Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Central Bank of Nigeria’s decision to raise its policy rate by 50bp, to 18.50%, reaffirmed that officials continue to focus on tackling high and rising inflation at the expense of supporting the struggling economy. The increasing likelihood of fuel …
24th May 2023
The most troubling aspect of April’s inflation data, released earlier today, was evidence that price pressures are becoming increasingly domestically generated. Accordingly, we now expect the Bank of England to raise interest rates further than we …
Monetary policy to be kept tight despite falls in inflation Mexico’s headline inflation rate fell to a 20-month low of 6.0%y/y in the first half of May and is set to drop further over the coming months. That said, strong wage growth will keep inflation …
A strong rebound in tourism provided a big boost to growth in Thailand and Hong Kong last quarter, which along with China, were the three best-performing countries in Emerging Asia in Q1. But for the rest of the region, the GDP figures painted a …
This webpage has been updated with a table and chart of key data. Rising core inflation to keep policymakers in hawkish mood South Africa’s headline inflation rate dropped back to 6.8% y/y in April but the further strengthening of core inflation will …
BoE will need to work harder to conquer inflation Note: We’ll be discussing the UK April CPI report in a briefing at 10:00 BST/17:00 SGT on 24 th May. Register here. The Bank of England won’t be able to ignore the smaller-than-expected fall in CPI …
The decision by the Reserve Bank of New Zealand to lift its official cash rate by 25bp, to 5.50%, was in line with what most had anticipated. However, with the Bank sounding more dovish than it has in the recent past, we think its hiking cycle is now …
RBNZ signals tightening cycle is at an end The RBNZ slowed the pace of tightening this month, while signalling that its tightening cycle was at a close. The Bank’s decision to hike its official cash rate by 25bp, to 5.50%, was correctly predicted by 20 …
The resilience of the April activity data and apparent stabilisation in housing have raised hopes that a recession may yet be avoided this year. That said, forward-looking indicators suggest that the huge rise in interest rates and tightening of bank …
23rd May 2023
Hungary’s central bank (MNB) cut the interest rate on its one-day deposit tender at today’s meeting, from 18% to 17%, and this is likely to be followed by further cuts in the coming months, with the central bank’s key policy rates returning to single …
MNB inching closer to an easing cycle Hungary’s central bank (MNB) left its base rate on hold at 13% as expected today and the post-meeting communications are likely to provide guidance on when the overnight daily deposit rate of 18% will be cut, which …
As in other advanced economies, Australia’s neutral rate of interest rate will probably edge up a bit over the coming decades. That will result in higher borrowing costs, but Australia’s low public debt levels mean that the government will be able to …
The past month has brought some encouraging news on the inflation front. Consumer price inflation dropped sharply in April to an 18-month low, keeping the headline rate comfortably within the RBI’s 2-6% target range. Both energy and food price inflation …
22nd May 2023
The Bank of Israel (BoI) delivered another 25bp interest rate hike, to 4.75%, at today’s meeting and did not offer any guidance as to whether this would be the last in the cycle. On balance, we think the central bank will deliver one more 25bp hike, to …
We think China’s Loan Prime Rate will be left unchanged (Mon.) We expect the Reserve Bank of New Zealand to raise its policy rate by 25bp, to 5.50% (Wed.) Real consumption in the US probably rebounded a bit in April (Fri.) Key Market Themes We suspect a …
19th May 2023
The Bank of Canada’s latest Financial System Review reiterated the risks to households from higher interest rates, but concluded that most are coping well. Following the rapid turnaround in the housing market and upside surprise to CPI inflation in April, …
SA: threat of AGOA loss no disaster, but unwelcome Allegations that South Africa has supplied arms to Russia has led to calls for the country to lose preferential trade access to the US via the African Growth and Opportunities Act (AGOA). As it happens, …
Recent solid activity data and the apparent progress on debt ceiling negotiations appear to have convinced some Fed officials that it is still too early to pause interest rate hikes. We still aren’t convinced the Fed will hike again in June, but there is …
The Central Bank of Egypt (CBE) opted to leave interest rates unchanged at Thursday evening’s MPC meeting and the lack of comment on the pound will only add to investor concerns about the commitment to orthodoxy. Unless something changes soon, the path …
Sweden inflation surprise As of this week, coverage of Switzerland and the Nordic economies will be incorporated, along with the euro-zone, in our expanded Europe Economics service. We will continue to analyse the economic data from the Nordics and …
Chinese government bonds have rallied over the past couple of months, with the 2-year yield falling over 20bps since mid-March. This reflects mounting expectations for monetary easing in response to what has widely been viewed as an underwhelming …
Although monetary tightening has been a drag on equities over the past year or so, we don’t think the end of rate hikes means the stock market is set for big gains. Rate hikes among developed markets look to be drawing to a close . In particular, we think …
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
Productivity crunch creates dilemma for RBA The RBA has been ringing the alarm bells about dismal productivity gains for a while now. In the minutes of its May meeting, the Board noted that if productivity growth did not return to the modest pace recorded …
