Filtered by Topic: Monetary Policy Use setting Monetary Policy
Domestic demand coming off the boil Recent data paint a mixed picture of the state of domestic demand. On the one hand, survey evidence remains relatively upbeat. The PMI readings for India have recently held up much better than in most other EMs and …
18th November 2022
With inflation still more than five times the Riksbank’s target, Stefan Ingves may be tempted to end his marathon stint as Governor with another 100bp rate hike. But we think the Bank is more likely to raise rates by 75bp, to 2.5%, while signalling more …
17th November 2022
Next year will be characterised by falling headline inflation, which should help to prevent interest rate expectations and bond yields from rising much further. But we also expect core inflation to remain above 2% for some time. As a result, we think …
Higher interest rates and larger private sector debt burdens mean that debt interest service ratios could rise to levels last seen in the 1990s in many EMs next year. This is unlikely to be a major problem in a handful of EMs such as South Africa, India …
Bank Indonesia (BI) today raised interest rates by a further 50bps (to 5.25%) and we think further hikes are likely as the central bank looks to support the rupiah and clamp down on inflation. In its press conference the central bank stated that …
Little sign of goods price pressures easing Final inflation data for October confirm that price pressures strengthened and became more broad-based. Unlike in the US and UK, there is little sign that goods inflation has passed its peak. While headline …
The central bank of the Philippines (BSP) today raised its main policy rate by a further 75bps (to 5.0%), and we think further tightening is likely in the near term. But with inflation having probably peaked, headwinds to the recovery mounting and the …
More hikes coming in Indonesia Bank Indonesia (BI) today raised interest rates by a further 50bps (to 5.25%) and we think further hikes are likely as the central bank looks to support the rupiah and clamp down on inflation. While a rate hike today was …
Further hikes likely in the near term, but tightening cycle to be over by early next year The central bank of the Philippines (BSP) today raised its main policy rate by a further 75bps (to 5.0%), and we think further tightening is likely in the near term. …
Core inflation pressures better than they look Although the annual rates of CPI-median and CPI-trim edged up in October, the 3-month annualised rates that the Bank of Canada is now focussed on declined. As that for CPI-median is now in the 1% to 3% …
16th November 2022
Broad-based strength in labour market and inflation to prompt 75bp hike next week Rates to peak at 5.0% by April With inflation set to drop back, RBNZ will cut rates in late-2023 With the labour market and inflation going from strength to strength and …
Inflation may have peaked, but battle not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October will mark the peak. But core inflation may yet rise further, which is why we think the …
Fresh upwards pressures pushing up inflation Data out of Nigeria showing a pick-up in inflation to 21.1% y/y in October offered little sign that price pressures are abating. And that’s before the effects of recent flooding and currency weakness have fully …
15th November 2022
Rise in core inflation will keep Riksbank in hawkish mode Another bigger-than-expected increase in core inflation, to 7.9% in October, will keep the Riksbank focused on slowing demand when policymakers meet next week. We expect a further 75bp rate hike, …
Prices pressures are moderating in earnest The substantial falls in both headline consumer and wholesale price inflation in October reinforce our view that the Reserve Bank will slow the pace of monetary tightening in its next scheduled policy meeting in …
14th November 2022
Sovereigns tap the dollar bond market Governments in Turkey and Poland made a splash this week as they announced rare dollar bond issues. Turkey appears to be taking advantage of low credit spreads but the decision in Poland follows recent concern among …
11th November 2022
Lula starting to show his true colours? Developments this week poured cold water on the rally in Brazil’s financial markets that followed Lula’s election victory. Comments from Lula himself yesterday suggesting that higher spending should be prioritised …
Bank of Canada Governor Tiff Macklem said this week that the unemployment rate will need to rise to help restore price stability, but he also played down the significance of the strong gains in employment and average earnings in October. That suggests …
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
House prices falling in Sweden and Norway Sweden’s housing market has cooled significantly this year and prices are likely to fall outright soon. SEB’s monthly survey showed that in October, 22% of households expected house prices to rise whereas a much …
Savings rate fell below pre-virus level in Q3 Comments by RBA Deputy Governor Bullock suggest that the risks to our above-consensus policy rate forecasts are shifting to the downside. Bullock noted today that the Bank is getting closer to the point where …
Another 75bp hike, but end of tightening cycle on the horizon Mexico’s central bank delivered a fourth consecutive 75bp interest rate hike, to 10.00%, today but, with inflation now past its peak and the economy likely to slow sharply over the coming …
10th November 2022
While the risk premium that pushed gilt yields up and the pound down after the mini-budget has mostly been reversed under the stewardship of Sunak and Hunt, the fear that the markets will baulk at any fiscal indiscipline means that the Chancellor will …
Goods deflation begins; health insurance flips The better than expected 0.3% m/m increase in core consumer prices in October won’t on its own persuade the Fed to drop its hawkish stance. But we expect this to mark the start of a much longer …
The pace of global monetary policy tightening is slowing But neither history nor central bank guidance give a reliable steer of the future profile Early signs are that the Bank of Canada and US Fed will lead the retreat next year In recent weeks, …
