Filtered by Topic: Monetary Policy Use setting Monetary Policy
As core PCE inflation is on track to return to the 2% target by the middle of this year, we expect the Fed to cut interest rates by 25bp at every meeting from March onwards, with rates eventually falling to between 3.00% and 3.25% in early 2025. The …
22nd January 2024
Why are markets pushing back on rate cut expectations? How will the ECB play its upcoming meeting? What’s really happening to China’s economy? Group Chief Economist Neil Shearing tackles the big macro and market questions in our latest episode of The …
19th January 2024
SARB to stay on sidelines until after the election? Remarks by South African Reserve Bank (SARB) Governor Kganyago this week have increased the risk of rates staying higher for longer, particularly if fiscal risks build ahead of the election. Governor …
We argued last week that there was little to support the idea that the “last mile” of getting inflation back to 2% will somehow be the hardest. But new data on rent inflation released this week raise the possibility that the disinflationary process won’t …
Revising down our Hungary interest rate forecast In Hungary, dovish comments from the central bank (MNB) deputy governor this week and recent softer-than-expected inflation data have prompted us to revise down our interest rate forecast. We had flagged …
Recent falls likely to be reversed soon Asian currencies have made a poor start to the year, with most having fallen by 1-4% against the US dollar. (See Chart 1.) The falls are largely a reflection of an upward shift in US interest rate expectations …
Data released this week suggest that the euro-zone economy may have contracted a bit more than expected at the end of last year. Germany’s first and “very preliminary” estimate of Q4 GDP suggests that it fell by 0.3% q/q. (See here .) And euro-zone …
Note: Join us on our upcoming Asia Drop-in on 25th January. We’re discussing China’s missing stimulus, the Asian monetary policy outlook and much more. Register here for the 20-minute online briefing. Inflationary pressures moderating Inflation fell to an …
Overview – The easiest wins in the disinflation battle are behind us now that base effects from the previous surge in energy prices have run their course. Indeed, we expect energy effects to lift inflation in advanced economies slightly this year. But we …
18th January 2024
We think Norges Bank will keep its policy rate unchanged at 4.50% next week but, given the weakness in the krone and tight labour market, retain a hawkish bias in its guidance. Further ahead, we think rates will be cut sooner than the Bank expects as …
Policymakers to acknowledge weak economy and decline in inflation. But not ready to consider rate cuts. We expect first cut to come in Q2. The ECB is certain to keep interest rates unchanged next week, leaving the deposit rate at 4%, and we expect …
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone, especially with tradables …
This page has been updated with additional analysis since first publication Labour market will turn faster than the RBA anticipates With labour market data for December disappointing expectations, we’re more convinced than ever that the RBA will take its …
CPI-trim and CPI-median are overstating inflation pressures Economy going from bad to worse Bank to start cutting interest rates in April The acceleration in the CPI-trim and CPI-median measures of core inflation in December suggests the Bank of Canada …
17th January 2024
India’s economy has grown at a healthy clip over recent quarters and, with the help of government spending, we think it will continue to hold up well ahead of the upcoming general election. Given also that headline consumer price inflation is likely to …
The latest euro-zone inflation data, published this morning, will dampen policymakers’ concerns about the strength of domestic price pressures. But with underlying inflation still too high for comfort, this won’t be enough for the Bank to change its …
Policy rate left unchanged, central bank hints at cuts later in the year Bank Indonesia left its policy rate on hold at 6.00% at its meeting today, but gave further hints that provided the rupiah continued to hold up well against the US dollar, there …
This page has been updated with additional analysis since first publication. Downward trend stalls, but drop to below 2% still coming in April The unexpected rise in CPI inflation from 3.9% in November to 4.0% in December (consensus and CE forecast 3.8%) …
We expect GDP growth to slow to a crawl this year, weighed down by weak consumption growth and sluggish export growth. While the virtuous cycle between prices and wages has shown signs of a slowdown in recent months, it will soon receive a boost when …
In recent months, there have been growing concerns that the rapid rise in rental inflation will force the Reserve Bank of Australia to keep rates higher for longer. To be sure, leading indicators suggest that rental inflation will continue to accelerate …
While overall inflation has moderated, services inflation has accelerated Bank will wait for upcoming spring wage negotiations before adjusting policy We expect a rate hike to 0.1% in March, with Yield Curve Control ending by mid-year The Bank of …
16th January 2024
The Bank of Canada’s quarterly business and consumer surveys continue to flash warning signs about the outlook for the economy and labour market. The normalisation of inflation expectations remains painfully slow, however, presenting a risk to our view …
15th January 2024
We don’t expect the Federal Reserve, European Central Bank or Bank of England to cut rates in their first meetings of 2024, but they may drop hints about when monetary easing could start. A team of our senior economists held this online briefing after the …
There’s a popular view that the RBA won’t start cutting interest rates until later in the second half of this year. We think Australia’s Q4 CPI release on 31 st January will help build the case for those cuts to start far sooner. Our ANZ and Markets …
