Central Bank Views
RBA’s July Minutes – Cutting Rate to Weaken Aussie and Lower Unemployment Rate
RBA’s minutes for the July meeting revealed that the objective for lowering interest rate in July again was bringing down the unemployment rate and lowering the exchange rate. Unlike the June minutes, the central bank had not hinted more rate cuts would come in the near-term. Yet, we do...
Dovish FOMC Minutes Heighten the Case for July Rate Cut
The FOMC minutes for the June meeting maintained a dovish tone, paving the way for a Fed funds rate cut later this month. The member generally acknowledged downside risks to growth have intensified while heightened uncertainty, in particular in trade tensions, would pose negative impacts on business investment. Fed’s...
BOC Left Rate Unchanged at 1.75%. Cautious about Trade But Overall Tone Stays Neutral
BOC left the policy rate unchanged at 1.75% yesterday and maintained a neutral tone. Policymakers turned more cautious about the impact of trade tensions on economic activities and noted that global interest rates have been lower over the past months. Yet, they acknowledged that domestic growth remained upbeat. While...
BOC Preview – Not Following Fed’s Footstep
BOC is expected to leave the policy rate unchanged at 1.75% this week, and for the rest of the year. Data flow since the last meeting has remained resilient, offering the central bank more room to take a wait and see mode and assess the economic developments. We believe...
RBA Lowers Policy Rate to Fresh Record Low of 1%
As widely anticipated, RBA lowered the cash rate for a second consecutive month today. After the -25 bps cut, the policy rate has reached a fresh record low of 1.00%. At the concluding statement, it pledged to adjust the monetary policy if needed”.
On recent economic developments, RBA acknowledged that...
RBA Preview – Another -25 bps Rate Cut Expected This Week
We expect to RBA to cut the cash rate, by -25 bps, to 1% in July. Although this would be earlier than RBA’s projection in the May SoMP, it is largely in line with market expectations, which has priced in about 70% of a rate cut in July. We...
RBNZ Review – Stand Pat and Stay Cautions
NZDUSD climbed higher after RBNZ left the OCR unchanged at 1.5%, a well-anticipated move. The members maintained a dovish tone, but not more dovish than in the previous meeting. Although the central bank indicated that interest rates might need to be lower, it does not sound like it would...
RBNZ Preview – Maintaining Cautious Tone to Pave Way for Further Cuts
After lowering the policy rate by -25 bps to 1.50% in May, RBNZ would likely remain on hold this month. Domestic economic developments came in largely consistent with policymakers’ projections. Yet, global economic outlook remains uncertain and major central banks have recently shifted their stance on the dovish side.
As...
FOMC Review – Divided Fed Signals Rate Cut This Year Still Likely
FOMC left the policy rate unchanged at 2.25-2.50% but with one dissent. St Louis Fed President James Bullard voted against the decision as he proposed to cut the rate by -25 bps. The dot plot projections show that more members are in favor of lowering interest rates. The policy...
RBA Minutes Indicate More Rate Cuts In Coming 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 bank rate by -25 bps to 1.25% in June. The...
BOE Preview – Record Low Interest Rate Remains Intact Despite Recent Hawkish Comments
We expect BOE to leave the policy rate unchanged at 0.75% this week. It would also keep the size of the asset purchase program at 435B pound. Although there has been some noise pushing for a rate hike, we expect the votes on both measures to be unanimous.
UK’s economy...
FOMC Preview – Preparing for Rate Cut
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 guidance and median dot plot. It is likely that the...
SNB Maintained Pledge to Intervene FX Market if SNF Too Strong. Question is How to React if Fed and ECB Ease Further
In its quarterly meeting, SNB announced to leave the policy rate – the interest rate on sight deposits, unchanged at -0.75%. On a technical change, the central bank introduced a new benchmark – the SNB policy rate- in replacement of the 3-month LIBOR. The members acknowledged recent strength in...
ECB Not Dovish Enough – Low Rate to Stay until Mid-2020 and TLTRO Pricing Revealed.
We believe ECB’s more dovish tone in June is insufficient to stimulate the economy. As expected, ECB extended the timing that the historically- low interest would remain. It also released the pricing of the TLTRO-III. We were slightly disappointed that the interest rates offered was higher than those in...
RBA Lowers Policy Rate to 1.25%. Two of Big Four Pledge to Pass the Cut to Market in Full
For the first time in 3 years, RBA lowered the cash rate by -25 bps to 1.25%, a fresh record low, in June. The rate cut had been well anticipated as the members sought to support the labor market and boost inflation. Further reduction is possible later this year....
ECB Preview- More on Dovish Side. Focus on Forward Guidance Extension and Pricing of TLTRO-III
We expect the ECB to deliver a more dovish message in June. We expect to see changes in the forward guidance. ECB would also announce the technical details of TLTRO-III. The economic projections would probably similar to the previous ones, despite modest upside surprise in the first quarter GDP...
Market Not Convinced by BOC’s Intentionally Neutral Tone
Despite BOC’s effort to temper the need of a rate cut, the market is obviously unconvinced. Market participants continue to price in about 30% chance of rate cut later this year and USDCAD surged to the highest level since January. The key message from the meeting is that the...
BOC to Avoid Hinting Rate Hike Despite Improvement in Economic Data
We expect BOC to stay put - leaving the policy rate unchanged at 1.75%, at the upcoming meeting. Macroeconomic indicators released since the April meeting showed improvement. Governor Stephen Poloz said in an interview last week that interest rates are likely to still go up “a bit”, if recent...
ECB Lacks Confidence that Economic Forecasts Could be Achieved. Focus on June for TLTROs Details
Reinforcing the dovish tone, the minutes for April’s ECB meeting exemplified the members’ pessimism over the economic outlook. They were becoming less confident that the baseline scenario of growth can be achieved. As such, the central bank would try to stimulate bank lending via the Targeted Longer-Term Refinancing Operations...
FOMC Minutes Reinforced Patience Approach to Monetary Decision
The FOMC minutes for the meeting in May unveiled that the members remained optimistic about the economic outlook. They also viewed that soft inflation was a transitory phenomenon. These resulted in the judgment that “a patient approach” to monetary policy decision remains appropriate and the policy rate should stay...