Filtered by Topic: Monetary Policy Use setting Monetary Policy
Encouraging signs in January CPI and economy has slowed sooner than expected But labour market still tight and wage pressures too strong Risk of higher interest rates elsewhere also keeps pressure on the Bank The fall in CPI inflation in January and …
1st March 2023
RBA’s hawkishness suggests rates will rise for a few more months However, softer incoming data suggest that the peak in rates isn’t far off Looming slowdown in activity and inflation opens door for rate cuts before year-end The RBA adopted a more …
Slowdown in inflation won’t prevent RBA from lifting rates to 4.1% GDP growth softened last quarter and inflation slowed sharply in January. But with inflation still very high, that won’t prevent the RBA from hiking the cash rate to a peak of 4.1% in May …
We think even if some of the recent headwinds that have buffeted emerging market (EM) assets fade, a slowdown in global growth might keep them under pressure in the near term. EM assets have had a fairly tough month . Local-currency and …
28th February 2023
We think Australia’s GDP growth softened a touch in Q4 (00.30 GMT) Germany’s HICP inflation probably fell in January (13.00 GMT) We expect the ISM manufacturing index for February to have remained weak (15.00 GMT) Key Market Themes We think the recent …
Hungary’s central bank (MNB) reiterated the message that it’s unlikely to cut its base rate anytime soon, when it left that rate on hold again today (at 13.00%). That said, the MNB offered some signs that it may be close to phasing out its market …
MNB to keep its base rate on hold as inflation threat persists Hungary’s central bank (MNB) left its benchmark base rate on hold again today (at 13.00%) and, with inflation likely to stay far above target for some time, we don’t expect the MNB to start …
Local governments have stepped up their borrowing since the start of the year. They issued RMB860bn in special bonds over the course of January and February, up from an average of RMB105bn per month during the second half of 2022. Special bonds are …
A widening in profit margins could mean that inflation is slower to fall back to the Bank of England’s 2.0% target than we expect. That would cause the Bank to raise interest rates even further than we currently anticipate and/or keep them higher for …
Asian currencies have dropped back over the past few weeks against the US dollar, with the two worst hit currencies (the Thai baht and the Korean won) down around 6% against the greenback since the start of the month. Renewed concern about inflation in …
27th February 2023
Sub-Saharan Africa’s two biggest economies, Nigeria and South Africa, are both facing slow-burning debt problems. In Nigeria at least, elections on Saturday offer an opportunity to shift towards greater fiscal discipline – especially if opposition …
24th February 2023
Argentina-IMF relations set for a rockier phase Argentine officials headed to Washington this week to discuss the fourth review of the country’s IMF deal. The good news is that Argentina is likely to have met last year’s performance criteria, which …
The People’s Bank last cut policy rates in August. Worries about currency weakness then stayed its hand – plus a view that supply-side disruption linked to COVID would render further easing ineffective. Those concerns have since gone away. We had thought …
The more hawkish tone in financial markets this week is justified. Prior to this week, investors seemed to be optimistic that the previous increases in interest rates would be enough to bring inflation back down to the Bank of England’s 2.0% target, and …
As we noted here , the Riksbank has made a big policy shift in the few weeks since Erik Thedéen took over as Governor. The most concrete changes were to raise its forecast for policy rates and announce the start of outright asset sales, but the Bank has …
MPC minutes highlight divergence of views The MPC minutes of the RBI’s policy meeting from earlier this month – in which the pace of tightening slowed to a 25bp hike , taking the repo rate to 6.50% – confirm that there are significant differences of …
Fight over yield ceiling resumes Yield Curve Control (YCC) remains on borrowed time. The 10-year Japanese government bond (JGB) yield has consistently closed above the 0.5% ceiling since Monday last week and this week the Bank has once again had to step …
We think Japan’s headline CPI inflation rose to a four-decade high in January (23.30 GMT) US income and spending data is likely to show a strong rebound in consumption (13.30 GMT) We expect headline and core US PCE price indices to have risen by 0.5% …
23rd February 2023
Investors seem to have become more worried about inflation recently, with evidence that the global economy is holding up better than expected suggesting underlying price pressures might prove more persistent than hoped. That’s taken a toll on both “safe” …
The recent resilience of economic activity has left us comfortable with our view that the Bank of England will raise interest rates from 4.00% now to a peak of 4.50%, rather than to 4.25% as analysts expect, and keep rates at that higher level all year. …
Further rise in services inflation will keep Banxico in hawkish mood Mexico’s headline inflation rate edged down to 7.8% y/y in the first half of February but the further pick-up in services inflation will continue to concern policymakers at Banxico. We …
CBRT eases policy after earthquakes hit Turkey’s central bank (CBRT) lowered its key policy rate by 50bp, to 8.50%, today as policymakers sought to support the economy in the wake of the devastating earthquakes this month. Another rate cut in March looks …
After a stellar performance for most of 2022, the Gulf economies are slowing. Primarily, that has reflected the impact of oil production cuts agreed with the rest of OPEC+ which is weighing on growth in oil sectors. And in the UAE and Qatar at least, the …
The Bank of Korea today left interest rates unchanged (3.5%), but appeared to leave open the door to further hikes later in the year. However, with the economy struggling badly and inflationary pressures set to ease further over the coming months, we …
