officials were split on the outlook for …
3rd July 2024
The stronger-than-expected rebound in GDP in Q1 and the improving outlook for households suggests the next government, which the polls ahead of the election on 4th July imply will be a Labour one, will benefit from the economic recovery being a bit …
No rate cuts for another year or so The decision by Poland’s central bank (NBP) to leave its policy rate at 5.75% today came as no surprise and we doubt that policymakers will have scope to lower interest rates until the middle of next year. The NBP …
We expect the RBNZ to leave rates on hold for a seventh consecutive time at its meeting next Wednesday. To be sure, the Bank will probably strike a hawkish tone out of an abundance of caution. However, with the economy in tatters and inflation on its way …
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
2nd July 2024
This page has been updated with additional analysis since first publication. Continued strength of services inflation all but rules out July ECB cut It already seemed unlikely that the ECB would cut interest rates at its meeting in July, and June’s …
Concerns about the economy will keep RBA from hiking The minutes of the RBA’s June meeting revealed that the Bank’s tightening bias remains intact. The Board noted that there were a number of factors that supported the case for a rate hike last month. …
The latest manufacturing PMIs suggest that the recovery in global industry lost some momentum at the end of Q2. While activity in emerging markets continued to grow strongly, industry was still struggling in some large advanced economies. Nonetheless, …
1st July 2024
Housing market will cool in earnest Australian house price gains softened just a smidge in June as housing demand held up reasonably well. However, as strained affordability takes its toll, we still think that house price growth will ease markedly in the …
The May CPI data were a step back after the run of soft core price readings in the first quarter. The broader evidence stills seems supportive of a July interest rate cut, but the next CPI release for June, to be released in the run up to that meeting, …
28th June 2024
Africa Chart Pack (June. 2024) …
Failed coup, economy on the ropes The news on Wednesday that armed soldiers had tried to storm Bolivia’s presidential palace in an attempted coup seemed to hark back to the Latin America of the 1970s (as well as a James Bond film of the 2000s). The …
Further economic weakness in Korea Korea’s economy weakened markedly in May. Data published today show that retail sales fell by 0.2% m/m last month, a second consecutive monthly fall. With the labour market cooling and high interest rates weighing on …
China’s economy has regained some momentum in recent quarters and should continue to do relatively well in the near-term. Consumers remain cautious, and a slew of policy measures aimed at supporting the ailing property sector has done little to boost new …
Yen sliding to multi-decade lows The yen continued its descent this week, climbing above the 160 mark against the dollar that triggered foreign exchange intervention in late-April . It has not been this weak since 1986. The Ministry of Finance this week …
A narrower path The release of hotter-than-expected CPI data this Wednesday sent shockwaves through financial markets. Indeed, investors are now pricing in a nearly 40% chance of 25bp rate hike by year-end, whereas at the start of the week they thought …
Rates on hold again, but a dovish tilt Mexico’s central bank left rates unchanged at 11.00% today, but there was a surprising dovish shift in the Board’s communications – despite the post-election fall in the peso. A small reduction in the policy rate …
27th June 2024
Egypt needs to adapt to keep the lights on Daily blackouts in Egypt have returned as gas shortages intensify and, while the government can afford to spend its way out of the issue for now, climate risks require a permanent shift in strategy. Temperatures …
Table of Key Forecasts Global Overview – The global economy seems to be heading into recovery mode as the adverse effects of the previous surge in inflation subside. Real incomes are recovering in most advanced economies and China is feeling the benefits …
CNB cuts by larger-than-expected 50bp, but delivers hawkish guidance The decision by the Czech National Bank (CNB) to deliver another 50bp cut to its policy rate today, to 4.75%, was a dovish surprise to most analysts (although not ourselves). That said, …
The Emerging Markets Economic Outlook contains analysis and forecasts for the seven emerging regions we cover: China, India, other Emerging Asia, Latin America, Emerging Europe, the Middle East & North Africa and Sub-Saharan Africa. It also contains …
Overview – Growth in Sub-Saharan Africa is set to accelerate over the next couple of years, helped by a more favourable external environment as well as falling inflation and interest rates. But tight fiscal policy will constrain the recovery and our …
Rates on hold, CBRT sticks to hawkish message The decision by the Turkish central bank (CBRT) to leave its main policy rate on hold again today, at 50.00%, was widely expected, and the continued hawkish communications support our view that interest rate …
