Filtered by Topic: Monetary Policy Use setting Monetary Policy
Click here to read the full report. Overview – Emerging European economies are set for recessions this winter as the impact of high inflation, tight financial conditions and weakening external demand take their toll. Our GDP forecasts for 2023 are below …
12th December 2022
Overview – Soaring interest rates and weak real income growth will result in a more pronounced slowdown in economic activity in both countries than most anticipate. With New Zealand’s central bank determined to push the economy into recession, we’re now …
The Bank of Canada’s 50bp rate hike this week means that variable mortgage rates are now more than 400bp higher than the start of the year. This raises the risk that some will be forced to sell their homes, although there was little evidence of …
9th December 2022
Political chaos rattles Peru It’s been a tumultuous week in Peru that culminated in the ousting of left-wing President Pedro Castillo on Wednesday after he attempted to stage a “self-coup”. He was arrested on charges of rebellion and conspiracy (and …
Fed could be upstaged by CPI data The Fed is used to holding centre stage, but next Wednesday’s policy announcement could end up being overshadowed by the November CPI data, due for release on Tuesday. If we’re right and core prices increased by another …
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
The end of the cycle is nigh… Next Thursday will see the last scheduled meetings of the year for several European central banks. The ECB and BoE will grab most of the attention, but the SNB and Norges Bank will also be in action and we expect both to …
Inflation still rising in the Philippines The past week has brought mostly good news on the inflation front. Of the nine countries in the region to have reported November inflation figures, the y/y rate dropped or was stable in eight of them. (See Chart …
Overview – The authorities are making policy changes to address two of the key drags on China’s economy, the zero-COVID policy and the property sector downturn. But it will be a while before these efforts bear fruit. And in the meantime, the economy will …
We think price pressures in China cooled further in November… (01.30 GMT) … while a decline in US PPI could foreshadow a similar drop in CPI next week (13.30 GMT) University of Michigan consumer confidence is probably still historically weak (15.00 GMT) …
8th December 2022
We expect the Norges Bank to raise its policy rate by 25bp next week, to 2.75%. Signs that the economy is weakening by more than expected might encourage policymakers to nudge down their interest rate forecast. But we still suspect that the policy rate …
The Bank is most likely to slow the pace of rate hikes to 50bp next week. But we forecast a further 100bp of hikes next year to a peak deposit rate of 3%. The key principles guiding QT will be that it is steady and slow. There is a case for the ECB to …
Shift down from 75bps hike in November to 50bps hike in December MPC starting to think more about the level of rates rather than the pace of rate hikes We think rates will rise to a peak of 4.50%, before being cut sharply in 2024 A shift from the 75 …
Overview – The economy is heading for a moderate recession, as higher interest rates weigh on domestic demand and exports contract amid the global downturn. Weaker demand, together with lower commodity prices and an easing of supply shortages, should …
Overview – The RBI has slowed the pace of rate hikes and is likely to call a halt to tightening in early 2023. As the economy weakens, rate cuts could come onto the agenda by late next year and materialise in early 2024, several months sooner than the …
The SNB is likely to look through the recent fall in inflation and hike rates by 50bp next Thursday, to 1.0%, in line with market expectations. We now think that this will be the end of the tightening cycle. Recall that the SNB raised its policy rate by …
The statement accompanying the Brazilian central bank’s meeting yesterday, at which the Selic rate was left at 13.75%, made clear that policymakers are increasingly concerned about fiscal loosening when president-elect Lula takes power. This reinforces …
This page has been updated with additional analysis, chart, and table of key figures. Jump in inflation a sign of things to come; tightening still on the agenda Egypt’s CPI inflation rate jumped from 16.2% y/y in October to 18.7% y/y in November – its …
Slowing growth keeps the NBP on hold Poland’s central bank (NBP) stuck to its script today as it left interest rates on hold at 6.75% for the third consecutive meeting. With inflation nearing a peak and the economy slowing, we think the tightening cycle …
7th December 2022
The Bank of Canada delivered a somewhat dovish 50bp rate hike today, by softening its explicit forward guidance that interest rates will need to rise further. Our GDP and inflation forecasts suggest there is little need for the Bank to raise rates …
The end of the tightening cycle? The Bank of Canada delivered a somewhat dovish 50 bp policy rate hike today by softening its explicit forward guidance that interest rates will need to rise further. We would not rule out a final 25 bp interest rate hike …
Pace of tightening to slow with 50bp rate hike Powell to maintain hawkish line; projections may show higher peak in rates But further good news on inflation will prompt a rethink soon The Fed is set to slow the pace of tightening with a 50bp rate hike …
Overview – The recent resilience of economic activity in Latin America will not last and we think that growth will slow by more than most expect in 2023. Having been among the first to tighten monetary policy last year and with interest rates well above …
Overview – 2023 will be a tough year for the economy as the effects of the previous rises in inflation and previous hikes in interest rates (as well as a future rise from 3.00% now to a peak of 4.50% in early 2023) are felt. Our view that inflation and …
