Filtered by Topic: Monetary Policy Use setting Monetary Policy
The central bank of the Philippines (BSP) today raised its main policy rate by another 50bp (to 4.25%), and signalled that more hikes were likely in the near term. While further tightening is likely over the coming months, with inflation having peaked …
22nd September 2022
The Brazilian central bank’s decision to leave the Selic rate unchanged at 13.75% after 12 consecutive hikes makes it one of the first central banks globally to bring its tightening cycle to an end. Policymakers are likely to turn to interest rate cuts …
More tightening to come Even after today’s widely-expected 50bp rate increase by the Norges Bank, taking the policy rate to a 10-year high of 2.25%, the Bank has not finished tightening yet. The policy statement accompanying the rate hike said that “the …
The Bank of Japan kept policy loose and retained its easing bias today and we think it won’t tighten policy even as underlying inflation reaches its 2% target. As was widely anticipated, the Bank kept its short-term policy rate at -0.1% and its target for …
New interest rate forecasts for Indonesia Bank Indonesia (BI) today raised interest rates by a further 50bp (to 4.25%) and signalled that further tightening was likely as it aims to clamp down on rising inflation. While a rate hike today was never in …
SNB adds to the crop of bumper rate rises The Swiss National Bank continued its tightening cycle today, delivering a 75bp rate hike as we expected. Further rate rises are likely at the next couple of meetings, but we think that investors have got ahead of …
Further hikes likely in the near term, but tightening cycle to be over by end-2022 The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bp (to 4.25%), and signalled that further hikes were likely in the near term. The …
Bank of Japan won’t tighten even as inflation rises well above target The Bank of Japan kept policy loose and retained its easing bias today and we think it won’t tighten policy even as underlying inflation reaches its 2% target. As widely anticipated, …
The Fed stuck to the script in delivering a 75bp rate hike at its September meeting, but in our view still managed to deliver a hawkish message with the accompanying projections , which imply an additional 75bp hike in November and a 50bp move in …
21st September 2022
A hawkish 75bp hike The Fed may have stuck to the script by delivering a 75bp rate hike at its September meeting, but it still managed to deliver a hawkish message with the accompanying projections, which imply an additional 75bp hike in November and a …
We think the Federal Reserve will raise rates by 75bps... (19.00 BST) ...and the Bank of England to hike by 50bps (12.00 BST) We expect the SNB and Norges Bank to continue tightening policy too (08.30 & 09.00 BST) Key Market Themes The extent of the …
The RBI this month asked four public-sector banks to trial its central bank digital currency (CBDC) before year-end, keeping to the timeline that it set out when plans were first announced in the FY22/23 Union Budget. As our CBDC handbook explains, any …
Inflation passed its peak, but monetary policy hawks still hold most sway The fall in inflation in South Africa, to 7.6% y/y in August, marked the first sign that price pressures are turning a corner. But we doubt this will be enough to convince the …
Despite incurring a record loss last year and now having to operate with negative equity, the RBA has not requested a recapitalisation from the government. But given that it did receive a capital injection in 2013 and that it may well record further …
The Fed looks set to deliver a third consecutive 75bp rate hike tomorrow, but if we’re right that inflation will fall back soon, officials will quickly pivot to much smaller hikes. The continued drop in gasoline prices and easing food inflation will …
20th September 2022
Even after raising its policy rate by 100bp today, the Riksbank signalled that its tightening cycle has some way to go. We expect another large hike at its final meeting of the year in November, perhaps by 75bp. Next year, the beginning of QT will ease …
The outlook for China’s economy has deteriorated recently, but it still doesn’t look like the PBOC will ease policy much in response. We suspect that if the central bank were to have a change of heart, it would be quite disruptive to the country’s …
16th September 2022
Manufacturing outlook remains muted Although manufacturing sales volumes increased by 0.5% m/m in June and 0.6% m/m in July, those gains only partly reversed the 2.1% decline in May. Furthermore, the July gain looks like it was boosted by a …
August CPI data reinforce monetary policy divide The latest batch of inflation data out of Central and Eastern Europe (CEE) provides support to our view that tightening cycles in Czechia and Poland are at an end, but that Hungary’s central bank (MNB) …
Policymakers worried by falling won The Korean won has continued to fall against the US dollar over the past week and is now at its lowest rate against the greenback since the 2008-09 Global Financial Crisis. It has fallen by 15% against the dollar since …
The economic data this week suggest that slowing activity growth isn’t yet putting downward pressure on core inflation, which is likely to see the Fed remain in hawkish mode at its meeting next week. But we still think that picture could change quite …
PBOC trying to loosen without triggering renminbi The onshore renminbi weakened past 7/$ for the first time in two years today. Recent currency weakness has clearly put the PBOC on edge. It has been pushing back via the daily fixing. The exchange rate …
Data released this week brought yet more evidence that the euro-zone is heading for recession. The energy crisis was already weighing on industry in July, with output in the sector contracting sharply, especially among energy-intensive producers. And …
Not a lot appears to link electricity, hot drinks, furniture and eggs, but this week all four made it into Statistics Sweden’s CPI categories with the highest annual inflation rates in August. The message from this week’s inflation release for August …
Easing cycle entering a slower phase The decision by Russia’s central bank to cut the policy rate by a smaller 50bp, to 7.50%, confirms that, having already lowered rates sharply since April, the easing cycle is entering a slower phase. The decision was …
