Filtered by Topic: Monetary Policy Use setting Monetary Policy
Soaring electricity and gas prices will help lift inflation above 3% by year-end. But with that boost unlikely to be sustained, the Bank of Japan won’t see a need to tighten monetary policy. The surge in food prices and the fading drag from last May’s …
24th August 2022
The growth outlook for the emerging world has taken a turn for the worse. The latest activity data for China suggest that the post-lockdown recovery has lost steam. The PBOC has responded by lowering interest rates and we expect further easing, but we …
23rd August 2022
It’s clear in hindsight that the Bank of England kept monetary policy too loose for too long during the recovery from the pandemic. But that does not mean that the mandate given to it by the government requires change. In fact, making radical changes to …
Bank Indonesia (BI) hiked interest rates by 25bp to 3.75% today, and the hawkish commentary from the press conference increases the risk that the Bank will tighten policy further this year. Today’s decision came as a surprise. Of the 27 analysts …
Bank will tighten policy further Bank Indonesia (BI) hiked interest rates by 25bp to 3.75% today, and the hawkish commentary from the press conference suggests that the Bank will tighten policy further over the coming months. Today’s decision came as a …
Australia’s house prices are now falling at a similar rate as they did during the 2017-19 downturn, which was the largest in the country’s modern history. (See Chart 1.) Home sales remain well above pre-pandemic levels, building activity is holding up …
22nd August 2022
Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the faltering economy. We expect additional easing to follow in the coming months, but policymakers still appear reluctant to engineer a …
PBOC extends lifeline to struggling economy Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to support the faltering economy. We expect additional easing to follow in the coming months, but …
Ruto wins, but political risks remain elevated Deputy President William Ruto was this week declared winner in Kenya's presidential election, but the result is being challenged and the threat of violence lingers. Even if that is avoided, Mr. Ruto will …
19th August 2022
In addition to revealing that higher interest rates had barely affected household and corporate finances, national accounts data for Q1 suggested that, with the exception of households in a handful of medium-sized economies, private sectors are …
The further rise in core inflation in July was largely due to a surge in travel services prices, much of which should be reversed after the summer. Nevertheless, that rise in core inflation, the continued strength of broader housing-related activity, …
Turkey doubles down on unorthodoxy The surprise interest rate cut by Turkey’s central bank this week, despite inflation reaching close to 80% y/y in July, threatens to sow the seeds of the next currency crisis. After all, Turkey’s external position is …
With the rebound in activity growth in July coming against a backdrop of easing inflation, we still think the Fed will hike rates by a smaller 50bp next month. July data should ease …
Core inflation to offset falls in food & energy CPI data for July released last Friday indicated that the upside risks to food inflation we flagged earlier this year have not materialised. As we noted, food prices fell by 0.7% m/m in seasonally-adjusted …
Our existing forecast envisages 25 basis point (bps) hikes at the Bank of England’s September and November policy meetings. But given the data released over the past week, we now would not be at all surprised if the Bank were to deliver a second 50bps …
Norway's GDP back to pre-crisis trend Having had a relatively good pandemic, Norway is now one of the few European countries to benefit from the energy crisis. We learnt this week that mainland GDP increased by 0.3% in June. Although this was a little …
Recession just round the corner The second estimate of euro-zone GDP in Q2, published this week, confirmed that the economy grew at a decent pace in the first half of the year. (See here .) However, this is unlikely to last. The construction sector is …
Hit to hydro putting pressure on coal supplies Southwest China is currently experiencing power shortages due to a severe drought and heatwave. Officials in Sichuan province and Chongqing municipality have responded by ordering week-long halts to factory …
A hike on Thursday due to inflation worries With inflation at a 24-year high, the Bank of Korea (BoK) looks certain to raise interest rates again at its meeting on Thursday. We have pencilled in another 25bp hike, which would take the policy rate to …
Abdalla begins with a hold as pressures mount on pound The Central Bank of Egypt (CBE) kept interest rates on hold, at 11.25%, in the first meeting under new caretaker governor Hassan Abdalla but, with pressure mounting on the pound, we still think …
18th August 2022
Amer departs… The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer yesterday has further increased scrutiny of the country’s exchange rate policy. A weaker pound is clearly needed, preferably under an IMF deal, but there is a clear risk that …
Turkey’s central bank stepped up its fight against economic orthodoxy by cutting its one-week repo rate by 100bp, to 13.00%, despite the backdrop of inflation at 80% and an extremely poor external position. This latest move could prove to be the trigger …
Underlying inflation still rising Final inflation data for July underline that price pressures remain strong and broad-based. With wholesale natural gas and electricity prices having surged again in the weeks since July, retail gas and electricity prices …
Following today’s decision by the Norges Bank to raise its policy rate by 50bp at the second consecutive meeting, we now expect the Bank to make it a hat-trick of 50bp hikes at the next meeting in September. With price pressures looking strong, further …
The central bank in the Philippines (BSP) today raised its policy rate by a further 50bps to 3.75%, and gave a strong indication that more rate hikes are likely over the coming months. That said, with inflation set to peak soon and headwinds to the …