This page has been updated with additional analysis since first publication . The PBOC fails to deliver Despite a cut being widely expected, the MLF was again kept unchanged today – for a fifth straight month. The main factor holding the PBOC back was …
Ecuador erupts The dramatic escalation of violence in Ecuador this week after President Noboa announced plans to crack down on organised crime has shone the spotlight onto the country’s growing problem with drug trade related crime. Ecuador has …
12th January 2024
NBR won’t cut rates as far as most expect in 2024 The National Bank of Romania (NBR) left its policy rate unchanged at 7.00% today and, although a monetary easing cycle seems to be drawing nearer, we think that interest rates are unlikely to be cut as far …
At the ECB’s last meeting in December, President Christine Lagarde insisted that it was too early to discuss rate cuts. But the first comments of 2024 from policymakers, including Ms Lagarde herself, suggest that policy loosening may not be too far away. …
Growth pick-up to extend into Q1, fade by year-end The Q4 GDP data due on Wednesday are likely to show that China’s economy ended 2023 on a more positive note. Our GDP tracker points to y/y growth of 5.5%, up from 4.9% in Q3. That partly reflects a weaker …
Inflationary pressures moderating The economic data released this week all suggest that the case for tighter monetary policy is diminishing. For a start, the Tokyo CPI showed that inflation excluding fresh food fell to just 2.1% in December, within …
Inflation could start with a 3 in December We explained last week why we expect the RBA to cut interest rates earlier than most anticipate and the sharp fall in inflation in November supports our view. The available data suggest that the Q4 inflation …
Egypt’s policy shift and IMF deal edging closer Meetings this week between Egypt, the IMF, and the US took place following the release of a draft economic plan, which points to the expansion of the current IMF deal and a renewed shift towards economic …
11th January 2024
We think that global growth will undershoot consensus expectations in 2024 as various props to growth from 2023 fade and as the lagged effects of past rate hikes continue to feed through. Among the advanced economies, the US will continue to outperform …
This page has been updated with additional analysis since first publication . The renewed fall in Brazil’s headline inflation rate in December, to 4.6% y/y, paves the way for another 50bp cut to the Selic rate (to 11.25%) at the central bank’s next …
Economic growth in Jordan has been sluggish for the best part of a decade and the outlook doesn't look much brighter. While the renewed IMF programme will help to contain external strains, the Israel-Hamas conflict will weigh on the crucial tourism sector …
The Bank of Korea left its policy rate on hold today (at 3.5%), but struck a more dovish tone than after previous meetings. With inflation on the way down and growth likely to struggle over the coming months, we expect the central bank to start cutting …
On hold again, rate cuts in Q2 The Bank of Korea (BoK) left its main policy rate on hold today (at 3.5%), but with inflation cooling and growth set to struggle, we think the central bank will cut interest rates sooner than most expect. The decision was …
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
Some ECB Governing Council Members have called for an increase in reserves requirements, primarily in order to reduce the Eurosystem’s interest expenditure. If implemented – which we think is likely – this would have the effect of tightening monetary …
ECB policymakers still insist that monetary policy will remain tight throughout the first half of the year, if not longer. But we think that weakness in economic activity and lower inflation will prompt them to start cutting in April. And in contrast to …
Inflation slowing, but will remain above target until mid-2025 Egypt’s headline inflation rate eased for a third consecutive from 34.6% y/y in November to 33.6% y/y in December. Comments last night suggest that an enhanced IMF deal is near, which is …
This page has been updated with additional analysis since first publication. Disinflation will pave the way for policy loosening before long With price pressures cooling in earnest, we’re growing increasingly confident in our call that the RBA will start …
NBP has limited scope for rate cuts in 2024 The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and we continue to think that the scope for monetary loosening ahead is relatively limited. While the consensus view in recent …
9th January 2024
The Fed-triggered financial market exuberance which ended 2023 hasn’t carried into the new year, with yields rising and equities struggling. Group Chief Economist Neil Shearing explains what’s changed – and what hasn’t – to explain this mood shift. He …
5th January 2024
Nigeria spending up, but no more deficit financing This week, Nigeria signed its 2024 budget into law. Spending is projected to be higher than originally anticipated, although officials are signalling that it will be financed by higher revenues rather …
Fed still coy about QT end-game FOMC minutes put focus on inflation data The minutes of the mid-December FOMC meeting did not dissuade us that the Fed will start to cut interest rates from this March onwards. Admittedly, officials warned that “they would …
Conditions in the housing market seem to be improving, with the local real estate board data pointing to a big improvement in the home sales-to-new listing ratio in December. While the unseasonably warm weather may have played a role and house prices …
BoI starts easing cycle, but uncertainty remains high Israel’s central bank started its monetary easing cycle this week with a 25bp interest rate cut – a move that came a bit sooner than we’d expected. But inflation risks are greater than most anticipate, …
Will the BoK turn dovish? The Bank of Korea looks almost certain to leave interest rates unchanged at its meeting on Thursday. But with inflation falling and concerns about the economy mounting, we expect the central bank to strike a more dovish tone …
