Filtered by Topic: Monetary Policy Use setting Monetary Policy
BoJ back in control for now The Bank of Japan’s Yield Curve Control framework had to battle for survival to an extent never seen since its launch in 2016. 10-year Japanese Government Bonds (JGBs) have fallen back to 0.20% today after briefly breaking the …
1st April 2022
Efforts to stabilise China’s financial markets have been a short term success. Although in aggregate March was one of the worst months on record for portfolio outflows from onshore markets, there were signs of a shift after Vice Premier Liu He’s promise …
31st March 2022
High commodity prices caused by the war in Ukraine have driven a rally in Latin American currencies and equities this month, and are causing exports to surge. Weekly trade figures from Brazil and Chile show that exports were up by 25-40% y/y in early …
The Czech National Bank (CNB) slowed the pace of its tightening cycle for the third consecutive month today with a 50bp rate hike to 5.00%, but hawkish communications after the meeting suggest that the CNB is not finished yet. We now expect a 50bp hike at …
Spillovers from the war in Ukraine will have a varied impact across Sub-Saharan Africa. Large oil producers such as Nigeria and Angola are benefitting from the surge in global oil prices but, for the rest of the region, it is worsening their terms of …
What does the end of the Expo mean for Dubai? The World Expo in Dubai closes its doors today and, while it has provided a near-term fillip to the economy, we are concerned that it will leave a legacy of overcapacity in key sectors that reignites the …
The war in Ukraine has devasted its economy, while Western sanctions are likely to push Russia into a deep contraction, with GDP set to fall by 12% this year. Immediate fears of a Russian sovereign default have not materialised and Russia’s financial …
30th March 2022
The spillovers from the war in Ukraine in the form of higher commodity prices will have contrasting impacts on the Gulf and the rest of the region. We estimate higher energy prices will boost Gulf hydrocarbon export revenues by around 10% of GDP this year …
The Monetary Policy Report released by Chile’s central bank today, following on from its 150bp rate increase to 7.00%, suggests that its tightening cycle is winding down to a close. However, we think that high inflation alongside Chile’s growing external …
With the Ukraine war and pandemic-related prices pressures still much stronger than anticipated, we think the ECB will not want to wait much longer before beginning to raise interest rates. Our new forecast is for three 25bp rate hikes this year and five …
Dovish MPC commentary suggests rates will stay on hold next week But inflation is likely to become more of concern over the coming months Repo rate likely to rise by more than the consensus expects this year Since the outbreak of the war in Ukraine, MPC …
The Bank of Thailand (BoT) left interest rates unchanged at its meeting today and suggested that it would continue to look through a temporary rise in inflation to support the economic recovery. We are sticking with our view that the central bank will …
Overview - We expect Japan’s economic output to return to its pre-virus path by the end of the year. With the recovery from the pandemic complete, we expect GDP growth to slow from 2.7% this year to just 1.0% in 2024. The Bank of Japan won’t respond to …
Successful vaccination campaigns allowed governments to keep economies open during the recent Omicron waves, and our Mobility Trackers suggest that activity held up much better than we had originally anticipated. Indeed, GDP figures for Vietnam published …
29th March 2022
With the government facing defeat in May’s election, today’s Budget continued the course of loose fiscal policy that began at the start of the pandemic. As the unemployment rate is set to fall to a 50-year low, this only adds to the pressure on the RBA to …
It hasn’t failed yet but the Bank of Japan’s need to return repeatedly this week to defend the ceiling of its yield target suggests that cracks are appearing in the structure of Yield Curve Control. If maintaining it requires large-scale purchases, the …
Amid the broad-based “risk-on” tone in markets this week, the US dollar has edged down against most major currencies. As was the case last week, an increasingly hawkish tone by the Fed and a rise in 10-year US Treasury yields had little impact on the …
25th March 2022
Amlo threatens Mexico’s institutions again Yesterday’s comment by Mexican President López Obrador (Amlo) that Banxico would raise its policy rate by 50bp , four hours before the official decision, is not a big deal in itself. But it adds to the sense that …
Russia’s financial markets return from the ashes Trading on the Moscow Stock Exchange returned this week, with the central bank allowing trading of sovereign debt from Monday and selected equities from Thursday. Russian markets remain illiquid and there …
Ghana: interest rates up, gov’t spending down The Ghanaian authorities took steps this week to shore up the cedi and tackle the poor public finances but, even though a sovereign default is not imminent, officials may eventually have to back down and turn …
Breman vents to a bunch of 16-19 year olds Riksbank Deputy Governor Anna Breman appeared to take out her hawkish frustrations on a group of secondary students in a speech on Wednesday. One can only speculate as to what the pupils made of the talk; while …
We think that property markets are the weak link when it comes to the impact of tightening monetary policy. A modest rise in interest rates might only cause price falls in a few obvious candidates. But rates might have to rise only a bit further than we …
Doves in the ascendency Dovish comments from policymakers over the past week support our view that central banks in South East Asia will buck the trend of global tightening and leave interest rates unchanged over the coming months. The central bank in the …
Yesterday’s unanimous vote by Mexico’s central bank to raise the policy rate by 50bp, to 6.50%, came as no surprise since it had already been revealed by President López Obrador (Amlo) earlier in the day. While we wouldn’t go as far as to say the central …
Inflation picking up even further NAB’s February business survey had already highlighted that purchase costs were rising at a rate consistent with a further pick-up in underlying inflation. And the flash PMIs for March, released this week, provide further …
