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Central Bank Views

BOJ Introduced Forward Guidance and Made Subtle Changes in YCC

BOJ made some changes in its unconventional monetary policy in July. We believe these changes sent a dovish message that it takes longer time than previous anticipated for inflation to reach the +2% target. At this meeting, BOJ introduced forward guidance reinforcing the commitment to keep for policy rate...

Fed Prepares for Rate Hike in September

The upcoming FOMC meeting later this week aims at preparing the market for another +25 bps rate hike in September. As no press conference and economic projections would follow the August meeting, the post-meeting statement, and the minutes in three weeks, would be used for communication and setting expectations....

BOC Review – Raised Growth Outlook but Upbeat Business Investment Might Diminish in Coming Years

BOC delivered its fourth post-crisis rate hike in July. While the increase of +25 bps had been widely anticipated, the accompanying statement and the updated growth forecasts appear more hawkish. While raising GDP growth outlook for 2019 and 2020, BOC’s wage growth forecast remained benign. Meanwhile, it heightened its...

BOC Preview – Rate Hike Fully Priced In, Data and Trade with US Continue to Guide Future Path

Since the BOC meeting in May, at which the policymakers removed the “cautious” rhetoric, the market has been raising its bet on a July rate hike. As of today, the market has priced in over 90% chance of a +25 bps rate hike at this week’s meeting. GDP growth...

FOMC Minutes: Members Urged Attentions on Yield Curve, Change in Forward Guidance

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 were concerned over the flattening of US treasury yield curve,...

RBA Left Cash Rate Unchanged at 1.5%, Content with Aussie Depreciation

RBA left the cash rate unchanged at 1.5% for a 21st meeting in July. The outcome had been widely anticipated. Indeed, the market has expected no interest rate adjustment at least until late 2019. As a result, market reaction outcome was rather muted. On the global economic development, RBA acknowledged...

RBNZ More Dovish in June Meeting

RBNZ left the OCR unchanged at 1.75%. While the central bank reiterated its “neutral” monetary policy stance, the accompanying statement revealed that policymakers have turned slightly more dovish than previous months. The members were concerned about global trade tensions and the resulting financial market volatility. They also acknowledged more...

BOE Voted 6-3 to Keep Rate at 0.5%, QE Tapering Might Come Sooner

Surprisingly, BOE voted 6-3 to leave the Bank rate on hold at 0.50%. Chief economist Andy Haldane joined Ian McCafferty and Michael Saunders in opting for a +25bps rate hike. The outcome is more hawkish than consensus of a 7-2 vote. The more split committee was resulted from the...

BOE Preview – Focus on June Meeting Minutes

Last month, BOE left the policy rate at 0.5% and the asset purchase program at 435B pound. It acknowledged the growth slowdown in the first quarter but noted that more information is needed to confirm whether it was driven by temporary factors. Although deputy governor Dave Ramsden suggested earlier...

ECB to End QE in December, No Rate Hike At Least Until Summer 2019

ECB's decisions in June came in largely in line with our expectations, although it might have contained surprises for other market participants. The central bank decides to reduce the size of its QE program to 15B euro/ month, from the current 30B euro/ month, from October. The entire purchase...

Fed Raised Policy Rate in June. Two More to Come amidst Upbeat Economic Developments

Decided unanimously, FOMC raised the Fed funds rate by +25 bps to a range of 1.75-2.00%. In a technical adjustment, it also lifted the interest rate paid on required and excess reserve balances, by +20 bps, to 1.95% so as to maintain the trading in the fed funds market...

ECB Preview – Members to Discuss QE Tapering This Week, Attention Moves to Rate Hike Path and Forward Guidance

The recovery in euro since late-May gathered momentum last week after ECB Chief Economist and executive board member Peter Praet signaled the central bank would discuss QE tapering at this week’s meeting. We are not surprised by this as it is appropriate for the members to communicate with the...

FOMC Preview – Fed’s Rate Hike A Done Deal, Focus Turned to Forward Guidance

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. The focuses are on the forward guidance on the future...

RBA Left Cash Rate Unchanged, Affirmed that Credit Condition Remained Accommodative

RBA left the policy rate unchanged at 1.5% in June, and made no change to the monetary policy guidance. The central bank remained confident over the global economic outlook. Indeed, it has so far not commented about the slowdown in economic activities in the Eurozone, UK and Japan, etc....

BOC Removes “Cautious” Reference, But 2H17 Rate Hikes Experience Suggests Members Can Make Over-Aggressive Judgements

Canadian dollar recorded the biggest one-day rally in two months after BOC’s more hawkish- than- expected statement. Policymakers turned less concerned over the economic outlook. As such, they dropped the words “cautious” and “over time” in the accompanying statement, a sign interpreted by the market as supportive for a...

BOC Likely Stands on Sideline This Month as More Data and Trade Outlook Awaited

Bank of Canada (BOC) would most likely leave its policy rate unchanged at 1.25% in May. Following two rate hikes in 2017 and one more in January this year, BOC has kept its powder dry since then. In April, the central bank cautiously noted that future monetary policy change...

FOMC’s May Minutes Shows Some Dovish Tweaks

The FOMC minutes for the May meeting contain some dovish signs from the Fed. The members remained confident over the economic developments, acknowledging strong employment market and improvement in inflation. However, many of them remained wary of limited wage pressures. The minutes emphasized “the aim of keeping inflation near...

BOE Downgraded Growth and Inflation Outlook. Market Bet for No Rate Hike This Year

BOE voted 7-2 to keep the Bank rate unchanged at 0.5% in May. The members voted unanimously to leave to asset purchase program unchanged at 435B pound. As we had mentioned in the preview (https://www.actionforex.com/action-insight/central-bank-analysis/92835-boe-could-be-more-dovish-than-hawkish-hold/), BOE’s message turned out more dovish than the market had anticipated. The staff revised...

RBNZ Turns Dovish, Downgrading Growth and CPI Forecasts

RBNZ left the OCR unchanged at 1.75% in May. The message delivered by the central bank came in slightly more dovish than expected, sending NZDUSD to a fresh 5-month low. In his first meeting in the capacity of the RBNZ Governor, Adrian Orr made some changes in the policy...

BoE Could be More Dovish than “Hawkish Hold”

BOE is almost certain to keep the Bank rate unchanged at 0.5% in the May meeting. Weakness in PMI data released last week aggravated concerns that recent the moderation in economic activities might persist. Doubts have arisen that whether the slowdown in 1Q18 is only driven by transitory factors...