Cuts coming sooner than consensus expects The Bank of Korea today left interest rates unchanged (3.5%), bringing an end to the country’s tightening cycle. With the economy struggling badly and inflationary pressures set to ease further over the coming …
The latest data suggest that current account deficits in the region’s major economies narrowed towards the end of last year, which is particularly good news for Colombia and Chile. Both were running alarmingly large shortfalls last year which helps to …
22nd February 2023
The January CPI data provided mixed signals about developments in underlying inflation. The CPI excluding food and energy and the CPI excluding the eight most volatile components each rose by just 0.1% m/m, which were the lowest gains since early 2021. …
The first year of the war in Ukraine has had an enormous impact on the country’s economy and left it highly dependent on financing from allies. Russia’s economy has contracted too, but it weathered the impact of Western sanctions better than expected and …
The war in Ukraine, which marks its one year anniversary on Friday, has had a profound impact on the emerging world. Ukraine’s economy has collapsed, while Russia’s has contracted too even though the imposition of sanctions has not been as severe as …
Even though the Reserve Bank of New Zealand slowed the pace of tightening at today’s meeting, it still signalled a peak in the overnight cash rate of 5.50% by the middle of this year. Our more pessimistic forecasts for economic activity and wage growth …
The higher bond yields that would follow abandonment of Yield Curve Control would make it more difficult to stabilise Japan’s public finances. But the long maturity of government debt means that the government’s interest rate bill would only creep up …
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
In a crowded field given the FY23/24 Union Budget and the RBI’s more-hawkish-than-expected policy announcement, the Adani short-selling crisis has been the main story over the past month. So far at least, there are few signs of broader contagion. Foreign …
21st February 2023
The near-term economic outlook for Korea is very poor, with falling real incomes, problems in the housing market and weak global demand all set to weigh on prospects this year. Our forecast is that the economy will grow by a below-consensus and …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
Being ranked by the Sunday Times as the top UK economic forecaster for 2022 is a great accolade and has generated a lot of interest in what we expect to happen next. Our forecasts for 2023 imply a tougher year than the consensus, with higher inflation …
20th February 2023
The Bank of Israel (BoI) hiked interest rates by another 50bp, to 4.25%, today and while it continued to point to signs of slower growth, it sounded more concerned about the strength of inflation than it did at its last meeting. It now looks likely that …
Q uantitative tightening and the repayment of TLTROs mean that the ECB’s assets are likely to decline by around one quarter by the end of 2024. We expect the repayment of TLTROs to have a negligible macroeconomic impact. QT should also proceed smoothly, …
The minutes of the Riksbank’s latest policy meeting show that the previously dovish Executive Board members have become less so, and that the new members are on the hawkish side. That reinforces our view that the Bank will raise rates by 50bp in April …
Governor Tiff Macklem reiterated this week that the Bank of Canada wants time to assess the impact of high interest rates, suggesting it will not respond to the strength of employment by immediately resuming interest rate hikes. The weakness of home …
17th February 2023
In a previous edition of the UK Economics Weekly we said that the CPI core services inflation and private sector pay figures released this week would prove pivotal in determining whether the Bank of England raises interest rates further or calls time on …
Food price inflation may be overstated The consumer price data for January released this week proved something of a nasty surprise , with the headline rate jumping unexpectedly sharply to 6.5% y/y, pushing it above the ceiling of the RBI’s 2-6% target …
UK retail sales volumes probably rose by 0.5% m/m in January (07.00 GMT) We think Russia’s GDP fell by 3.5% y/y in Q4 (16.00 GMT) Catch-up here on yesterday’s Drop-In on our UK economic outlook Key Market Themes The recent strength of the US dollar and …
16th February 2023
Inflation across most of Latin America has peaked, but this is mainly an energy story – core price pressures are proving much more persistent. And underlying price pressures are likely to ease only gradually over the coming months, which will keep …
A raft of strong data out of the US have poured cold water on the idea that its economy has tumbled into recession at the start of 2023. And this comes after GDP data revealed that the euro-zone and UK economies (narrowly) avoided outright contraction …
The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bps (to 6.00%) and increased its inflation forecast for this year significantly. We are revising our interest rate forecasts, and now expect two more 25bps hikes …
Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%) and signalled that further rate increases this year were unlikely. This supports our view that the tightening cycle has now come to an end. We expect the policy rate to remain on …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. This supports our view that the tightening cycle has now come to an end. We expect the …
More tightening still to come The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bps (to 6.00%), and we think more tightening is likely in the near term amid worries about high inflation. The decision was in line …
Signs of softening labour markets across Central and Eastern Europe (CEE) support our view that intense wage pressures in the region will ease in the coming months. Even so, we still think that wage growth will generally remain above levels consistent …
15th February 2023