Headline inflation in Central and Eastern Europe (CEE) will peak in most countries in the next few months, at around 20% y/y, and should fall to single-digits across the region by end-2023. But we think this initial large disinflation process will give …
The RBI slowed the pace of monetary tightening with a 35bp hike to the repo rate (to 6.25%) and, with headline inflation set to ease further and growth entering a softer patch, we think the central bank will call a halt to tightening in February. Further …
RBI slows the pace of tightening The RBI slowed the pace of monetary tightening with a 35bp hike to the repo rate (to 6.25%) and, with headline inflation set to ease further and growth entering a softer patch, we think the central bank will call a halt to …
Germany’s industrial output probably contracted by 0.5% m/m in October (07.00 GMT) We expect China’s exports to have fallen by 5.5% y/y due to cooling global demand We think the Bank of Canada will hike rates by 25bp, while Poland’s central bank stays …
6th December 2022
The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift the cash rate to 3.85% by April. The Bank’s decision to lift the cash rate from 2.85% …
RBA not backing away from rate hikes just yet The RBA today hiked the cash rate by 25bp as widely anticipated and while the statement was marginally less hawkish, we’re sticking to our view that the Bank will lift rates to 3.85% by April. The Bank’s …
The last big central bank decisions of 2022 resulted in another batch of hefty rate hikes – if smaller than recent – but also provided important signals about the direction of policymaking in the coming year. Group Chief Economist Neil Shearing and …
5th December 2022
Overview – We expect the lagged impact of higher interest rates to push the real economy into a mild recession next year. Although that downturn will be accompanied by only a modest rebound in the unemployment rate, we expect both headline and core …
Overview – The global downturn will pull Japan into recession next year. And with government caps on utility bills pushing inflation below the Bank of Japan’s 2% target by mid-2023, the Bank will remain the outlier by keeping monetary policy loose. Key …
South Africa’s political turmoil that severely endangered President Cyril Ramaphosa’s position has already shaken the country’s financial markets. In p art, this is related to the prospect of the ruling party attempting to shore up its dwindling support …
2nd December 2022
The national accounts data provided two pieces of good news this week, with revisions to the historical series and stronger-than-expected third-quarter growth leaving GDP higher than expected. While some argue that this will cause the Bank of Canada to …
While food inflation has surprised to the upside in major DMs, it seems to be at or near a peak. We expect a combination of base effects and an easing of underlying price pressures to drag on food inflation in 2023. Food inflation soared in the past …
With weaker growth overseas and the drag from the stronger dollar now pushing exports lower, the resilience of consumption is the only thing keeping the economy from falling into recession. Mixed signals for Q4 GDP Although third-quarter GDP growth was …
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
Valuations may stall equity outperformance India’s Sensex hit a fresh record high of 63,000 this week (see Chart 1), continuing its remarkable performance over the past few months in the context of the sell-off in equities elsewhere in the world. The …
Weak data, slowing inflation, dovish BoK A string of weak activity data, a sharp drop in inflation and dovish comments from the central bank support our view that the Bank of Korea’s tightening cycle is coming to an end soon. The final estimate of third …
Soft data prompt repricing of rate expectations The financial markets this week scaled back their expectations for interest rate hikes by the RBA and are now pricing in a peak in the cash rate of 3.6%, down from 3.9% last week. (See Chart 1.) Chart 1: …
Hopes may be rising that price pressures may finally be easing, but investors risk missing the fact that not all inflation cycles are alike. We think core inflation in the US will fall far faster than it will in the euro-zone, and this will have big …
1st December 2022
Stable inflation keeps pressure off SNB The low inflation rate in November supports our view that the Swiss National Bank will not need to raise interest rates much further in the current cycle. Indeed, there is a growing chance that policymakers raise …
Croatia’s adoption of the euro on 1 st January 2023 is likely to bring only small benefits to the economy given how widely used the euro already is in the country. Even so, we think prospects for Croatia’s economy remain bright and expect it to outperform …
30th November 2022
Higher interest rates weighing on domestic demand Core inflation pressures eased in October Bank to drop down to 25 bp hike as it balances risks of over- and under-tightening The easing of the three-month annualised measures of core inflation in October …
Economy holds up in Q3, but higher rates now taking a toll While base effects caused a sharp slowdown in headline GDP growth in India in Q3 (Q2 of FY22/23), growth held up well in quarter-on-quarter terms. However, there are signs in more timely activity …
Peak headline inflation won’t stop ECB hiking Euro-zone inflation may now be past its peak but with the core measure unchanged in November and set to remain well above 2% next year, we expect the ECB to hike rates by 50bp or 75bp in December. The fall …
Labour market remains very tight but consumption moderating and inflation peaking Risks to our above-consensus cash rate forecast are shifting to the downside With GDP growth slowing sharply next year, we still expect rate cuts from late-2023 With …
