Central Bank Views
BOC Review – Hiking Policy Rate to 1.75% with Hawkish Bias
The market was thrilled by BOC’s hawkish comments accompanying the widely-anticipated +25 bps rate hike. With the uncertainty of future trade relationship with the US reduced and economic growth on track, the members judged that it is prudent to move to “neutral” interest rate. Removal of the “gradual” rate...
ECB Likely More Cautious amid Soft Core Inflation and Italy. Reinvestment Details to be Revealed in December
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 announced in June, the focus is on the reinvestment arrangement....
BOC Preview – Rate Hike Fully Priced but Future Decision Still Data- Dependent
The market has fully priced in that BOC would raise its policy rate by +25 bps to 1.75% this week. With Canada-US trade uncertainty eased and the employment market staying strong, the focus is on whether policymakers would consider accelerating the pace of normalization. Notwithstanding a rosier picture, the...
Fed’s September Minutes Explained the Rationale of Removing Forward Guidance, Showed More Concerns about USD Strength
The FOMC minutes for the September meeting contained little news regarding the rationale of the 25 bps rate hike last month, as well as the future path of monetary policy normalization. Yet, there are some points worth nothing. First, the minutes explain why the “accommodative” guidance was removed. Second,...
RBA Minutes – Content with Weak AUD but More Concerned about Credit Conditions
The RBA minutes for the October meeting reinforced its cautious stance on the monetary policy. With the cash rate unchanged at 1.5% for 24 consecutive months, the members have seen no urgency to make adjustment. While affirming the next move would more likely a rise than a fall, there...
FOMC Hiked Rate and Removed “Accommodative” Policy Reference
FOMC raised the Fed funds rate, by +25 bps, to 2-2.25% in September. While the accompanying statement was largely dubbed from the previous meeting, the market has viewed the removal of the “accommodative” policy language has slightly dovish. This is evidenced in the instant drop of Treasury yields and...
BOE Preview- Upbeat about Recent Economic Developments, but Cautious over Brexit
Following the August rate hike, BOE would likely keeps its powder dry at least until the Brexit Withdrawal deal is finalized. Macroeconomic indicators released since the last meeting contain both upside and downside surprises. Yet, the overall developments should keep BOE’s policy path, rate hike at “a gradual pace...
ECB to Affirm QE Reduction from October and Downgrade Inflation Forecasts
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 15B euro) from October to December. There is chance that...
BOC Affirmed the Case of October Rate Hike, Downplayed Strong Growth and Inflation
BOC left the policy rate unchanged at 1.5% in August. Comments from Governor Stephen Poloz also signaled that a rate hike in October is highly likely. Yet, the market interpreted the message sent in the meeting was more cautious than previously. While acknowledging strong growth in the second quarter,...
RBA Left Cash Rate Unchanged for 25 Months in a Row
RBA left the cash rate unchanged at 1.5% for a 25th consecutive month. Similar to previous meetings, policymakers were upbeat over the growth and the employment outlook, while acknowledging soft wage growth and inflation. In short, the central bank is optimistic over the business conditions and higher levels of...
BOC Preview – Growth Upbeat, Just Not Justifies Another Rate Hike Until October
Recent upbeat macroeconomic data has lifted speculations for a BOC rate hike in September. Yet, we do not expect the developments since the last meeting should change the central bank’s gradual normalization policy. Policymakers should bear in mind the lesson of a back-to-back rate hike (July and September) last...
Powell Signals He Would be More Cautious in Face of Uncertainty
Weaker USD, lower Treasury yields, higher equities… Market reactions showed that Fed’s chair Jerome Powell’s speech at Jackson Hole symposium was interpreted as “dovish".
Discussing about “Monetary Policy in a Changing Economy”, Powell revealed the challenges of navigating the stars – u*, the natural rate of unemployment, r*, the neutral...
FOMC to Continue Rate Hike Despite Trump’s Criticism
The minutes for the July FOMC meeting affirmed that the policy rate is prone to increase in September, notwithstanding Trump’s pressure. The members remained upbeat over the economic growth outlook but warned on downside risk due to intensifying trade tensions. They acknowledged the need to amend the language to...
RBA Too Early to be Confident over Consumer Spending
The RBA minutes of the August meeting contained little news, in particular after release of the quarterly Statement of Monetary Policy two weeks ago and Governor Philip Lowe’s parliamentary testimony last week. The minutes reiterated confidence over domestic economic development, hinging on the robust employment market. We also notice...
RBNZ Delays Timing for Rate Change and Inflation to Reach +2%, Kiwi Slumps
RBNZ’s August statement comes in more dovish than we had anticipated. While leaving the OCR unchanged at 1.75%, the members pushed backward expectations for the next interest rate adjustment. Moreover, they pushed back the timing for inflation to reach the +2% target. New Zealand dollar slumped after the announcement....
RBA Keeps Policy Rate at Record Low for Two Years; Might Downgrade 2018 Inflation Forecast
RBA left the cash rate unchanged at 1.5% for the 22nd meeting today. The accompanying statement continued to deliver a “neutral” tone on the future path of the monetary policy. Since the last meeting, domestic economic growth has stayed, and will stay, “above trend” while the job market has...
RBNZ Preview – Policy Rate On Hold, Overall Tone Neutral or Slightly Dovish
At the August 9 meeting (this Thursday), we expect RBNZ to leave the OCR unchanged at 1.75% and deliver a neutral to slightly dovish policy statement. Since the June meeting, data showed that economic growth moderated while inflation picked up. In the job market, the unemployment rate climbed higher...
BOE Review: Unanimous Rate Hike Decision Fails to Revive Pound
BOE surprisingly voted unanimously to raise the Bank rate, by +25 bps, to 0.75%. This marks the first increase since last November and the second since global financial crisis. The Committee revised higher forecasts for GDP growth and inflation for this year and in 2019. At the press conference,...
FOMC Review – Gradual Rate Hike Path Remains Intact and Economic Assessment Upgraded
The August FOMC statement contained few changes, following quite remarkable amendments in the June one. The only change came from the upgrade in the assessment of the economic developments. Interestingly, Chair Powell’s “for now” qualifier on the rate hike path was not included in the statement, let alone any...
BOE Expected to Deliver Dovish Rate Hike in August
BOE’s rate hike in August is almost fully priced in. The focus is, thus, on the monetary policy outlook. The upcoming increase of +25 bps is the second one in more than a decade. Although the pickup in growth in the second quarter has reinforced most policymakers’ view that...