Doves take control at the NBP Poland’s central bank (NBP) announced (very late by its usual standards) that it had left interest rates unchanged at 6.75% at today’s MPC meeting, confirming previous comments from policymakers that they believe the current …
9th November 2022
The recent IMF deals reached by governments in Egypt and Tunisia are positive developments and will help ease balance of payments strains in both countries. Egypt has already made progress with meeting the IMF’s demands and restoring macro stability, …
The ECB might start quantitative tightening next year but that’s not guaranteed, and even if it does so we doubt that it will make much of a dent in its government bond holdings. As a result, interest rates will remain the most important tool for …
The latest activity indicators show that the economy contracted in October, and the forward-looking measures of new orders and expectations suggest that the downturn will get worse. We have pencilled in a contraction in GDP of 0.5% q/q for the fourth …
8th November 2022
The Fed’s mounting losses are an expected result of surging interest rates and will not prevent officials from continuing to tighten policy, nor will they require the Treasury to step in and “recapitalize” the central bank. But it does mean that …
The Polish central bank’s dovish monetary policy stance is becoming increasingly at odds with the severity of inflation pressures and this reinforces our long-held view that inflation won’t return to the central bank’s target until 2025 at the earliest. …
NBR’s tightening cycle nearing an end The National Bank of Romania (NBR) slowed down the pace of its tightening cycle today, with a 50bp interest rate hike to 6.75%. We think that the tightening cycle is nearing an end, but that interest rates will have …
NBP divided on the length of its tightening cycle The divergent views among policymakers at the National Bank of Poland (NBP) make it increasingly difficult to tell whether the central bank’s tightening cycle is coming to an end. We expect the NBP to …
4th November 2022
The modest fiscal loosening unveiled in the Fall Economic Statement this week is unlikely to move the needle much for monetary policy, but the surge in employment in October and the acceleration in wage growth nevertheless leave the Bank of Canada’s …
This week’s FOMC meeting may have dashed hopes that the Fed will follow the recent dovish tilts of some other central banks. But we still think Fed officials are underestimating the degree to which their aggressive rate hikes will put downward pressure on …
ECB Governing Council members had a busy week, with just under half of them giving speeches or interviews on the outlook for monetary policy. There are four key takeaways from their comments. First, rates will rise further. All policymakers who spoke …
Falling inflation may keep SNB in check The reductions in headline and core inflation in Switzerland in October confirm that inflation has now passed its peak, and both measures look set to continue on a downward path next year. (See here . ) We don’t …
This week the Bank of England displayed the most extreme example of a “dovish hike” that we can recall. The hike bit; the 75 basis point rise in interest rates was the largest rise since 1992; it meant that rates have risen in each of the past eight …
Our US Economics team held a briefing shortly after the October data release, in which they answered client questions and addressed key issues around what was happening at the Fed and Congress, including: How far the Fed will raise interest rates; Whether …
RBA increasingly worried about wage-price spiral The Reserve Bank of Australia lifted the cash rate by 25bp on Tuesday as we and most other analysts had anticipated and the marked upward revision to its inflation forecasts support our view that the Bank …
Composite PMIs for Italy and Spain probably fell further in October (09.00 GMT) We think US non-farm payrolls rose by 225,000 in October (12.30 GMT) Sign-up to our Global Economics Drop-In on the upcoming recession Key Market Themes We’re inclined to …
3rd November 2022
Although the Monetary Policy Committee (MPC) raised interest rates today by 75 basis points (bps), from 2.25% to a 14-year high of 3.00%, it sent the strongest signal yet that it thinks rates won’t need to rise much above 4.00%. But with price/wage …
Dovish CNB unlikely to tighten further The Czech National Bank (CNB) left its policy rate on hold, at 7.00%, for a third consecutive meeting today. With inflation nearing a peak and the economy now contracting, we think rates will be left unchanged over …
The RBI’s out-of-cycle meeting today concluded with no decision on interest rates. That’s no surprise – it was called for administrative reasons, rather than as a response to changing economic conditions. We believe that further tightening will still be …
Dovish tilt, but rates may still rise to 5.00% Although the Monetary Policy Committee (MPC) raised interest rates today by 75bps, from 2.25% to a 14-year high of 3.00% (consensus 3.00%), it sent a strong signal that it is unlikely to raise rates to the …
The surge in energy prices this year has led to a sharp widening in Hungary’s current account deficit and increased its dependence on foreign capital inflows. While the central bank (MNB) seems to have put a floor under the currency recently, it remains …
Today’s decision by the Norges Bank to slow the pace of rate hikes is the beginning of the end for its tightening cycle. But we don’t expect a pivot towards interest rate cuts next year. The Bank signalled at its last meeting that after raising its policy …
Falling inflation will allow SNB to raise rates less than others The decline in both core and headline inflation in October supports our view that Switzerland has passed peak inflation. We expect further falls in the coming months which will allow the …
The Nigerian central bank’s plans to replace high-value bank notes by the end of January will, if India’s experience in 2016 is anything to go by, disrupt activity and fail to address some of the problems (e.g. illicit activity) that policymakers are …
