Filtered by Topic: Monetary Policy Use setting Monetary Policy
Erkan delivers, but lingering doubts remain All eyes were on Turkey’s central bank governor on Thursday and she delivered a convincing message during the Inflation Report briefing. The priority is clearly for a more rounded policy shift than one that …
28th July 2023
Weaker labour market Singapore’s labour market remains very tight, but there are growing signs that it is starting to loosen. According to figures published on Thursday, employment growth eased from 1.0% q/q in Q1 to 0.7% in Q2, while the unemployment …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
Reforms to take a back seat for now In an otherwise quiet week, the big news from the past few days is that India’s parliament has approved a no-confidence vote lodged by opposition parties against Prime Minister Modi’s BJP-led government. The motion has …
The Bank of Japan announced today that it will allow 10-year yields to rise above the 0.5% ceiling – which it says it is retaining – to a new “just-in-case” cap of 1.0%. With signs mounting of a virtuous cycle between inflation and wages, the chances of …
In the latest of our monthly EM Drop-Ins, Shilan Shah le a team of economists from across our EM and Markets services to answer client questions on what’s happening in EM macro while addressing key issues including: Which EMs are benefitting from the …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The Bank of Japan announced today that it will allow 10-year yields to rise to 1.0% instead of the current ceiling of 0.5%. We still think that a slowdown in inflation will convince the Bank to keep its short-term policy rate unchanged over the coming …
This page has been updated with additional analysis since first publication. Retail sales soften anew The sharp decline in retail sales in June suggests that sales volumes fell for a third consecutive quarter in Q2. With the RBA sounding increasingly …
Mbappé or not, Saudi gov’t focussed on sports The Saudi Pro League went from the back pages to the front pages this week as Al-Hilal (a football club recently acquired by the Kingdom’s sovereign wealth fund) made a world record $335mn bid for PSG’s Kylian …
27th July 2023
25bps hike and peak in sight Reverting to a 25bps hike rather than 50bps Rate hikes may come to a halt a bit sooner than most analysts and investors expect After a lengthy pause, rates to fall further than investors expect in late 2024 and in 2025 We’ll …
Policymakers at the South African Reserve Bank are keen to emphasise that their work to tame the “inflation monster” is not over, leaving open the possibility of additional monetary tightening. The two most likely triggers would be, first, if loadshedding …
As everyone expected, the Fed increased its policy rate by an additional 25bp today, taking the fed funds target range to between 5.25% and 5.50% but, while officials are possibly still eyeing one final hike later this year, futures markets are mostly …
26th July 2023
Policy rate now at peak, as disinflation will persuade Fed to stand pat in September As everyone expected, the Fed increased its policy rate by an additional 25bp today, taking the fed funds target range to between 5.25% and 5.50% but, while officials are …
Tighter monetary policy has had a big impact on financial conditions in the euro-zone, but we think its effect on activity is still in its early stages . Even if the region falls into a mild recession, it will be some time before policymakers are …
Sub-Saharan Africa is set to record its weakest growth this year, outside of the pandemic, since 2016 as the drags from domestic headwinds are exacerbated by a less favourable external environment. Our GDP growth forecasts across the region are generally …
Russia and Turkey have had a strong first half of the year, but growth across Central and Eastern Europe (CEE) remains depressed and we don’t expect a meaningful recovery until 2024. While inflation pressures are building in Russia and Turkey and further …
Data released this week show that tighter monetary policy has led to a sharp slowdown in money and lending growth, consistent on past form with falling GDP. Together with the latest business surveys, this supports our non-consensus view that the euro-zone …
Comparing the proper inflation gauges reveals that core inflation in Japan remains far lower than elsewhere. And with most of the recent pick-up in core inflation reflecting soaring imports costs, the Bank of Japan’s assessment that above-target inflation …
Economic activity slowing and inflation weakening faster than anticipated However, labour market still very tight and services inflation still accelerating Bank to hike to 4.35% next week, but September rate hike is a close call With inflation …
This page has been updated with additional analysis since first publication. RBA will deliver at least one more rate hike The faster-than-expected slowdown in inflation in Q2 may convince the RBA that it has done enough to rein in price pressures. …
Our forecast that in late 2024 and 2025 the Bank of England will cut interest rates further than investors expect suggests that UK gilt yields will fall and close the current gap with US yields. Admittedly, there’s still a risk that inflation in the UK …
25th July 2023
The Israeli government’s decision to press ahead with its controversial judicial reforms won’t necessarily cause foreign investment into Israel to dry up, but the direction of policymaking threatens to push the economy onto a permanently lower growth …