Kishida considering fresh support measures After a brief fall, the price of Brent crude oil has jumped again over the past week and we expect to remain around current levels of US$120 per barrel across the second quarter. Meanwhile, Japan’s biggest …
The upside inflation risks created by the war in Ukraine and the solid performance of South Africa’s economy prompted the Reserve Bank to push ahead with its tightening cycle today, raising the repo rate by 25bp to 4.25%. We maintain our view that rates …
24th March 2022
The reinvestment of oil revenues into US markets probably helped avert a rout in Treasuries during the mid-2000s hiking cycle, but even with oil prices on the rise again we don’t expect so-called “petrodollars” to halt the current slide in Treasuries. …
Ida Wolden Bache kicked off her time in charge at the Norges Bank with a rate hike and prepared the ground for even more aggressive tightening. We now expect 175bps of hikes by end-2023, to 2.50%, and there is good chance that the Bank front-loads the …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today and will be in little hurry to tighten policy in the months ahead, with supporting the economic recovery set to take priority over combatting inflation. Today’s …
Our proprietary Financial Conditions Indices suggest that global financial conditions have recently been as tight as they were during the China hard landing fears of 2015 and point to GDP growth staying below trend. Our new CE Interactive dashboard …
23rd March 2022
War in Ukraine will not prevent policy tightening as inflation remains elevated. In the past, tightening cycles have tended to end in recession. But soft landings are achievable and delaying now would increase future risks. The war in Ukraine has worsened …
The war in Ukraine, as well as the hawkish tone adopted by some developed market (DM) central banks, have led us to revise up our end-22 and end-23 forecasts for government bond yields in some DMs and to lower our projections for DM equities generally . …
While the war in Ukraine and sanctions on Russian oil mean energy prices will remain elevated and push headline inflation above 8% in March, it will still fall sharply later this year. (See Chart 1.) Energy inflation and inflation in categories that saw …
The surge in interest rate expectations is a key risk to housing. We recently set out how, due to the much larger share of variable rate mortgages than before the pandemic, the Bank of Canada would need to raise its policy rate to 2.5% to achieve the same …
The war in Ukraine will have several economic repercussions for the emerging world. We have lowered our aggregate EM GDP growth forecast for 2022 by 1%-pt, to 3.2%. Russia aside, the biggest downward revisions have been to other Emerging European …
New Zealand’s high share of fixed mortgage rates won’t insulate the housing market from RBNZ rate hikes. Indeed, we’re sticking to our view that house prices will fall this year and cause the RBNZ to reverse course next year by cutting interest rates. The …
Hopes for a large support package from UK Chancellor Sunak may be disappointed… …even though inflation in the UK probably reached a 30-year high last month (07.00 GMT) Sign up for our Drop-In on the impact of war in Ukraine on commodity markets here Key …
22nd March 2022
Hungary’s central bank (MNB) stepped up the pace of tightening today with a 100bp increase in its base rate, to 4.40%, and the hawkish communications underline the view that the central bank will respond to the deterioration in the inflation outlook with …
For the most part, EMs are well placed to withstand rising US interest rates, but there are pockets of vulnerability where external financing needs are significant. Among the large EMs, Turkey (unsurprisingly) stands out, and current account risks are …
The Central Bank of Egypt’s (CBE) decision to hike interest rates by 100bp, to 9.25%, and devalue the pound by 10% against the dollar suggests that policymakers have finally woken up to the worsening external position. The move could pave the way for a …
21st March 2022
Governor Kuroda admitted last week that inflation could hit the Bank of Japan’s 2% target in April but stressed that “that in no way signifies there will be a revision of our current monetary policy”. Even if rising import costs cause inflation to …
Migration is rebounding much faster after the border reopening than we had anticipated. While that will slow the decline in the unemployment rate, the labour market is already historically tight and inflation is set to surge. The upshot is that the RBA …
Even after its broad-based appreciation today, the US dollar seems set to end the week a bit lower against most major currencies. This is somewhat surprising given the FOMC’s hawkish tone on Wednesday and Fed Governor Waller’s comment today that a 50bp …
18th March 2022
While the start of a US Fed tightening cycle has historically sent alarm bells ringing in Latin America, the region generally looks well placed to weather any potential storm this time. Chile may be an outlier, though, given its worrying external …
Flash PMIs for March to give first steer on how the war in Ukraine has impacted DM economies UK chancellor may announce a small support package for households in the spring statement We expect Mexico’s central bank to raise its policy rate by 75bp on …
The Fed delivered on expectations of a 25bp rate hike this week but went further than we anticipated in pencilling in a further six 25bp hikes this year and four next. With their forecasts for core inflation in future years close to our own, we have …
Russia dodges default The saga over whether Russia’s government would make coupon payments on two Eurobonds this week seems to have been settled for the time being. At least some creditors are reported to have received payments (albeit a little late). …
The post-meeting speech by Russia’s central bank (CBR) governor Elvira Nabiullina made clear that policymakers think sanctions and autarky are here to stay for the long term. But at the same time, officials at the CBR appear to want to revert back to …
What’s Swedish for “fundamental change of view”? In a week when the US Fed and the Bank of England both raised interest rates, Riksbank Governor Ingves finally appears to have woken up to the need for tighter policy in Sweden. Mr Ingves reportedly said …
