Filtered by Topic: Monetary Policy Use setting Monetary Policy
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
15th August 2023
This page has been updated with additional analysis since first publication . Underwhelming wage growth bolsters case for RBA to stay put The sluggish pace of wage growth in Q2 reinforces our view that the Reserve Bank of Australia won't lift interest …
While economic activity was generally more resilient than feared in the first half of 2023, we expect global growth to disappoint in the coming quarters. We doubt that another bout of policy stimulus will radically improve the outlook for China’s economy, …
14th August 2023
PASO election tips economy deeper into crisis The news just out that Argentina has devalued the peso by around 20% against the dollar (to 350/$) and hiked the policy interest rate by 21%-pts to 118% underscores that the economy is lurching towards an even …
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is only set …
A fork in the road for Argentina Sunday’s open, simultaneous and compulsory primary elections (PASO) should give a first sign of whether Argentina will buck the regional political trend and shift to the right at the presidential election in October. All …
11th August 2023
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
Further CEE disinflation keeps rate cuts on track The July inflation data out of Central and Eastern Europe (CEE) this week suggests that our forecasts for interest rate cuts to arrive across the region over the rest of this year, and in early 2024, …
It is not surprising that Italian bank shares slumped this week after the government announced that it is imposing a windfall tax on the banks. The decision seemed to come out of the blue and to have been cobbled together at the last minute with several …
This page has been updated with additional analysis since first publication Inflation rise means Copom won’t increase the size of rate cuts The jump in Brazilian inflation to a slightly higher-than-expected 4.0% last month won’t stop Copom from lowering …
Upside risks to inflation still remain The RBI kept the repo rate on hold at 6.50% as expected this week and maintained a hawkish tone amid the recent surge in food prices. The Bank revised up its inflation forecast for Q3 significantly (from 5.2% to …
Aramco’s profit slump ≠ austerity The slump in the profits of Saudi Arabia’s state oil company, Aramco, in Q2 has focussed attention on the deterioration in the Kingdom’s budget position. But the authorities appear to be taking as many steps as possible …
10th August 2023
We think Norges Bank will go through with its plan to raise its policy rate by 25bp next week, to 4.0%, and follow that up with a final hike in September to 4.25%. At its last meeting, in June, Norges Bank raised its policy rate by 50bp, to 3.75%. That …
The RBI kept the repo rate on hold at 6.50% today as expected and maintained a hawkish tone amid the recent surge in food prices. It’s unlikely that the rate hiking cycle will restart. But there is a significant risk of the easing cycle that we expect to …
Recent interest rate cuts in Brazil and Chile have fuelled talk of a broad-based EM easing cycle and we expect most EM central banks to start cutting rates in Q4 or Q1. We expect those with the highest policy rates (above 10%) to deliver 500bp or so of …
9th August 2023
Even though the financial strains that emerged after SVB’s collapse have dissipated, interest rate hikes have left overall financial conditions in major advanced economies close to their tightest since the GFC, posing downside risks to activity. As …
RBNZ to remain on hold Although inflation and wage growth remain strong, they are showing signs of cooling As recession deepens, rate cuts will be on the table in Q1 2024 With inflation coming off the boil and labour market conditions starting to …
We think the 10-year/2-year Treasury yield spread will become less inverted over the next year or so, but doubt this will come primarily via a continued rise in the 10-year yield like we saw last week. A striking part of last week’s Treasury sell-off was …
7th August 2023
This page has been updated with additional analysis since first publication. NBR to stand pat until early 2024 The National Bank of Romania (NBR) left its main policy rate on hold again today, at 7.00%, and we think that it will continue to leave rates …
More reasons for the Bank to remain on hold The further rise in the unemployment rate in July and signs that the housing market is cooling again are both reasons to doubt that the Bank of Canada will raise interest rates further. Employment weakened in …
4th August 2023
Brazil and Chile spring dovish surprise The decisions in the past week by central banks in both Chile and Brazil to cut interest rates confirm that Latin America remains at the front of the pack in this global monetary cycle. Having been among the first …
CEE easing cycles around the corner Expectations for the start of monetary easing cycles in Poland and Czechia were strengthened this week after the publication of weaker-than-expected Polish inflation figures for July and the shift in language at the …
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
Core inflation remains a concern Figures from the Philippines published earlier today show that headline inflation fell to 4.7% y/y in July. This compares with 5.4% in June and a peak of 8.7% in January. Falling food and energy price inflation have been …
Government delivering on capex promise so far We noted at the time of the FY23/24 Union Budget announcement that the government appeared to be putting more emphasis on boosting longer-term prospects than had previously been the case. Capital expenditure …
