Sun, Jul 05, 2020 @ 11:04 GMT
President Mario Draghi’s last ECB meeting came in without surprise. He sent a cautiously dovish message about Eurozone’s economy and reiterated the importance of the stimulus package announced last month. The new leadership will likely maintain the existing policy...
BOJ offered to buy 190B yen of JGBs with maturity of 10- 25 years, down 10B yen from the purchase made on December 28. It also reduced the purchase of JGBs with maturity of 25- 40 by the same amount to 90B yen. The move has heightened speculations that the central bank is preparing to trim its stimulus measures. The market reactions match with the speculations with USDJPY slipping -0.42% while EURJPY down -0.65% on Tuesday. Japanese longer- dated 20- and 40-year bond yields rose to their highest in a month. Longer- term US Treasuries were also affected by BOJ’s move with 10-year yields gaining +6 points to 2.546%. Of course, the movement of US Treasuries was also affected by the auctions this year.
BOC appeared more confident over the economic growth outlook, although it maintained the policy rate unchanged at 0.5% in April. Policymakers upgraded the GDP growth forecast for this year amidst strong housing market activities in the first quarter, but revised lower the figure for 2018. It also revised mildly higher the inflation outlook, though. The central bank cautioned over the uncertainty of trade relations with the US and stressed that material slack remained in Canada. On the monetary policy, Governor Stephen Poloz described the stance as 'decidedly neutral' as the members weighed the improved economic developments against the uncertain trade policy. We expect the policy rate to stay unchanged at 0.5% for the rest of the year. The loonie strengthened around than +0.5% Wednesday as Canadian economic outlook improved. Yet, the magnitude of the gain was mainly due to USD's weakness as US President Donald Trump complained that the greenback is too strong and reiterated his preference of low interest rate policy.
BOE voted 7-2 to raise the Bank rate by +25 bps to 0.5%, the first time in over a decade, in November. Two deputy governors, Sir Jon Cunliffe and Sir Dave Ramsden, voted to leave borrowing costs unchanged. BOE voted unanimously to leave the asset purchase program unchanged at 435B pound. Governor Carney declined to comment when the unwinding would begin. Traders have begun to dump British pound ahead of the announcement on profit-taking. The selloff accelerates upon release of the meeting statement and the quarterly inflation report. The rate hike this month is to remediate excessive inflation which has sustainably overshot the +2% target for months.
The encouraging employment report might make the case of rate cut less strong this month. Economic developments since the December meeting have been mixed at best. Although job market and inflation showed improvement, GDP growth in the third quarter...
ECB announced the plan to reduce asset purchase next year. In line with the majority of market participants had anticipated, the central bank would trim the size of buying by half, to 3B euro per month, in the first nine months of 2018, "or beyond, if necessary". It added that stimulus measures would be implemented "in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim". The single currency dropped after the announcement, on profit-taking. The policy rates stayed unchanged, with the main refinancing rate, the marginal lending rate and the deposit rate at 0%, 0.25% and -0.40% respectively.
The Fed finally made formal announcement that it would begin normalizing the balance sheet in October. As indicated in June, the process does not involve active selling of securities, but a passive run-off of its holdings. The policy rate also stayed unchanged at 1-1.25%. The overall tone of the statement and the press conference came in more hawkish than expected. Depsite downward revision in the core CPI for this year, the staff upgraded the economic growth outlook and downgraded the unemployment rate forecast. The median dot plot continued to project one more rate hike this year, followed by three more increases in 2018. As CME's 30-day Fed funds futures suggested, bets for a December hike markedly jumped to 73.4% from 57.7% in the prior day.
At the upcoming meeting, ECB members would likely acknowledge stabilization in the region’s economy, while reiterating accommodative monetary policy. The focus of the meeting would be the strategic review, the first assessment of the central bank’s monetary policy in...
The Fed implemented an emergency rate cut of -50 bps on Tuesday, just two weeks ahead of the FOMC meeting scheduled on March 18. The Fed funds rate range now stands at 1-1.5%. While the move is not entirely...
SNB's FX reserve slipped to 738.17B franc, from a record high of 741.96B franc (revised from previous estimate of 741.32B franc), in November. The drop is in contrast with consensus of an increase to 745B franc and marks the first drop since June this year. Meanwhile, the sight deposit fell to 576.78B franc in the week ended December 1. Subsequent decline from the August peak has sent sight deposit to the lowest level since June 2017. The movements of both FX reserve and sight deposit have suggested that the SNB is not in a hurry to intervene with the recent weakness in Swiss franc. Separately, the country's unemployment rate stayed unchanged at 3% (seasonally adjusted) in November, compared with expectations of a rise to 3.1%. For the quarterly SNB meeting scheduled on December 14, we expect policymakers to maintain the status quo, i.e. keeping 3-month LIBOR target range unchanged, at between -1.25% and -0.25%, maintaining the interest rate on sight deposits with the SNB at -0.75% and reaffirming that the central bank is committed to intervene in the FX market as necessary. We believe the domestic economic developments since the September meeting have shown gradual improvements, leaving policymakers more room to wait and see.
The FOMC minutes for the June meeting revealed that the members were confident over the growth and inflation outlook, although they acknowledged intensifying trade conflicts. There were discussions over the term structure of interest rates. While many of them...
Fed lowered the policy rate by -25 bps to 1.75-2.00%, although market expectations of a rate cut diminished markedly ahead of the meeting. The decision was not unanimous. Yet, it revealed a more divided Fed. The updated median dot...
To us, the message conveyed in the FOMC minutes for the December meeting was somehow different from those at the post-meeting press conference. From the post-meeting statement and Chair Jerome Powell’s speech, we judged that the Fed turned a...
BOE kept the Bank rate unchanged at 0.75% but revised lower GDP growth and inflation forecasts. British pound strengthened against US dollar as the Committee voted 7-2 for the decision. The market had anticipated more members to support rate...
As expected, RBA left the cash rate unchanged at 1% in September. The accompany gin statement is largely unchanged from the previous one. RBA has not made any hints about a rate cut next month. Policymakers might want to...
Having cut the policy three times and announced QE program in March, BOC will likely keep the powder at the April meeting. Policymakers will explain the rationale of the stimulus measures, reinforcing that the policies are essential to containing...
At the meeting later in the week, BOE would most likely leave the Bank rate unchanged at 0.75%. It would also keep the purchases of gilts and corporate bonds remain at 435B pound and 10B pound, respectively. BOE sounded...
Following two consecutive rate cuts, RBA is widely expected to leave the cash rate unchanged at 1% in August. Incoming economic data since the last meeting have also supported the pause. Yet, given the aggressive target in the longer-term...
As widely anticipated, SNB left the sight deposit rate unchanged at -0.75%. The target range for the three-month Libor stayed at between -1.25% and -0.25%. Reiterating the excessive strength in Swiss franc, the central bank pledged that it would "remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration. Policymakers acknowledged ongoing improvements in the global economy but noted that it is "is still subject to considerable risks", among which the key is political uncertainty with "respect to the future course of economic policy in the US, upcoming elections in Europe, and the complex exit negotiations between the UK and the EU".
As expected, BOC left its overnight rate unchanged at 0.5% in January. Yet, it delivered a more dovish than expected message and sent CAD to a one-week low against USD. At the press conference, Governor Stephen Poloz revealed that 'Governing Council was particularly concerned about the ramifications of U.S. trade policy, because it is so fundamental to the Canadian economy'. He suggested that further rate cut cannot be ruled out of US' protectionist policy puts BOC's inflation target at risk.
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