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Monetary Policy

CBRT rate cut sowing the seeds of next currency crisis

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 for yet another currency crisis.

18 August 2022

Euro-zone Final HICP (July)

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 are set to rise steeply in the coming months, keeping the headline rate high.

18 August 2022

50 is the new 25 for the Norges Bank

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 rate increases are likely to follow.

18 August 2022
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Philippines: tightening cycle still has some legs

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 economic recovery mounting, we don’t think the tightening cycle will run much beyond the second half of this year.

Pound likely to remain under pressure this year

We think the Bank of England will hike interest rates by less than money markets now discount, which in turn should keep the pound under pressure against the dollar.

Consumer Prices (Jul.)

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 replaced by more persistent domestic inflationary pressures. This increases the chances that the Bank of England will opt for a 50 basis point (bps) interest rate hike on 15th September, rather than 25bps.

RBNZ will hike rates to 4% but cut next year

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 still expect rate cuts next year.

Consumer Prices (Jul.)

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 likely to opt for a 75 bp interest rate hike in September rather than drop down to a 50 bp move as many now expect.

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