Filtered by Topic: Monetary Policy Use setting Monetary Policy
Despite the softer tone of the CPI inflation data for June released earlier today, we have raised our forecast for the peak in Bank Rate. Rather than rise from 5.00% currently to a peak of 5.25%, we now think Bank Rate will peak at 5.50%. That’s a bit …
19th July 2023
Rate hikes from the Federal Reserve and European Central Bank at their July meetings look like done deals – it’s the messaging accompanying those decisions that may prove key to what the banks decide to do in September and beyond. Another increase also …
India's economy is showing signs of coming off the boil and, with inflation lodged within the RBI’s target range, a resumption of the tightening cycle looks unlikely. However, the onset of a severe El Niño is a looming threat and presents a key risk to …
Drop in inflation means SARB to stand pat tomorrow The larger-than-expected fall in South Africa’s headline inflation rate to 5.4% y/y in June brings it back within the Reserve Bank’s 3-6% target range for the first time since April 2022 and means that …
Provisional data from the Australian Bureau of Statistics suggest that consumer spending slumped in Q2, as households sharply pared back discretionary expenditure. Faced with falling real incomes and depleted savings buffers, we think households will only …
This page has been updated with additional analysis since first publication. Headline inflation moderates, but underlying inflation remains elevated Although price pressures are dissipating, they could prove stickier on the way down than we anticipate. As …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
18th July 2023
Swiss inflation has fallen sharply this year to below 2% and we expect it to stay there for the foreseeable future. In contrast to the SNB’s view, we think second-round effects on wages will be quite limited. And as a result, we forecast the SNB to start …
RBA softens tone, but further rate hikes remain likely The minutes of the RBA’s July meeting showed that its decision to hit pause was far from a foregone conclusion. Indeed, the Board did consider the option of a 25bp hike alongside the option of leaving …
The large macroeconomic imbalances that built up during Chile’s post-pandemic recovery have eased substantially, which is likely to prompt the central bank to deliver more rate cuts than almost any other EM central bank over the next couple of years. We …
17th July 2023
The Bank of Canada struck a hawkish tone at its meeting this week, emphasising persistent excess demand and sticky price inflation. Nonetheless, with the upgrades to the Bank’s GDP and inflation forecasts putting them above our own, we think the hike this …
14th July 2023
More signs of economic weakness Activity data released this week brought further evidence that euro-zone GDP contracted in Q2. While industrial production edged up by 0.2% m/m in May, it is still set to have fallen in Q2 as a whole, barring an increase of …
May data underscore Turkey’s vulnerabilities The raft of Turkish activity and balance of payments data for May published this week highlighted the precarious nature the economy was in prior to the shift back to orthodox economic policymaking. The …
While the resilience in economic activity looks to have continued in May, the latest surveys point to GDP growth slowing in June. And in China, the post-reopening rebound appears to have already fizzled out. Meanwhile, the significant tightening in …
As we had anticipated following the publication of the recent review into the institutional framework of the Reserve Bank of Australia, Governor Lowe’s term will end in September. The government announced today that Deputy Governor Bullock will become the …
Shunto may be more influential than we thought Regular wage growth hit 1.8% y/y in May, the biggest rise in almost thirty years. It’s still too early to tell but the May data might mark the start of the elusive virtuous cycle between rising wages and …
Note: We’ll be discussing macro and market risks around El Niño’s return in a 20-minute briefing on Wednesday, 19 th July. Click here to register. The likelihood of an El Ni ño event over the second half of the year raises the risk that activity is …
13th July 2023
Rate hike on the cards, odds (just) in favour of a 25bp move The rise in Russian inflation to 3.3% y/y last month means the central bank will almost certainly follow through on its recent hawkish rhetoric by hiking interest rates when it meets next month. …
12th July 2023
The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation falling and the survey indicators implying that inflation expectations are normalising, we …
Hike to 5.0% likely to be the last The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation declining and the survey indicators implying that inflation …
Our latest Chart Pack on the Middle East and North Africa is embedded below. Economic growth across the region will be much weaker this year than last and our forecasts are generally below the consensus. The latest round of OPEC+ oil output cuts will …
The decision by the Reserve Bank of New Zealand to leave rates on hold at 5.50% came as a surprise to no one. Indeed, the Committee noted that monetary policy in New Zealand had turned restrictive far sooner than in many other economies. Although the Bank …
RBNZ leaves rates unchanged The RBNZ’s decision to leave its official cash rate on hold at 5.50% was widely expected. In fact, all 25 analysts polled by Reuters, including ourselves, had anticipated the pause. The minutes of the July meeting reinforce our …
