Filtered by Topic: Monetary Policy Use setting Monetary Policy
The Bank of Japan kept policy settings unchanged today and signalled that it is more worried about the negative impact of higher commodity prices on activity than about inflation spiralling out of control. Indeed, we expect the Bank to keep policy loose …
18th March 2022
Today’s 25bps hike takes interest rates up to the pre-pandemic and post-Global Financial Crisis high of 0.75% and, although the Monetary Policy Committee (MPC) sounded a bit less hawkish than it did at its past meeting in February, it still signalled that …
17th March 2022
The Norges Bank will kick off the post-Olsen era next Thursday with a 25bp interest rate hike, to +0.75%, and while we expect it to raise rates three more times this year, the balance of risks is skewed towards it proceeding even faster. Meanwhile, …
The rise in mortgage rates implied by our new higher policy rate forecasts would reduce affordability by 12% over the next year which, in isolation, is not especially alarming when considering that the home sales-to-new listing ratio is still pointing to …
On the verge of Iran nuclear deal 2.0 Media reports seem to suggest a revived Iran nuclear deal could be signed off imminently, which will boost global oil supplies and could put downwards pressure on prices. It may also help to ease geopolitical tensions …
The surge in commodity prices as a result of the war in Ukraine will have several repercussions for India’s economy. As a major net commodity importer, its terms of trade will deteriorate and we think the current account deficit could reach almost 4% of …
Taiwan’s central bank (CBC) today unexpectedly raised its main policy rate by 25bps to 1.375%, but we doubt this is the start of an aggressive tightening cycle given the mounting downside risks to growth and the relative weakness of inflation. We had …
Brazil’s central bank slowed the pace of its hiking cycle with a 100bp hike (to 11.75%) yesterday, but the hawkish tone of the statement suggests that Copom is more concerned about the coming jump in fuel inflation than we had thought. As a result, we …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and the weakness of inflation and strong performance of the rupiah mean the tightening cycle is likely to be very gradual. The decision came as little surprise and was …
The Fed began its tightening cycle with a 25bp hike today and, despite the uncertainty caused by the war in Ukraine and China's efforts to contain the spread of the Omicron variant, officials look set to hike rates by an additional 25bp at each of the …
16th March 2022
Central banks in the Gulf will have to follow the US Federal Reserve in raising interest rates by virtue of their dollar pegs, which will weigh on domestic demand and recoveries in non-oil sectors. And higher debt servicing costs could cause concerns in …
We now expect inflation to reach a 21-year high of 5.2% in Q3 as fuel prices surge and firms pass on higher raw material costs to consumers. With the labour market nearing full employment and inflation expectations picking up, we reiterate our long-held …
We warned at the start of the year that global growth would disappoint, while inflation would surprise to the upside in 2022 and recent events have added to those concerns. The surge in commodity prices related to the war in Ukraine means that headline …
15th March 2022
Stronger-than-expected start to 2022 Activity data for the first two months of the year was stronger than anticipated, which probably explains why the People’s Bank (PBOC) unexpectedly kept its policy rates on hold today. But the economy looks set to come …
Concerns about inflation in Korea are rising, just as those about financial stability risks are starting to recede. Despite the worsening growth outlook caused by the surge in energy prices and war in Ukraine, we expect the Bank of Korea (BoK) to continue …
14th March 2022
The surprisingly strong rise in employment in February reduces the downside risks to near-term economic activity from higher energy prices and reinforces our view that the Bank of Canada will now hike more aggressively than we previously assumed. A …
11th March 2022
We expect the Fed and the BoE to raise their policy rates by 25bp… (Wed. & Thu.) … and Brazil’s central bank to hike interest rates by 100bp, to 11.75% (Wed.) In contrast, policymakers in Japan, Russia and Turkey will probably leave rates unchanged Key …
Fed to hike by 25bp and “proceed cautiously” We expect the Fed to hike interest rates by 25bp at next week’s FOMC meeting and, despite the war in Ukraine, to unveil new projections showing at least five interest rate hikes this year in total. We also …
Russia’s economy is in the early stages of a deep recession and we’ve revised our forecast for GDP to collapse by 12% this year. We’ve also revised our forecasts for Central and Eastern Europe as a result of the war in Ukraine with inflation set to be …
Franc(ie) goes to Hollywood parity The Swiss franc rose through parity with the euro in the early hours of Monday for the first time on record. However, its foray into uncharted territory was brief, and it has since given up the gains it made in March. It …
Yesterday’s ECB announcement was more hawkish than expected, but so far the Bank’s Chief Economist Philip Lane hasn’t published a new blog post to correct the message as he has done a number of times in the past. You can read our response to the decision …
Rising inflation to keep Copom’s tightening cycle going The rise in Brazilian inflation to 10.5% y/y in February will be followed by further increases to more than 11% in the coming months on the back of higher fuel prices. While Copom hinted at its last …
Credit growth disappoints Broad credit growth was much weaker than expected last month, reversing much of the acceleration of the past few months. This suggests that more easing measures will be needed to meet the policy objectives that were recently laid …
We think UK GDP will have reversed all of December’s drop in January (07.00 GMT) Higher oil prices probably weighed on US consumer confidence this month (15.00 GMT) Clients can view our new Oil Market Monitor dashboard here Key Market Themes While the ECB …
10th March 2022
War in Ukraine worsening the tricky mix between rising inflation and slowing GDP growth Rising price expectations to force MPC to raise interest rates by 25bps A tight labour market may mean that rates rise to 2.00% next year The economic consequences of …