On Tuesday, the Reserve Bank of Australia left its cash rate unchanged at 4.10%, upending the consensus forecast for a 25bp rate hike. The Bank’s detailed Monetary Policy Statement , published earlier today, showed that the Board did discuss the option of …
10-year yield continues to rise The Bank of Japan’s defence of Yield Curve Control (YCC) has devolved this week into a rearguard action. Since last Friday’s policy tweak to allow the 10-year Japanese government bond (JGB) yield to rise above 0.5%, the …
Though investors appear to be increasingly moving towards our view of Bank Rate peaking at 5.50%, we think the levels priced into the market beyond this year – and, accordingly, expectations for gilt yields and sterling – are still too high. Today’s …
3rd August 2023
The key points that stand out from the recent moves by central banks in Brazil, Chile and Hungary to cut interest rates are, first, how quickly policymakers have shifted from hawkish to dovish and, second, how they appear to be front-loading their …
We think the euro-zone economy will contract in the second half of 2023, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline inflation in the euro-zone will continue …
We think the Fed’s done with raising rates and won’t hike again at its September meeting – but much will depend on the next couple of inflation reports, including July’s. Chief US Economist Paul Ashworth and Deputy Chief US Economist Andrew Hunter held a …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
This page has been updated with additional analysis since the post-meeting statement and press conference. CNB on the edge of a policy shift The Czech National Bank (CNB) left its main policy rate on hold at 7.00% today, but the post-meeting …
Closing in on the summit, but BoE suggests rates will stay at the top for a long time Today’s 25bps rise in interest rates, from 5.00% to 5.25% (CE 5.25%, 2/3 of consensus 5.25%, 1/3 of consensus 5.50%), may be followed by another hike in September to our …
BCB kicks off Brazil’s easing cycle The Brazilian central bank (BCB) started its easing cycle today with a larger-than-expected 50bp cut in the Selic rate, to 13.25%, and the relatively dovish tone of the accompanying statement suggests that policymakers’ …
2nd August 2023
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
Jump in food prices makes rate hold next week less of a certainty On balance, we still think the MPC will stand pat but strike a more hawkish tone If food price surge is sustained, loosening may be pushed back from early 2024 The recent surge in food …
The Bank of Thailand (BoT) today raised its policy rate by a further 25bps (to 2.25%), but we think this marks the end of the tightening cycle. With inflation now well below target and headwinds to the economic recovery mounting, we expect rates to remain …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
1st August 2023
The Reserve Bank of Australia left rates unchanged at 4.10% for the second consecutive month. And while the Board continued to strike some hawkish notes, there is a good chance that its tightening cycle is already over. The RBA’s decision flew in the face …
RBA stands pat The RBA’s decision to leave its cash rate unchanged at 4.10% means that its almost certain that our forecast for a terminal rate of 4.60% won’t come to fruition. Ahead of today’s meeting, 20 out of 36 analysts polled by Reuters, including …
Housing rebound continues unabated Australia’s house-price rebound went full steam ahead in July. At the margin, that should strengthen the case for the RBA to lift its cash rate by a further 25bp at its meeting later today. Nonetheless, with resurgent …
Hold does not mark the end of the tightening cycle Pakistan’s central bank (SBP) today left its main policy rate unchanged (at 22.0%), but we doubt this marks the end of the tightening cycle. With inflation likely to remain above target for some …
31st July 2023
China's reopening recovery has fizzled out and the economy is now at risk of slipping into a recession. We think policymakers will provide enough stimulus to avoid this and deliver a modest reacceleration in growth over the coming quarters. But most of …
Central Bank of Nigeria’s reluctance to hike This week, the CBN’s policy rate hike of 25bp underwhelmed markets, presenting further evidence that Nigerian policymakers are trading off growth concerns with their inflation mandate. The MPC chose to hike …
28th July 2023
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
The Bank of Japan (BoJ) seems to have effectively ended yield curve control (YCC) without making a big splash in financial markets, but we wouldn’t rule out further effects – on Japan’s markets and those around the world – just yet. For a start, we …
Fitch gives Haddad a gift The upgrade by Fitch to Brazil’s long-term foreign currency sovereign debt rating this week, from BB- to BB, provides another sign that fiscal concerns in the country are easing. Fitch justified the move on the …
This week’s FOMC meeting brought hints that Fed officials are no longer wedded to previous plans for further policy tightening. Even if activity growth continues to hold up a bit better than expected, we think a run of weaker inflation readings will …
Our View : Growth in most advanced economies will disappoint later this year, putting pressure on “risky” assets and favouring “safe” ones. Developed markets (DM) government bond yields will therefore decrease further, helped by central banks shifting …
