Filtered by Topic: Monetary Policy Use setting Monetary Policy
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
Euro-zone industrial production probably edged up in January (10.00 GMT) The UK’s Spring Budget may contain limited short-term fiscal loosening (12.30 GMT) We think that US retail sales fell by 0.8% in February (12.30 GMT) Key Market Themes How the …
Given the large amount of uncertainty about how the fallout from SVB’s collapse will evolve, we have grouped possible outcomes into three broadbrush scenarios. Only in the worst scenario of financial problems spreading overseas will the global effects …
Strong inflation data counter financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is still likely …
Strong inflation data unlikely to outweigh financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is …
Even if the collapse of several mid-tier banks doesn’t develop into a full-blown systemic crisis, it will more than likely trigger a credit crunch. That raises the risk that the economy will suffer a harder landing, which would accelerate the needed …
13th March 2023
This Global Economics Update answers 5 key questions about the fallout from SVB’s collapse. While the situation remains in flux, there are good reasons to think that it does not call into question the solvency of the US or wider global financial system …
Overview – The economy is on the brink of a mild recession but with underlying inflation still accelerating, we expect new Bank of Japan Governor Ueda to end Yield Curve Control at the upcoming meeting in April. Key Forecasts Table Domestic Demand – We …
The circumstances of the Silicon Valley Bank (SVB) collapse are unique enough that it probably won’t trigger a widespread financial contagion. Nevertheless, it is a timely reminder that when the Fed is singularly focused on squeezing inflation by jacking …
10th March 2023
Despite the renewed hawkishness of central bankers elsewhere, the speech that followed the Bank of Canada’s policy announcement this week suggests that the bar to resume rate hikes remains high. Bank still comfortable with its “conditional pause” The …
Powell in hawkish mood Fed Chair Jerome Powell confirmed this week that interest rates are set to rise higher than we previously anticipated. Powell noted that the strength of the January activity, employment and inflation data indicated that …
Brazil: is a Q2 rate cut plausible? The prevailing monetary policy story in Brazil so far this year has been one of ‘higher for longer’. We set out such a view recently , the BCB’s communications point this way and analyst expectations have shifted up. A …
The view that interest rates in developed markets may rise further and stay higher for longer than previously anticipated gained further traction this week following US Fed Chair Jerome Powell’s hawkish comments on Tuesday. Our US Economics team revised …
GDP shrank in Q4 (to two decimal places) The third estimate of euro-zone GDP in Q4, released earlier this week, strengthened our conviction that the economy will underperform most forecasters’ expectations. The 0.1% q/q expansion in GDP in the fourth …
We have revised up our forecasts for real GDP and no longer think the economy will be quite as weak. This has very little to do with the 0.3% m/m rise in real GDP in January released this morning. Most of that was a rebound after the widespread strikes …
Thailand forecast change The recent inflation data from Emerging Asia have made for encouraging reading, with headline inflation falling in seven out of the nine countries to have published February data. (See Chart 1.) Chart 1: Consumer Prices (%, …
Credit growth benefiting from reopening boost Bank loan growth jumped to a 14-month high in February. And broad credit growth accelerated for the first time since September. This rebound should continue in the near-term thanks to a reopening revival in …
Governor Phil Lowe’s proclamation at Wednesday’s AFR business summit that the RBA was closer to a pause in interest-rate increases has fed speculation of a dovish pivot on the part of the Board. Indeed, financial markets have tamped down their …
Lower inflation means Norges Bank can stick to 25bp hikes February’s decline in headline and core inflation takes some of the pressure off the Norges Bank and means that it is likely to hike by 25bp at the meeting in two weeks’ time. After surprising on …
The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April . While that decision was widely anticipated, we were among the few who predicted the …
Case for end of YCC a touch weaker but still strong Contrary to our expectations, the Bank of Japan did not make any changes to Yield Curve Control (YCC) at today’s meeting. And the case for abandoning the policy now looks a little less compelling than a …
BoJ still likely to end Yield Curve Control The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April. We were among the few who expected the Bank …
The Fed is clearly trying to avoid a premature easing in financial conditions and a repeat of 1970s-style “stop-go” monetary policy. This Update discusses some lessons from that period for equity markets today. Equities have struggled over this week, …
9th March 2023
50bp hike looks a done deal. New guidance likely to explicitly point to higher for longer policy rates. No more news on QT next week, but we expect it to accelerate in July. We expect the ECB to raise interest rates by 50bp next week and accompany that …
Inflation edges down, but still a bit more tightening in the pipeline Mexico’s headline inflation rated edged down to 7.6% y/y in February but the further pick-up in services inflation will continue to worry policymakers at Banxico. We think that the …