Mexico’s central bank held its policy rate at 11.25% at today’s Board meeting, bringing the tightening cycle to an end. But with inflation unlikely to return to target until late-2024, policy will probably stay tighter than most expect over the next …
18th May 2023
Our best guess is that the impact of monetary policy tightening on euro-zone economic activity will be less than five percent of GDP, which is the lower end of a range estimated in an ECB Economic Bulletin paper this week. However, even that could be …
A quick solution to South Africa’s energy crisis is nowhere to be seen. Not only will power cuts remain a drag on economy but there are growing concerns that they are fuelling inflation, threatening the country with a period of stagflation. That presents …
Any impact of QT has so far been modest and swamped by the effects of higher policy rates. Asset disposals might put some upward pressure on yields in the euro-zone in the near term, but the process of balance sheet normalisation will be slow and in some …
The central bank in the Philippines (BSP) today left interest rates unchanged (at 6.25%) but stated it was ready to resume its tightening cycle later in the year. However, with inflation falling back and headwinds to the economy mounting, we expect rates …
Fears among investors have continued to grow that Egypt’s government will default on its debt in the coming years although, for now at least, there remains a path to avoid such an outcome. Taking that path will require the government to step back from …
Tightening cycle at an end The central bank in the Philippines today left interest rates unchanged (at 6.25%) but stated it was ready to resume its tightening cycle later in the year. However, with inflation falling back and headwinds to the economy …
The rapid turnaround in the housing market and the upside surprise to CPI inflation in April have raised the case for another interest rate hike from the Bank of Canada, which we now judge is slightly more likely than not. The potential for US debt …
17th May 2023
Inflation is now on a downward trend and interest rates are at, or very close to, a peak. But central banks will only cut interest rates once there are clearer signs that underlying price pressures are under control. That could be as early as later this …
The RBNZ will lift its OCR by 25bp next week. With upside risks to inflation persisting, we’ve pencilled in another 25bp hike in July. However, we still think the Bank will pivot to rate cuts by year-end. The latest data don’t tell a compelling story as …
The RBA’s balance sheet has barely shrunk since it decided to stop reinvesting the proceeds from maturing bonds. While pressing ahead with quantitative tightening would make it easier for the Bank to engage in quantitative easing during future downturns, …
16th May 2023
RBA retains its tightening bias The minutes of the RBA’s May meeting were on the hawkish side, but we still think that the Bank’s tightening cycle is already over. Although the Board discussed the option of leaving the cash rate unchanged, it ultimately …
The resilience of PCE core services ex-housing inflation is only partly due to the strength of labour market conditions, and other factors are likely to play an important role in driving it lower over the rest of this year. That should reinforce the …
15th May 2023
A flurry of data and policy announcements in recent weeks has provided more clarity about where the global economy is heading, even as it has highlighted some key risks to that outlook. Three things have become clear. The first is that the global economy …
Australia’s house prices have rebounded over the last couple of months and most leading indicators suggest that the recovery has legs. However, we doubt that a sustained recovery is on the cards. While false dawns in the housing market are rare, they did …
We think that investors are underestimating the scale of interest rate cuts in the UK next year. If we’re correct, that could propel Gilts to the top of the class for local-currency returns over the rest of 2023. Local-currency returns from ICE BofA’s …
12th May 2023
Some relief on the inflation front The past week or so has brought some positive news on the inflation front. Data from Brazil earlier today showed that the headline rate fell to a 30-month low in April. This followed data releases that showed falls in …
It’s been a week to forget for South Africa, in which fears emerged that the improvement in the public finances is stalling and concerns about (even more) intense loadshedding surfaced. That was topped off by allegations that South Africa supplied weapons …
Yesterday’s 25 basis point rise in interest rates from 4.25% to 4.50% was widely expected in the end. But we’ve been forecasting that rates would rise to 4.50% since November last year. (See here .) The most striking thing coming out of yesterday’s …
Copom to stay hawkish despite inflation decline The sharp fall in Brazilian inflation, to 4.2% y/y last month, was encouragingly broad based among the sub-categories of the CPI basket. But we think the central bank will want to see more evidence that core …
Close call in the Philippines The central bank in the Philippines (BSP) has tightened monetary policy aggressively over the past year as it has tried to crack down on inflation, which has been much higher than in the rest of the region. Its meeting on …
Treasury won’t go on a spending spree Earlier this week, the Australian government boasted its first budget surplus in fifteen years. However, the picture in New Zealand is less rosy. The kiwi nation’s fiscal accounts are in worse shape than the …
Q1 GDP releases have confirmed that the major economies avoided recession at the start of the year and some of the more recent survey data suggest that this resilience continued into Q2. The composite PMI output index for developed economies rose from …
Ueda leaves door open to acting before full review Bank of Japan Governor Ueda spoke on Tuesday in the Diet and mostly repeated what he said in the Bank’s post-meeting press conference on 28 th April, when he left monetary policy settings unchanged in his …
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
11th May 2023
