Filtered by Topic: Monetary Policy Use setting Monetary Policy
Overview – We expect consumption to rebound from the Omicron wave within a few weeks, lifting euro-zone GDP to its pre-pandemic level in the first half of the year. But GDP will remain below its pre-pandemic path for the foreseeable future. Meanwhile, …
21st January 2022
We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a …
Denmark achieves a geranium “greenium” Denmark joined the growing list of countries to offer a green sovereign bond, on Wednesday. The country is far from a trailblazer in the area, with the Netherlands, Germany, and the UK all amongst those to have …
Thai tourism to support the baht Better times lie head for Thailand’s tourism industry after the government this week announced it would resume its quarantine-free travel scheme from 1 st February. The scheme was suspended late last year due to fears …
Chile: Boric appoints ‘Super Mario’ Marcel President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal …
Virus cases peaking in parts of India Daily COVID-19 cases in India are still rising sharply and are now around an eight-month high. But encouraging signs are emerging in the state-level data. New infections have stabilised in Maharashtra, and they have …
Labour market tightest since 2008 The 64,800 rise in Australian employment in December meant that the unemployment rate fell from 4.6% to 4.2%, the lowest rate since 2008. RBA Governor Lowe noted last year that if the economic data exceeded the Bank’s …
Although the dollar’s rally has stalled over the past six weeks or so, and may tread water for a while longer, we think that it will ultimately appreciate a bit further this year and next. The key driver of the greenback’s rise since the middle of last …
20th January 2022
Overview – The regional recovery will lag further behind others in the emerging world in the coming years. The Omicron-led surge in virus cases presents a risk to growth in the near term, but we suspect that the economic hit will be small. Larger drags …
We expect UK retail sales to have fallen in December (Fri. 07.00 GMT) Japan’s headline inflation probably edged up to 0.8% last month (Thu. 23.30 GMT) Read our key calls for economies and markets in the year ahead here Key Market Themes For the first time …
The long and detailed account of December’s Governing Council meeting underlines that there are significant differences of opinion about the inflation outlook. We suspect that the balance of opinion will shift in the coming months towards forecasting …
Overview – We expect regional GDP growth to come in below expectations this year as high inflation erodes households’ real incomes and policy becomes more restrictive. Despite this view on the growth outlook, we think that persistent capacity constraints …
Overview – We expect underlying inflation to remain well above the 2% target this year, which means the Fed will push ahead with four rate hikes even though real GDP growth is likely to disappoint. Core inflation will average 4.3% in 2022 and close to …
Our new oil price forecasts The price of oil has risen sharply since the turn of the year and, while we still expect it to fall back by year-end, recent supply issues suggest that it will not decrease by as much as we had expected. As a result, the door …
Turkey’s central bank (CBRT) followed kept its one-week repo rate on hold at 14.00% today and, even though inflation is likely to breach 40% in the coming months, President Erdogan is unlikely to permit interest rate hikes. We think it’s more likely that …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, but the decision to raise the reserve requirement ratio (RRR) from March suggests that rate hikes will come sooner than we had previously expected. The decision to leave rates …
After twelve years in the job, Øystein Olsen was never going to spring a surprise at his last meeting in charge of the Norges Bank. Instead, the Bank left its policy rate unchanged at 0.5% and reiterated that it “will most likely be raised in March”. We …
The dovish tone of Bank Negara Malaysia (BNM) as it left rates on hold today only strengthens our non-consensus view that policy will be left on hold this year to support the recovery. In contrast, the analyst consensus is for 50bps of tightening, while …
The 50bp rate hike made by the Central Bank of Sri Lanka (CBSL) today – after it stood pat for two meetings as foreign currency dried up and inflation soared – is likely to prove too little too late. The CBSL today raised its deposit and lending rates by …
Overview – Australia’s Omicron outbreak will hold back the recovery this quarter, but there are plenty of reasons why Australia will outperform New Zealand over the next couple of years. As the labour market has tightened more rapidly than we had …
Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to push down borrowing costs. We expect additional easing to follow in the coming months, including measures to push down deposit rates. But …
Inflation was lower than Bank expected in Q4 and Q1 GDP growth is set to be weak Bank nevertheless set to turn more hawkish amid signs of surge in wage growth ahead Bank to use policy statement to tee up rate hike at the next meeting in March Amid growing …
19th January 2022
We expect China’s central bank to cut its 1-year Loan Prime Rate by 10bp (01.30 GMT) But we think that Turkey’s central bank will pause its easing cycle (11.00 GMT) We also expect interest rates to be left on hold in Indonesia, Malaysia and Norway Key …
Fed usually flags start of tightening cycle ahead of time Balance sheet run-down likely to come sooner and be more aggressive than 2017/18 FOMC will have more hawkish tilt until Biden’s nominees are confirmed With many Fed officials now either explicitly …
Overview – India’s Omicron wave should only be a temporary setback to the economic recovery. As long as recurrent large waves of COVID are avoided, we think that economic growth will be faster this year than last. We also think that inflation will soon …