For most economies in Emerging Asia it will be local factors, not the actions of the US Fed, that determine the next moves by the region’s central banks. Given the poor outlook for economic growth in Asia, policymakers are unlikely to respond to a more …
This webpage has been updated with additional analysis, Chart and Table of key figures. Inflation continues to soar, tightening cycle to resume Egypt’s headline inflation rate jumped to 31.9% y/y in February, leaving it just shy of an all-time high and …
Malaysia’s central bank (BNM) left its policy rate unchanged today (at 2.75%) and with the economy likely to remain weak and inflation set to fall back further over the coming months, we expect rates to stay on hold for the rest of the year. Today’s …
Rates set to remain on hold in 2023 Malaysia’s central bank (BNM) left its main policy rate unchanged today (at 2.75%) and stated again that it would continue to take time to monitor the impact of past rate hikes before deciding if further tightening was …
The Bank of Canada kept its policy rate unchanged at 4.5% today as expected but, with one eye on the strength of the recent US data and the Fed’s hawkish reaction to that, it sounded less confident that it could maintain the conditional pause in rates …
8th March 2023
The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave little away in terms of guidance). But with inflation likely …
Recent evidence about the health of the euro-zone economy has been mixed. National figures released so far suggest industrial production rebounded in January but retail sales remained very weak. And while activity surveys now point to a small expansion …
Policy unchanged, but Bank leaves the door open to future hikes There were no surprises from the Bank of Canada today as it kept the policy rate unchanged at 4.5%, as it previously hinted it would, and reiterated that it is still prepared to resume …
Rates on hold, door for rate cuts this year remains open Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we don’t think the NBP will rule out further interest rate hikes just yet. But with inflation …
Headline inflation in Mexico will continue to fall back over next couple of years, but strong wage growth means that it won’t return to Banxico’s 2-4% tolerance band until late-2024. Against that backdrop, we think the central bank will deliver two more …
Fed Chair Jerome Powell confirmed today that interest rates are set to rise higher than we previously anticipated. But with most evidence still pointing to economic weakness and markedly lower inflation this year, we still believe the Fed will begin …
7th March 2023
We think that most – perhaps two thirds – of the drag on activity from tighter monetary policy in advanced economies is still to come through in 2023. So, despite some surprisingly resilient data recently, we are sticking to our forecasts for advanced …
Click here to view an online briefing with our team about China's economic plans. It was recorded on 6th March, 2023. The economic plans that have been detailed at the National People’s Congress are more cautious and restrained than had seemed likely …
6th March 2023
Koruna strength will add to disinflation in Czechia The recent strength of the Czech koruna, which hit a 14-year high of 23.3/€ this week, adds to a number of disinflationary forces that are currently taking hold in the country. And we think that …
3rd March 2023
The latest data give the Bank of Canada plenty to think about ahead of its policy announcement next week. The data appear to lend support to the Bank’s view that a soft landing is still achievable, with the stagnation in fourth-quarter GDP followed by a …
The February employment report and Fed Chair Jerome Powell’s testimony to Congress next week should give a clearer indication of whether recent talk of interest rates going “higher for longer” is justified. Longer, but not necessarily higher? Market rate …
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
Another inflation surprise… The focus this week was on yet another higher-than-expected inflation print. The headline inflation rate edged down in February, but only to 8.5%, whereas a much bigger fall had been anticipated. And the core measure rose …
Bank under political pressure to abandon Yield Curve Control as inflation surges Incoming Governor Ueda seems to have been given a mandate to end the policy However, existing Governor Kuroda may well spring one last surprise Yield Curve Control is on …
We think inflation in Turkey eased slightly to 54% in February (07.00 GMT) Final PMIs in Europe may confirm that activity is holding up better than expected (09.00 GMT) We expect the US ISM services index to have fallen back in February (15.00 GMT) …
2nd March 2023
Labour markets look very tight in Central Europe and a handful of other EMs (particularly in Latin America), and we think that wage growth is unlikely to fall far enough in these countries to bring inflation back to target in the near future. One …
The account of the ECB’s last meeting is consistent with our view that the ECB will raise its deposit rate to 3.0% a fortnight today and continue hiking beyond that. In light of the data released since the last meeting, there are growing upside risks to …
Pakistan’s central bank (SBP) raised its policy rate by 300bps (to 20.0%) today, and signalled monetary policy would remain tight as policymakers look to secure a loan deal with the IMF and tackle multi-decade high inflation. We expect a further 200bps …
Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp hike at the meeting in …
