Thu, Jan 23, 2020 @ 11:41 GMT
A rate hike of +25 bps at the upcoming FOMC meeting is a done deal as the market has for months priced in over 90% chance of its occurrence. Recent macroeconomic developments indicate such rate hike is totally justified....
Investors viewed Fed Chair Janet Yellen's testimony before the Senate Banking Committee as modestly hawkish. As such, expectations for a March rate hike rose modestly while Treasury yields climbed higher. While reiterating that all meetings are 'live' for a rate hike, Yellen warned that waiting too long to remove accommodation would be unwise'. Meanwhile, she cautioned over the uncertainty over the economic policy under Donald Trump's administration. Yellen emphasized the Fed's monetary policy stance is not based on 'speculations' about fiscal policy. The economy's 'solid progress' is what is 'driving the policy decisions'.
While it has been widely anticipated that this week’s ECB meeting would be non-eventful, it is closely watched. We expect the central bank to reaffirm that the monthly asset purchases would be halved in size (from 30B euro to...
FOMC voted unanimously to leave its policy rate within a target range of 0.50-0.75%. The outcome had been widely anticipated as the Fed just adopted rate hike of +25 bps in December. Only minor changes were seen in the accompanying statement. In short, policymakers retained the stance that future interest rate change would be 'data dependent'. They also reiterated that economic conditions will evolve in a manner that will warrant only gradual increases in the federal fund rate'. The market has only priced in 2 rate hikes this year, although the December dot plot signaled there might be 3. CME’s 30-day Fed fund futures suggested a 17.7% chance of rate hike in March, down from 20.3% prior to FOMC meeting. Yet, they priced in a 38.8% chance in May, compared with 37.7% the day before the meeting.
ECB left interest rates and the QE program unchanged in July. The members also decided to keep the QE reference in the forward guidance. The central bank indicated it would continue buying assets in the market for some time and President Mario Draghi admitted that "inflation is not where we want it to be, nor where it should be" and "that's why a substantial degree of accommodative monetary policy is still needed". The single currency plunged after the dovish statement. However, it reversed to gains and jumped to a fresh 14-month high against USD after Draghi indicated that QE discussion would begin in autumn.
The RBA minutes for the May meeting contained little news but reiterated policymakers' the importance of the property market and the labor market conditions in its policy decision. The stance to leave the monetary policy unchanged was obviously due to the perceived uncertain outlook in these two areas. As noted in the concluding statement in the minutes, 'the board continued to judge that developments in the labour and housing markets warranted careful monitoring'.
RBA left the cash rate unchanged at 1.5% in April, continuing to struggle between soaring property prices and subdued inflation. Policymakers appeared more optimistic over the global economic outlook than the domestic one. The central bank remained concerned over the rising property prices and warned of the situation that household borrowing growth was outpacing growth in income. We expect RBA to leave its monetary stance unchanged throughout the year.
The Fed could make a number of changes in the upcoming June FOMC meeting, to pave way for a rate cut in as soon as July. We would focus on three things: updated economic projections, adjustment in the forward...
RBNZ left the OCR unchanged at 1.75% in May. Policymakers shrugged off the recent NZD depreciation and the rise in inflation, indicating that the monetary policy would likely stay unchanged for the rest of the year and probably until 2020 before tightening. The market was disappointed by the lack of hawkish comments and the unchanged forward guidance. Down -1.85, NZDUSD slumped to an 11-month low of 0.6816 after the announcement.
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.
RBA, in its June meeting minutes, explicitly noted that the policy rate would be lower. This message came in more dovish than market expectations. The major concern remained in the lackluster improvement in the labor market. RBA cut the...
The FOMC voted unanimously to leave the Fed funds rate unchanged at 1.25-1.5% in January. There were some minor changes in the accompanying statement but the theme continues to suggest that that gradual removal of monetary stimulus remains on track. Policymakers eventually took out the impacts of hurricanes in its economic forecasts and continued to see 'solid' growth in' employment, household spending and business fixed investment'. Meanwhile, they acknowledged that core inflation has stopped declining, thus allowing them to maintain the view that inflation would strengthen this year then stabilize at around the 2% objective. The Fed reaffirmed the pledge to monitor the development closely. The market viewed the meeting outcome as slightly hawkish, sending Treasury yields modestly higher. CME’s 30-day Fed funds futures suggest that the market has now priced in 80% chance of rate hike in March, up from 74% before the announcement. Other barometers have suggested that chance of a March rate hike has increased to 90%.
FOMC raised the fed funds target range, by +25 bps, to 0.75%-1.00% with 9-1 vote. Minneapolis Fed President Neel Kashkari dissented as he favored leaving the monetary policy unchanged. The Summary of Projections (SEP) shows virtually the same macroeconomic outlook. Moreover, the median dot plot maintained three rate hikes this year and in 2018. Chair Janet Yellen noted that that the projections have not included potential fiscal stimulus promised by President Donald Trump. She also noted that the Committee discussed on balance sheet policy but no conclusion was reached. The market was disappointed, reflected in the decline in US dollar and Treasury yields, as they had anticipated more hawkish statement and some upward adjustments in economic forecasts.
The FOMC minutes for the November revealed that the members still considered a rate hike in December is appropriate. Yet, they debated on the change in forward guidance regarding the pledge on “further gradual increases” in the policy rate....
We expect ECB to emphasize downside risk to growth in this week's meeting on October 25. That would be a slight shift from the more hawkish stance at the last meeting six weeks ago. With the path of QE...
SNB left the policy rate unchanged at -0.75%. It reiterated the commitment to “intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration”. Additionally, the central bank adjusted the interest charged on banks’...
RBA left the cash rate unchanged at 1.5% in November, following the last reduction in August 2016. The accompanying statement contained little surprise. While staying confident over the employment situation, policymakers remained weary off the persistently soft inflation and wage growth. The RBA stance is largely unchanged from the previous meeting. We retain the view that the policy rate would stay unchanged for the entire 2018.
As widely anticipated, BOJ again voted 8-1 to leave the monetary policies unchanged in October. The targets for short- and long-term interest rates stay at -0.1% and around 0%, respectively while the guideline for JGB purchases remains at an annual pace of about 80 trillion yen. The central bank has turned more upbeat on the economic outlook, especially on Capex and consumption. Goushi Kataoka was again the lone dissent as he supported bond purchases so as to facilitate the decline of 10-year (or over) bond yields. Governor Kuroda's speech at the press conference has not tilted towards less easing/ policy normalization in the near-term
We expect BOE to leave the Bank rate unchanged at 0.75% and keep the size of the asset purchase program at 435B pound. Heightened risk of no-deal Brexit, downside risks to economic outlook, market pricing of a rate cut...
BOE voted 7-2 to leave the Bank rate at 0.50%. The members voted unanimously to leave to asset purchase program unchanged at 435B pound. The members were generally positive over the economic outlook, noting that "recent data releases are...
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