We think that UK inflation will hold steady at its 10-year high of 5.1% (07.00 GMT) We expect Canada’s inflation to have reached its highest level since 1991 (13.30 GMT) Register here for our webinar event “The World in 2022” Key Market Themes With …
18th January 2022
The “new economic model” adopted by Turkey’s government is likely to mean low real interest rates and a persistently weak lira, but it will come alongside a shift towards capital controls, ever higher inflation and growing fiscal and banking sector risks. …
The Bank of Japan today upgraded its assessment of inflation risks to “broadly balanced” for the first time since 2014. However, it reiterated its pledge to keep expanding the monetary base until inflation exceeds 2% and also signaled that it will keep …
The Riksbank has learnt from its past tendency to project rate hikes that never arrive. But the single repo rate rise by end-2024 that it currently projects is stretching the limits of plausibility in the other direction. Of course, policymakers will …
17th January 2022
Overview – Although the hit to households’ real incomes from a bigger surge in CPI inflation than most expect (to a peak of almost 7% in April) explains why we think GDP growth will be slower this year than the consensus forecast, we still think that the …
The People’s Bank (PBOC) has stepped up its efforts to loosen monetary conditions, following up last month’s reduction to the Loan Prime Rate (LPR) with cuts to the rates at which it lends to banks. Another LPR cut this month is now a given and we expect …
China’s economy probably failed to gain much momentum last quarter (Monday) The Bank of Japan may revise up its inflation forecasts at its policy meeting (Tuesday) We suspect that UK inflation remained above 5%, a 10-year high, last month (Tuesday) Key …
14th January 2022
The continued surge in Omicron infections suggests that the disappointing December activity data will be followed by further weakness in January, but there are no signs that it will delay the Fed’s accelerating plans to tighten policy. This week’s Senate …
“Dynamic clearing” hasn’t failed yet It is too soon to conclude – as many seem to have – that Omicron will swamp China’s efforts to suppress COVID. Those efforts are far more forceful than anyone else has tried. The country’s first …
The Omicron variant of COVID-19 is causing new virus cases to surge in the emerging world. (See Chart 1.) Many EMs are reporting record daily cases or that new infections are rising sharply. South Africa ’s experience offers some hope – cases are now …
Russia-Ukraine tensions hit a new crisis point A tense week of negotiations between Russia, the US and NATO have ended with what now seems to be a more serious ratcheting up in tensions that is likely to weigh on local financial markets for some time. The …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
There were signs that supply shortages were starting to ease in some places at the tail end of 2021. World trade was its strongest since shortages began to bite a year ago and industrial production had picked up too, especially in the auto industry as …
Economy running hot before Omicron The economic data released this week corroborates our view that GDP surpassed its pre-lockdown level in Q4. For one thing, retail sales values jumped by 7.3% m/m in November and were 6% above their previous peak a year …
The Bank of Korea (BoK) is far from done, after making its first back-to-back rate hike since 2007 today. We now expect a total of four 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s decision to raise the policy rate from 1.00% to 1.25%, …
We expect US retail sales fell slightly in December (13.30 GMT) We think that the UK economy expanded in November (07.00 GMT) China’s exports probably remained strong last month, while imports softened Key Market Themes The US dollar has started the year …
13th January 2022
Norwegian policymakers will keep interest rates on hold, at +0.50%, next Thursday, before resuming their tightening cycle in March. We forecast one rate hike per quarter this year, which is one more than investors have currently priced in over the period. …
Window for Gulf fiscal loosening to close Oil prices have risen to near pre-Omicron highs this week, but we think that is likely to be short lived. As prices drop back the window for governments in the Gulf to loosen fiscal policy will shut. Brent crude …
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
We expect policymakers in Denmark and Switzerland to match the 50bps of interest rate hikes that we now forecast in the euro-zone next year. And against the backdrop of rising global interest rates, we now think that the Riksbank will start a tightening …
We expect the Bank of Canada to wait for the coronavirus restrictions to be lifted before starting to raise interest rates, suggesting it is more likely to begin hiking in March or April than at its meeting this month. OIS futures imply a near 50% chance …
12th January 2022
Omicron supply chain disruption won’t lift consumer inflation much Balance sheet to shrink gradually, but that won’t cause tighter monetary conditions Bank still views weaker yen as positive and won’t respond with tightening While Omicron is likely to …
We think that GDP growth in the Gulf will be stronger than most expect this year on the back of rising oil output. Elsewhere, we expect a larger depreciation of the Egyptian pound than most anticipate and, if anything, there is a growing risk of an even …
With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise …
While the strength in New Zealand’s economy will cause the RBNZ to hike rates further this year, we think the RBNZ will end its hiking cycle earlier than the financial markets anticipate. What’s more, we think a housing downturn in 2022 will weigh on the …