The stability of UK financial markets ahead of the UK general election is striking when compared to the sharp moves in French asset prices ahead of the French legislative elections. It’s probably because the UK election result isn’t in doubt and the …
May’s data show a continued gradual increase in money and lending growth, though both remain slow. While the ECB’s loosening cycle is now underway, money and lending growth are set to remain subdued. The ECB’s previous monetary tightening caused the …
This page has been updated with additional analysis since first publication. Riksbank pauses but will probably cut again in August The Riksbank’s decision to leave rates unchanged was as expected and does not suggest that policymakers are regretting their …
Dovish BSP hints at first rate cut in Q3 The central bank in the Philippines (BSP) today left its main policy rate unchanged (at 6.50%), but dropped clear hints that rate cuts were coming soon. We are sticking with our view that the central bank will cut …
Overview – Below potential GDP growth and falling core inflation will persuade the Bank of Canada to cut interest rates further, with the policy rate settling at 2.5% next year. Lower interest rates should, in turn, drive a recovery in GDP growth from …
26th June 2024
Slightly softer inflation print won’t ease Copom’s concerns The slightly lower-than-expected Brazilian inflation figure, of 4.1% y/y, for the first half of June won’t change the picture that the central bank’s easing cycle is over – for this year at …
Overview – Activity has slowed to a standstill in both countries. Although output growth should gather momentum going forward, it will remain below its pre-pandemic average. However, with underlying inflation still running well above target, central banks …
Overview – We expect core inflation to be back to the 2% target by early next year, allowing the Fed to begin cutting interest rates from this September. GDP growth will remain a little lacklustre this year but, as the shift in monetary policy begins to …
25th June 2024
After a strong start of the year, regional growth appears to have slowed in Q2 and we expect this to continue in the coming quarters. Brazil and Mexico’s economies are likely to underperform the Andes and disappoint consensus expectations in the next …
Bank Al-Maghrib joins the EM rate cutters Morocco’s central bank, Bank Al-Maghrib (BAM) announced this afternoon that it has cut its key policy interest rate by 25bp, to 2.75%. We expect that the Bank will continue to tread cautiously, as the governor has …
Overview – China’s economy is on course to expand by 5.5% this year, buoyed by policy support and strong exports. But we remain less sanguine about the medium-term outlook. Domestic Demand – A ramp up in fiscal spending should boost domestic demand in …
If the results of France’s election, or actions of the next French government, trigger contagion to other euro-zone countries’ bond markets, the ECB could respond by purchasing their bonds using the Transmission Protection Instrument (TPI). Under some …
Overview – The next government, which the polls ahead of the election on 4 th July suggest will be a Labour one, will benefit from a combination of lower inflation, lower interest rates and faster economic growth than most are expecting. We think that a …
Prime Minister Modi begins his third term with a weakened mandate, but an economy that is primed to grow by 6.5-7% per year between 2024 and 2026. That would put India on course to become the world’s third largest economy within the next couple of years. …
Growth in the Gulf economies is likely to pick up in the coming quarters, particularly as oil output starts to rise from October. We think non-oil sectors will continue to grow strongly. But the outlook will become more challenging from 2025 as oil prices …
Are signs of recovery sustainable? Is inflation receding enough for more central banks to join the global easing cycle? Do upcoming elections pose a risk to the economic outlook? Our senior economists for held two special briefings on Monday, 1st …
24th June 2024
The recent encouraging inflation data reinforce our view that the Fed will cut interest rates in September. We remain confident that core inflation is heading back to the 2% target, which should allow the Fed to cut rates again in December and by even …
Strong services inflation and fall in peso to keep Banxico in hawkish mood The continued strength in core services inflation in Mexico in the first half of June, combined with the post-election slump in the peso and heightened political uncertainty, means …
We held an online Drop-In session late last week to discuss the outlook for monetary policy following the June policy meetings of the Bank of England, US Federal Reserve and ECB. (See a recording here .) This Update answers several of the questions that …
The Summary of Deliberations from the Bank of Canada’s June meeting reiterated that further interest rate cuts are likely but gave little away about how quickly the Bank will move. With another two CPI releases before the July meeting, our sense is that …
21st June 2024
