Filtered by Topic: Monetary Policy Use setting Monetary Policy
Over to the Senate The House passed its “One Big Beautiful Bill” budget reconciliation on Thursday, which extends the 2018 Trump tax cuts beyond this year, raises the personal exemption for retirees, and eliminates taxes on tips and overtime pay. To …
23rd May 2025
How concerning is underlying inflation? The removal of the carbon tax pushed headline inflation down to 1.7% in April, comfortably in the bottom half of the Bank of Canada’s 1% to 3% target range. Nonetheless, the acceleration of the Bank’s preferred …
Copom: one final hike? Brazil’s Q1 GDP data due next Friday should show that the economy recorded strong growth in Q1, supporting the case for the central bank to deliver one final hike in this cycle. Having slowed sharply at the end of last year, …
Assessing the fallout after a busy election weekend Last Sunday was a busy day of voting in CEE and threw out some surprises. Pro-EU centrist Nicusor Dan won the second round of Romania’s presidential election, even though he’d lagged in the polls. …
ECB account reveals disagreement The account of last month’s ECB meeting, published on Thursday, showed diverging views on the risks to inflation and the appropriate monetary policy stance. It noted that “a few” members of the Governing Council “could …
SA budget merely presses pause on fiscal debate South Africa’s finance minister appears to have succeeded – at the third time of asking – at delivering a 2025 Budget that will make it through parliament. But it seems almost certain that tensions within …
MAS to loosen policy further GDP in Singapore contracted by 0.6% q/q last quarter according to the second estimate of national accounts figures published on Thursday. While this marked a slight improvement from the initial estimate (a 1.0% decline), it …
Inflation fight isn't over yet While the RBA’s decision to cut rates by 25bp at its meeting on Tuesday was widely expected, the Board’s overtly dovish messaging still caught most observers off guard. Indeed, Governor Bullock made news in her post-meeting …
CBE delivers smaller cut as disinflation (temporarily) stalls The Central Bank of Egypt (CBE) cut its overnight deposit rate by a smaller-than-expected 100bp today, to 24.00%. But as inflation continues to ease over the coming months, we still think …
22nd May 2025
The latest flash PMIs point to weak activity and a softening of price pressures in advanced economies outside the US. But the surveys suggest that tariffs are already having an inflationary impact in the US. Our estimate of the weighted average of the …
Overview – Inflation has fallen further towards central banks’ targets and we expect it to remain subdued across most of the world. Tariffs will cause a temporary uplift in the US. But elsewhere, their economic drag will add to the disinflationary effects …
Israel readying strikes on Iran’s nuclear facilities? Rumours that Israel could strike Iran’s nuclear facilities suggest that conflict in the region could escalate. But there are reasons to think that the fallout for the oil market, and therefore the Gulf …
Our View: The economies of Central and Eastern Europe have lost momentum over the course of 2025 and, while the region is relatively insulated from US tariffs, the risks to our growth forecasts have generally shifted lower this month. Some central banks …
India’s economy is emerging from its soft patch. Headline CPI inflation should remain close to the RBI’s 4% target over the coming months, enabling the central bank to continue easing monetary policy. We’re expecting a further 50bp of cuts to the repo …
Banxico looks set for another cut despite rise in inflation The larger-than-expected rise in Mexico’s headline inflation rate in the first half of May, to 4.2% y/y, was driven in large part by non-core components and is unlikely to sway Banxico’s …
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
The near-term outlook for Canada is a little bleak. After a solid first quarter, we expect GDP growth to be muted as the imposition of US tariffs and risk of more to come weighs on exports, consumer spending and investment. Employment is likely to decline …
21st May 2025
Core inflation in India rose to an 18-month high in April, but there are reasons to think that this overstates the extent to which the economy is running into capacity constraints. And with headline inflation at a multi-year low, further policy easing …
Inflation stays low, but inflation target change may keep SARB on hold The rise in South Africa’s headline inflation to 2.8% y/y still left it below the lower bound of the Reserve Bank’s 3-6% target range and, ordinarily, would make us more confident that …
Easing cycle to be gradual Bank Indonesia today cut interest rates by 25bps for the first time since January, and we expect further easing over the coming months. Today’s decision to cut the policy rate from 5.75% to 5.50% was predicted by 20 out of the …
The RBNZ is all but certain to cut its cash rate by 25bp, to 3.25%, at its meeting ending on 28 th May. With the recovery showing signs of faltering, the labour market remaining weak, and underlying inflation continuing to fall, we expect the Bank to …
We assume that the 90-day pause on reciprocal tariffs will become permanent, keeping tariffs at 10% for most countries except China, which will face a steeper 40% levy. A recession should be avoided, provided Congress can quickly redirect the tariff …
20th May 2025
Rates on hold with CBN in wait-and-see mode The Central Bank of Nigeria left its policy rate on hold at 27.50% today and, with the disinflation progressing slowly and concerns that low oil prices will put downward pressure on the naira, it looks like it …
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
RBA cuts by 25bp, leaves the door open for further easing With the Bank growing increasingly concerned about downside risks to the economy, there is a good chance that it will cut rates further than we are currently anticipating this cycle. The RBA’s …