We estimate that the impact of higher fuel, food and potentially goods prices triggered by the war in Ukraine will add roughly 1.0%-pt to headline inflation rates across major Latin American economies this year. One key lesson from the past year is that …
In today’s monetary policy statement, the ECB said the Russian invasion of Ukraine was a watershed moment for Europe, but it concluded that it does not require a big change in monetary policy. Indeed, the Bank announced an acceleration in the pace at …
The latest surge in global commodity prices has intensified the dilemma facing the world’s major central banks: on the one hand it will push headline inflation (and inflation expectations) even higher, but on the other there’s little monetary policy can …
War in Ukraine will lift inflation above 2% But Bank has made clear it will look through transitory, cost-push inflation Kishida will probably appoint a continuity candidate to replace Kuroda While the war in Ukraine will lift Japanese inflation to the …
Surging commodity prices have led us to substantially increase our forecasts for consumer price inflation, but the negative impact of higher prices on household purchasing power, and therefore real consumption, should be more than offset by stronger …
9th March 2022
The UK is not as exposed to the economic consequences of the war in Ukraine as the rest of Europe. Even so, in response to the surge in global commodity prices caused by the war we have dramatically revised up our inflation forecasts and modestly revised …
We expect five 25bp rate hikes this year and another four next year War in Ukraine doesn’t alter policy outlook Fed likely to downplay inflationary impact of energy price surge We expect the Fed to hike interest rates by 25bp at next week’s FOMC meeting …
The National Bank of Poland (NBP) stepped up the pace of tightening today with a 75bp interest rate hike, to 3.50%, and the marked deterioration in the inflation outlook due to the war in Ukraine is likely to mean that rates rise much further in the …
8th March 2022
The State Bank of Pakistan (SBP) today left interest rates on hold at 9.75%, but the surge in oil prices mean it is likely to resume its tightening cycle soon. The consensus ahead of today’s meeting was split. Of the 46 analysts polled by Bloomberg, 21 …
RBA Governor Lowe noted in a recent speech that the Bank no longer has specific criteria for deciding whether inflation is sustainably in the target range. But he highlighted that along with the actual rate of inflation and the outlook, the breadth of …
7th March 2022
This Update discusses three ways in which the outbreak of war in Ukraine has called into question our asset allocation views. While the situation is fluid and the outlook especially uncertain, it also provides our initial thoughts on how things might play …
4th March 2022
Governor Tiff Macklem’s speech on Thursday seemed much more hawkish than the policy statement that accompanied the Bank of Canada’s decision to raise interest rates by 25 bp this week. (See here .) Macklem said the evidence of broadening inflationary …
The war in Ukraine has prompted us to revise our forecasts for euro-zone GDP, inflation and monetary policy. Russia’s downturn in 2015 had no obvious impact on euro-zone GDP and Russia has become less important as an export market since then. But we …
Bank of Thailand in a tricky spot Inflation has become a major policy headache for the Bank of Thailand (BoT) after figures released today showed that the headline rate surged from 3.2% y/y in January to 5.3% in February, the highest rate since 2008. (See …
With inflation surging, the currency coming under downward pressure and the country on the verge of a sovereign default, today’s 100bp rate hike in Sri Lanka won’t be the last in the current cycle. We have long said that the Central Bank of Sri Lanka …
Supply disruptions easing, but risks are high There are signs that supply disruptions in India have eased a touch. The PMIs for February released this week show that the backlog of works components have stabilised after rising sharply since the middle of …
Governor Kuroda’s successor to be more hawkish PM Kishida’s decision to replace arch-dove Kataoka Goushi with centrist Takata Hajime from Okasan Securities at the Bank of Japan could create a slightly less dovish policy board. But it probably won’t make …
GDP will return to pre-virus trend by mid-year The 3.4% q/q rise in Q4 GDP left output just 1.4% below its pre-virus trend, but the recovery remains very lopsided. GDP outside the heaviest-hit sectors has risen by 4.5% since Q4 2019 even as output in …
Omicron outbreak probably weighed on euro-zone retail sales in January (10.00 GMT) We think US non-farm payrolls rose by 600,000 last month (13.30 GMT) Read our latest research on the economic impact of the war in Ukraine here Key Market Themes So far, …
3rd March 2022
ECB will stress caution and flexibility in light of Ukraine war. New ECB forecasts will show lower growth, much higher inflation. Policymakers will still plan to resume normalisation when and if the situation is clearer. At next week’s monetary policy …
Bank Negara Malaysia (BNM) today left its main policy rate on hold and the dovish tone of its statement supports our non-consensus view that rates will remain on hold throughout 2022. We think the market and consensus are wrong to expect hikes this year. …
Inflation smashes through 50% Turkey’s headline inflation rate leapt again to reach 54.4% y/y in February due to the combination of the lira’s collapse in late-2021 as well as higher domestic energy prices and a large minimum wage hike at the start of …
Chair (pro tempore) Jerome Powell indicated in his congressional testimony today that, with Russia's attacks on Ukraine roiling markets and creating additional uncertainty, he was inclined to support a 25bp hike later this month and that the Fed should …
2nd March 2022
The Bank of Canada’s decision to raise interest rates by 25bp today was widely expected and the statement supports our view that it will follow up with another hike next month, but there was little indication that the Bank intends to start quantitative …
The spread of Russian interbank interest rates over the central bank’s policy rate – which was hiked aggressively on Monday – has widened pointing to some stress in the banking sector. But for now it is far from the levels recorded during 2008/09 and …