Fed’s July meeting minutes likely to emphasise commitment to further hikes (Wed. 19.00 BST) We expect the Norges Bank to raise its policy rate by 50bp to 1.75% (09.00 BST) Turkey’s central bank will probably leave its one-week repo rate on hold at 14% …
17th August 2022
The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer points to a growing tension within policymaking circles on the best way to address the country’s external imbalances. We think the next governor will ultimately need to let the pound …
Upward surprise will keep Bank of England in hawkish mode The encouraging evidence that the upward pressure on underlying inflation from global factors has started to ease will be of little comfort to the Bank of England given the signs that this is being …
The RBNZ lifted the overnight cash rate by 50bp to 3% today as everyone had anticipated and signaled that it will deliver another 50bp hike in October. We now expect the Bank to hike rates to a peak of 4% instead of our previous forecast of 3.5%, but we …
Underlying inflationary pressures still very strong The fall in headline inflation to 7.6% in July left it lower than the Bank of Canada’s recent forecast but, amid continued broad upward pressure on core prices, we still judge that the Bank is more …
16th August 2022
Wholesale inflation trending down, but still elevated The fall in Indian wholesale price inflation in July reflects easing wholesale food inflation and lower commodity prices. But given both WPI and CPI inflation are still elevated, we think the RBI will …
Jobs market still hot even as economy contracts June’s labour market figures revealed further evidence that the weaker economy is leading to a slightly less tight labour market. That said, by any metric the labour market is still exceptionally tight. And …
The UK unemployment rate probably remained flat in June (07.00 BST) Canada’s CPI inflation may have dropped back in July (13.30 BST) We think US industrial production edged higher last month (15.15 BST) Key Market Themes We expect external and domestic …
15th August 2022
Latest jump in inflation to keep CBN in tightening mood Inflation in Nigeria jumped to 19.6% y/y last month and we think that the headline rate will rise a bit further. Policymakers are likely to respond by raising the benchmark interest rate from 14.00% …
The latest data out of Nigeria suggest that GDP growth weakened further in Q2. Ongoing production problems in the oil sector will drag on growth in the coming year and, while that is likely to be offset by fiscal stimulus ahead of February’s elections, we …
Inflation rises, but will soon drop back Saudi inflation picked up to 2.7% y/y in July due to strengthening underlying price pressures, but we think that it is now at or close to a peak and will gradually fall back over the rest of this year and next. If …
The People’s Bank (PBOC) has cut its policy rates in response to a loss of economic momentum. A cut to the Loan Prime Rate (LPR) later this month is now a given and we expect additional easing measures further ahead, though it’s far from clear that this …
Colombia’s tax reform Colombia’s President Gustavo Petro was inaugurated last weekend and his economic team was quick to make their mark, presenting a new tax bill to congress. The bill seeks to add COP25trn (1.7% of GDP) to government coffers this year, …
12th August 2022
The drop back in CPI inflation in July wasn’t enough alone to convince Fed officials to change their plans for interest rate hikes. But we expect the better news on inflation to continue over the coming months, which will eventually persuade the Fed to …
PBOC inflation concerns add to policy constraints The People’s Bank (PBOC) published its quarterly monetary policy report on Wednesday. It struck a less relaxed tone on inflation. While the PBOC still expects only a modest rise in CPI this year, in line …
Drought conditions add to woes By far the biggest problem afflicting Europe’s energy markets is Russia’s decision to cut its natural gas exports, but extreme weather conditions are making things worse. Water levels on the Rhine are already close to their …
Mexico’s central bank (Banxico) hiked interest rates by 75bp, to 8.50%, for a second consecutive meeting yesterday but, amid mounting evidence that the economy is struggling and with inflation close to a peak, we think that the pace of tightening will …
A very weak Q2 Most countries in the region have now published second quarter growth figures for 2022, and the numbers have been generally disappointing. (See here .) In q/q terms, GDP contracted in the Philippines, China, Taiwan and Singapore. Korea and …
Contraction in Q2 unlikely to be just a blip The 0.6% m/m drop in GDP in June was mostly due to the adverse effect of the extra Jubilee bank holiday. Even so, the GDP figures confirmed that the economy contracted by 0.1% q/q in Q2 as a whole and we have …
Further rise in core inflation will keep Riksbank in hawkish mode The decline in CPIF inflation in July will be of limited comfort to policymakers given that the core rate, excluding energy, jumped to 6.6%. We still think the Riksbank may raise its repo …
Net migration worsened population decline Japan’s population fell by 726,342 (0.6%) last year. The figure would have been less alarming if not for negative net migration of 107,202, which is a trend we do not think will last. (See Chart 1.) Chart 1: Net …
ABS will publish monthly inflation figures It’s been a long time coming, but the Australian Bureau of Statistics revealed this week that it will start publishing monthly in addition to the existing quarterly data on consumer prices. We hope the new …
While history shows that recessions can begin even while employment is still rising, the current rate of payroll employment growth is far too strong to be consistent with an economic downturn. By the same token, although we think an outright contraction …
11th August 2022
The Norges Bank said in June that it was likely to raise its policy rate by 25bp at its meeting next week, but we now think it is more likely to go for a 50bp hike. Whatever it decides on interest rates, we expect it to signal strongly that further hikes …
We think the euro-zone will soon fall into recession as high inflation, tighter monetary policy and weak global growth take their toll. While the economy should recover next year, the rebound will be held back by a lack of policy support. What’s more, we …