Overview – We still think a mild recession over the coming quarters is more likely than not. As the economy weakens and the downward trend in core inflation gathers pace, we think interest rates will eventually be cut more quickly than markets are pricing …
11th July 2023
This page has been updated with additional analysis since first publication. Inflation plunge seals the deal on an August rate cut The sharp fall in Brazilian inflation to just 3.2% y/y last month makes it almost certain that the central bank will kick …
Underlying inflation is set to fall through the coming quarters as the price shock from the war in Ukraine and the yen selloff last year dissipates. What’s more, the economy is set to enter a mild recession in the second half of the year, dragged down by …
The UK CPI report for June will provide fresh evidence of whether the economy has a persistent inflation problem – and whether the Bank of England will need to do more in response. Chief UK Economist Paul Dales, Deputy Chief UK Economist Ruth Gregory and …
10th July 2023
The Bank of Israel (BoI) kept its policy rate on hold at 4.75% today, but its communications acknowledged the risk of having to hike rates again in the coming months if inflation data warrant it. We think they will and we expect the central bank to …
Further pressure on the CBE as inflation accelerates to an all-time high This webpage has been updated with additional analysis, as well as a Chart and Table of key data. Egypt’s inflation rate rose from 32.7% y/y in May to a record high of 35.7% y/y in …
We expect the RBA to lift rates to 4.85% by November, while the RBNZ's tightening cycle is likely already over with its cash rate now at 5.50%. With house prices now 18% below their January 2022 peak, we think New Zealand's housing downturn has run its …
The 10-year Treasury yield climbed back above 4% this week, as markets interpreted the minutes of the mid-June FOMC meeting as hawkish and reacted to signs that, although labour market conditions may be easing, wage growth remains too high. Most …
7th July 2023
We still think the yields of long-dated sovereign bonds in Canada, Australia and New Zealand will fall by the end of this year, but no longer expect them to do so by much more than the yields of bonds elsewhere. Canada, Australia and New Zealand have led …
We think the euro-zone economy will remain in recession over the coming quarters, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline euro-zone inflation will …
Fall in Chilean inflation paves the way for start of easing cycle later this month The larger-than-expected decline in inflation in Chile to an 18-month low of 7.6% in June seals the deal on an interest cut at the central bank’s next meeting later this …
Wage growth to climb higher in Australia The big news out of Australia this week was the RBA’s decision to skip a rate hike at its meeting on Tuesday. However, the decision to stay put was largely motivated by a desire to reassess the outlook with a new …
Interest rate cuts coming into closer vision The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, but it seems that the balance of the MPC is shifting in a more dovish direction. We expect the first interest rate cut …
6th July 2023
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
Twelve months on from last year’s political and economic crisis, Sri Lanka is slowly getting back on its feet. The economy looks set to rebound steadily over the coming quarters helped by a sharp drop in inflation, lower interest rates, a recovery in …
Economy and housing market enjoying renewed momentum Core inflation pressures easing but still too strong for comfort Loosening labour market means Bank unlikely to raise rates above 5.0% Note: We’ll be discussing the Canadian economic and policy outlook …
5th July 2023
Fed largely united in favour of temporary pause The minutes of the Fed’s mid-June FOMC meeting suggest that participants were largely of the same mind as far as the decision to temporarily pause the hiking cycle was concerned. Just as “almost all” …
A significant number of EMs that were running large current account deficits last year – including much of Central and Eastern Europe (CEE), Peru and Chile – have seen dramatic improvements in their external positions. That limits the downside risks to …
Rates on hold throughout this year Romania’s central bank (NBR) kept its main policy rate unchanged at 7.00% today and we think it will keep rates on hold throughout this year. The central bank is likely to be the last in the region to transition to …
Press reports suggest that Department of Finance Secretary Jenny Wilkinson is the front-runner to become the next Governor of the Reserve Bank of Australia, though Treasury Secretary Steven Kennedy and RBA Deputy Governor Michelle Bullock are in the …
RBNZ will leave rates unchanged next week With economy in recession and inflation expectations falling, tightening cycle is over But resilient labour market conditions will delay rate cuts until early-2024 Having raised rates more aggressively than any …
Further falls in inflation and the weakness of the most recent activity data support our view that the Bank of Korea (BoK) will shift to loosening monetary policy sooner than when others expect. Inflation figures for Korea published earlier today show the …
4th July 2023
The Reserve Bank of Australia’s decision to keep rates unchanged at 4.10% today suggests that interest rates may not rise all the way to 4.85% as we expect, but further tightening still seems likely . Today’s decision was a very close call: 15 economists …
Tightening cycle not over yet The RBA’s decision to keep rates unchanged today suggests that interest rates may not rise all the way to 4.85% as we currently expect, but further tightening still seems likely. Today’s decision was a very close call: 15 …