This page has been updated with additional analysis since first publication . Soft inflation print brings 50bp rate cut into play The Brazilian July mid-month inflation reading of 3.2% y/y suggests that price pressures are weaker than we and most others …
This page has been updated with additional analysis since first publication. MNB may pause or slow its easing cycle after September Hungary’s central bank (MNB) announced another 100bp cut to its one-day quick deposit rate (the key policy rate at the …
Analysts are split on whether the BoE will repeat June’s 50bps rate hike at the August meeting or revert to the 25bps hikes now favoured by the Fed and the ECB. And the release of the BoE’s new Monetary Policy Report will provide some clues to just how …
Inflation back to target, rate cuts likely later this year Bank Indonesia (BI) today left interest rates unchanged at 5.75%, but with the economy struggling and inflation falling back, we think the central bank will cut interest rates before the end of …
While the Fed and the ECB are set to hike interest rates this week, subsiding inflation means that the upcoming EM central bank meetings will tilt towards monetary easing . And we expect that the EM rate cutting cycle will broaden out over the course of …
24th July 2023
The region’s strong start to the year is unlikely to be sustained and we expect growth in 2024 to come in weaker than most expect. Inflation has come down a long way and price pressures should continue to ease over the coming months, paving the way for …
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is avoided, a …
More support signalled but follow-through remains in question The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It struck a dovish tone but fell short of delivering any major new announcements. …
GDP growth looks set to remain weak over the coming quarters, as tight monetary policy at home and subdued activity abroad weigh on demand. Meanwhile, inflationary pressures should continue to ease, as below-trend growth, easing disruption from the …
The Fed is almost certain to hike its policy rate by 25bp to between 5.25% and 5.50% at next week’s FOMC meeting, but we increasingly believe that will prove to be the peak. Despite the ‘higher for longer’ rhetoric from officials, a more marked decline …
21st July 2023
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
Russian FinMin throwing in the towel? A raft of comments from senior policymakers at the Russian Ministry of Finance this week highlight the pressures that the public finances are under and how policymakers are likely to tighten fiscal policy in response …
Argentina continues to dodge exchange rate issue An Argentine delegation travelled to Washington this week in a bid to close negotiations with the IMF on the fifth review of the country’s $44bn Extended Fund Facility (and, according to local media, to …
In a relatively quiet week for euro-zone economists, the most important release was the final inflation data for June. Unusually, these were revised slightly from the flash release as core HICP inflation is now estimated to have edged up to 5.5% rather …
Inflation worries trigger bumper hike The much larger-than-expected 100bp interest rate hike (to 8.50%) by the Russian central bank underscores policymakers’ concerns about inflation risks. And while we don’t think monetary tightening will continue quite …
The Treasury yield curve has been inverted for a long time by past standards, but we think it could remain so until next year even if there’s a recession in the interim. At the start of this month, it briefly looked as though the beginning of the end of …
New Zealand inflation looks sticky CPI data published on Wednesday revealed that New Zealand’s consumer prices rose by 1.1% q/q in Q2, only slightly below the 1.2% quarterly rise in Q1. Nonetheless, favourable base effects meant that annual inflation fell …
Bank will revise up 2023 inflation forecast Early signs that virtuous cycle between wages and prices has finally arrived However, widening of tolerance band would risk renewed bond market sell-off At the upcoming meeting, the Bank of Japan will revise …
EM growth will be weaker than most expect over the coming quarters. And with inflation falling back at the same time, the nascent EM monetary easing cycle will broaden out. Strong wage pressures in Latin America and Emerging Europe will limit how far …
20th July 2023
CBRT underwhelms again, risks to the lira build The 250bp interest rate hike, to 17.50%, by Turkey’s central bank today once again underwhelmed expectations and the slow and steady tightening is pushing the limits on what policymakers can get away with . …
Egyptian policymakers’ commitment (or lack of) to economic orthodoxy continues to provide cause for concern and, while we don’t share the view that sovereign default is a serious risk, the near-term economic outlook is challenging. Over a longer …
Widespread angst around China’s growth outlook is fuelling a debate about whether the economy is in the kind of “balance sheet recession” that typified Japan’s experience in the 1990s. In our latest briefing on the big macro and market themes in the Asia …
25bp rate hike next week likely to be the last, with rates peaking at 5.25%-5.50% Run of better inflation data to convince Fed to scrap plans for further hikes Falling inflation and weaker economy will see rates cut to 3.25%-3.50% by end-24 Fed officials …
19th July 2023
We still think the economy is more likely than not to fall into a mild recession later this year, as higher interest rates remain a drag and credit conditions continue to tighten. With the labour market proving resilient and core inflation still much too …