PBOC’s easing will confer only marginal benefits Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) probably won’t be the last this year. But rate cuts are likely to remain modest as the PBOC appears to think they could hinder …
Copom minutes intensify debate over June meeting The minutes to the Brazilian central bank’s monetary policy meeting last week, at which the Selic rate was hiked by 50bp, have added further fuel to the debate over whether the tightening cycle is already …
16th May 2025
Risks now skewed towards hikes rather than further cuts The National Bank of Romania (NBR) highlighted concerns with the uncertain political backdrop and recent pressure on the currency when leaving its policy rate on hold today, at 6.50%. We now think …
GNU will struggle to fill VAT hike-related hole South Africa’s finance minister takes his third stab at delivering the 2025 Budget on Wednesday. Disputes within the ruling GNU seem to have been resolved but this may come at the cost of slippage on …
Inflationary pressures linger on In case you missed it, our RBA Watch explains why we expect the Bank to cut rates by 25bp, to 3.85%, at its meeting next week. However, we suspect that the cut will be a somewhat hawkish one, with the Board reluctant to …
Lower energy prices will weigh on inflation The truce reached between China and the US over the weekend is a clear positive for Japan’s economy. Even so, we suspect that weak economic activity coupled with an impending plunge in inflation will delay …
Growth concerns leave the door open for another 50bp cut in June Mexico’s central bank (Banxico) lowered its policy rate by another 50bp, to 8.50%, at today’s meeting and the accompanying communications underlined that policymakers’ concerns have shifted …
15th May 2025
The decision by OPEC+ to follow up May’s faster rise in oil production with a similar increase in June suggests a change in tack on oil policy towards recapturing market share. This will provide a boost to GDP growth in 2025 and 2026 via higher output in …
We think the recent “bear flattening” of the US Treasury yield curve has a bit further to run. The story in the Treasury market over the past few weeks has generally been one of bear flattening (short-end yields rising by more than long-end ones) as …
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. Most euro-zone governments look set to continue running large budget …
14th May 2025
With trimmed mean inflation entering the RBA’s target band for the first time since 2021, the Bank will almost certainly lower interest rates by another 25bp at next week’s meeting. However, amidst early signs that price pressures are strengthening again, …
Japan’s economy won’t be affected much by global trade tensions. While the Bank of Japan has signaled a pause in its tightening cycle, we think the Board is underestimating the strength of inflationary pressures. We still expect another rate hike in July …
The latest survey data out of Mexico have been woeful and, while high-frequency hard data suggest that activity hasn’t fared as badly as might have been feared, the bigger picture is that the economy is very weak. This is likely to weigh heavily on …
13th May 2025
This page has been updated with additional analysis since first publication. Sticky wage growth will mean the Bank of England remains cautious The jobs market weakened further in the face of April’s rise in payroll taxes and the national minimum wage. But …
Fiscal slippage appears more likely across SSA Leaders across Sub-Saharan Africa faced with fiscal strains are increasingly embracing tax reform rather than rises. Banking on the former to quickly raise revenue is ambitious and we think this risks further …
9th May 2025
Euro-zone GDP expanded at a decent pace in Q1 but that was partly due to temporary tariff front-running effects. And while higher defence and infrastructure spending will support euro-zone GDP growth late this year and in 2026, the boost will be smaller …
The strong showing for far-right nationalist, George Simion, in the first round of Romania’s Presidential election on Sunday has deepened the country’s political crisis, and the fallout in Romania’s financial markets could get more messy in the coming …
UK-US trade announcement is no big deal The “full and comprehensive” trade deal between the US and the UK announced this week by President Donald Trump was none of those things. This rush to demonstrate progress on “deals” reveals a rising desperation …
Lower oil prices a mixed blessing The announcement from OPEC+ over the weekend that it will increase oil supply further in June briefly caused the price of Brent crude to drop below $60pb. It has since recovered to c.$63pb at the time of writing, but that …
Five months ago, we incorporated a 10% tariff on all UK goods exports to the US in our forecast. That has turned out to be a good call. Despite this week’s UK-US trade deal, the 10% “baseline” tariff remains. (See here for our response to the US-UK trade …
Asian exporters benefit from front-loading Asia publishes trade data much sooner than other regions which allows us to get an early indication of how Trump tariffs are affecting global trade. While the April data for Korea showed exports to the US …
More UK rate cuts coming, but not as quickly as investors expected The Bank of England predictably cut interest rates from 4.50% to 4.25% today and gave the impression that it will continue to cut rates at the current pace of 25 basis points (bps) every …
8th May 2025
Inflation rises, but Banxico still on course for a 50bp cut next week Mexico’s headline inflation rate edged up to 3.9% y/y in April, but we think that the challenging growth outlook and the relative resilience in the peso leave the door open for another …
For an updated and more detailed version of this analysis, click here . More rate cuts coming, but not as quickly as the markets expect While cutting interest rates from 4.50% to 4.25% today, the Bank of England poured some cold water on the markets’ …
Riksbank leave rates unchanged, but signals cuts may be coming While the Riksbank left its policy rate unchanged at 2.25% today, policymakers indicated that a rate cut is likely this year given the weakness of the economy. We now think that they are …