Hawkish signals from Lowe tilt the balance The release of stronger-than-expected US inflation figures on Tuesday prompted a small repricing of market expectations for the upcoming RBA meeting in October Markets now price in around a 50% chance of …
GPIF could shift back to domestic assets The release of stronger-than-expected US inflation figures on Tuesday contributed to a further rise in US long-term interest rates. They are now the highest they’ve been since mid-June. With the Bank of Japan …
Even more caution than usual should be exercised when using UK overnight indexed swap (OIS) rates to infer the expected path of Bank Rate over the next couple of years. This is because they have risen by far more than the yields of Gilts with comparable …
15th September 2022
We think China’s August activity data will reveal further economic weakness (03.00 BST) Final August euro-zone inflation data may show broadening price pressures (10.00 BST) We expect Russia’s central bank to cut by 50bp (11.30 BST) Key Market Themes …
Next week, we expect the Swiss National Bank, Riksbank and Norges Bank to raise interest rates aggressively. The SNB and the Riksbank both look set to raise rates by 75bp, and we would not rule out a bumper 100bp from the latter. But the Norges Bank is …
After fully adjusting our economic forecasts to take account of what is shaping up to be a big fiscal expansion, we now think the Bank of England will raise interest rates from 1.75% currently to a peak of 4.00% next year (our previous forecast was 3.00%) …
Rate hikes on the way across MENA A raft of central banks across the region look set to raise interest rates next week as those with dollar pegs follow the US Fed and we also hold a non-consensus view that the Central Bank of Egypt will resume its …
Monetary policy makers across Emerging Asia remain in hawkish mode – every central bank in the region with the exceptions of China and Vietnam has now raised interest rates this year – and further hikes are likely over the next couple of months. …
The recent decline in oil prices has weighed on some equity market indices and come alongside a decline in US inflation compensation, but we don’t think those moves will unwind much even if, as we expect, oil recovers a bit. Oil prices have now fallen …
Deadline for applications under COVID-19 lending facility won’t be extended Interest rate targets will remain at current levels as surge in inflation won’t be sustained Bank will be able to ride out renewed pressure on 10-year yield target The Bank …
The latest data have revealed that the world’s major economies are all struggling, but for different reasons. In Europe, the energy crisis is largely behind the recent softness in consumer and industrial activity. In the US, higher interest rates are …
14th September 2022
August CPI data guarantee rate hike of at least 75bp next week New projections may show rates peaking slightly higher We still expect eventual sharp fall in inflation to prompt rate cuts next year The continued strength of core inflation points to …
The continued resilience of the economy means that the RBA will have to raise rates more sharply than most expect, which in turn will result in a more severe slowdown in activity than widely anticipated. However, the more benign nature of the recent …
Large shortfall in labour supply keeps labour market exceptionally tight With further evidence that the weaker economy is leading to a cooling in labour demand, the renewed fall in the unemployment rate to a new 47-year low of 3.6% was driven by a …
13th September 2022
Rise in headline CPI rate should ensure another 50bp rate hike this month The rise in Indian CPI inflation in August to further above the RBI’s 2-6% target range should ensure that the central bank delivers another 50bp hike to the repo rate (to 5.90%) in …
12th September 2022
Reports that the ECB will soon start debating QT add to the risks facing euro-zone government bond markets. While the Bank could still expand its holdings of peripheral sovereign debt through the PEPP, QT would raise the bar even further for it to …
The Bank of Canada’s hawkish communications this week, alongside its 75bp policy rate hike, suggest that it remains unfazed about the downside risks to activity and that it initially favours a 50bp hike at the next meeting in October. That said, the …
9th September 2022
Chile and its constitution: back to square one While the surprisingly strong rejection of Chile’s proposed new constitution in Sunday’s referendum has eased some concerns about a radical shake up of the country’s economic model, the outcome doesn’t put an …
Frozen in the headlights Early indicators suggest that China’s economy was even weaker in August than it was in July, when the rebound from the Shanghai lockdown prematurely fizzled out. And constraints faced by policymakers – some they have little …
Zambia: pending debt relief may not be enough Analysis from the IMF this week suggests that, even with debt relief in the pipeline, putting Zambia’s public debt on a sustainable footing will be difficult. We will look in detail at the IMF’s projections …
Notwithstanding the big policy announcements in the UK this week, we still think that the pound and the UK stock market will struggle over the rest of this year, but expect 10-year Gilts to rally. We set out what we think the “Energy Price Guarantee” …
Fed still in hawkish mood In the run-up to the Fed’s next policy announcement on 21 st September, the release of August’s consumer price data next Tuesday could still be pivotal in determining whether the Fed will follow the ECB and Bank of Canada with …
CEE and the Nord Stream 1 gas shut-off The indefinite closure of the Nord Stream 1 gas pipeline by Russia late last Friday has added to the risks around energy supply in Central and Eastern Europe (CEE) and presents downside risks to our GDP growth …
The ECB went big this week, delivering on Thursday a 75bp rate rise, which President Lagarde described in the post-meeting press conference as a “frontloading step in [the Bank’s] journey of normalisation”. While she wouldn’t be drawn explicitly on how …
Inflation to reach 7% later this year We are adjusting our inflation and policy rate forecasts for Indonesia in response to the recent fuel price hikes. The 30% increase in the price of gasoline and diesel that was announced earlier in the week is aimed …
