Mon, Mar 30, 2020 @ 22:38 GMT
BOJ again voted 8-1 to leave the monetary policies unchanged in January. 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. As a ritual since he has joined the Board in September 2017, Goushi Kataoka has dissented again. The central bank has turned more upbeat on the inflation outlook although the members left the GDP growth and inflation forecasts unchanged for fiscal years from 2017 to 2019. At this meeting, the members also voted unanimously to extend for one year new the applications for the fund provisioning measure to achieve certain the goals such as stimulating bank lending and supporting economic growth.
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...
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...
As expected, RBA left the cash rate unchanged at 1.5% in March. Despite few changes in the monetary statement, policymakers appeared more upbeat on both the global and domestic economic outlook. The major change on RBA's view was on the housing market with the central bank now seeing the conditions 'strong' and prices 'rising briskly' in some markets. On the monetary front, RBA acknowledged further rate hike is coming in the US and 'there is no longer an expectation of additional monetary easing in other major economies'. With no explicit guidance on RBA's monetary policy outlook, we see it maintain a neutral bias with future rate decision dependent on incoming data.
In line with our expectations, ECB largely judged the recent slowdown in economic data as driven by temporary factors and moderation after periods of strong growth. The members maintained the view that risks to growth were “broadly balanced” and...
As widely anticipated, FOMC left the target range for the federal funds rate unchanged at 2.00-2.25% at its November meeting. The changes in the accompanying statement were limited. This is not unusual as the November meeting is in between...
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...
As widely anticipated, the RBA left the cash rate unchanged at 1.5%. Policymakers acknowledged that June inflation drifted back below the +2% target but remained confident it would improve gradually alongside the pickup of the economy. Policymakers, however, warned of Australian dollar's appreciation, suggesting that it would limit economic growth. A reference of the negative impact of strong currency on economic developments reappeared as AUDUSD has risen +5.7% from July's low of 0.7567.
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.
To our, and the market's, surprise, BOE's Kristin Forbes voted in favor of a 25 bps rate hike in March. While this had not altered the decision of keeping the Bank rate unchanged at 0.25%, the overall message sent to the public has now become more hawkish. The members voted unanimously to leave the government bond purchases at 435B pound and corporate bond purchases at up to 10B pound. Adding to the rising speculations of tightening is the minutes, which suggested that some of those who voted for unchanged policy believed 'it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted'. GBPUSD jumped to a 2-week high of 1.2376 after the announcement, before settling at 1.2358, up +0.55%.
The talk of the day is undoubtedly the flattening of US yield curve with the spread between the 10-year and 2-year yields fell to 64 bps, the lowest level since November 2007 on Thursday. Meanwhile, the spread between 30-year and 5-year yields also dropped below 75 bps, the lowest in about 2 week. Flattening yield curve has raised concerns as this is probably also a reason of diminished risk appetite this week, apart from disappointing global macro dat. Textbook knowledge suggests a normal yield curve is upward-sloping as yields for longer-dated investments are higher than shorter-dated ones. An inverted yield curve (short-dated yields exceed those of long-dated) is usually a signal of upcoming economic recession. A flat yield curve is the transitory period from a normal to an inverted curve. However, this interpretation does not necessarily hold true. For instance, US' economic growth managed to avoid recession, despite a series of global economic crisis from 1995-2000, years after the sharp yield curve flattening from 1994 to 1995 (Second Chart).
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...
ECB President Mario Draghi poured cold water onto hawks who had anticipated a more upbeat policy statement following recent improvement in macroeconomic data. However, the central bank downgraded the inflation forecasts for three years despite upward revision on GDP growth. The forward guidance was slightly less dovish with the reference "or lower" removed. Honestly, all of us understand that, at the currently exceptionally low (some are negative) interest rates, further rate cuts would offer little help to the economy. Notwithstanding expectations that the ECB would begin preparing the market over QE tapering, the central bank maintained the easing bias, reiterating the commitment to accelerate its monthly asset purchases if necessary. The single currency remains under pressure after dropping to a one-week low against the US dollar.
As widely anticipated, RBA left its cash rate, for an 8th meeting, at 1.5% in April. While headline CPI has more or less reached the central bank's target level, the core reading has remained subdued. Policymakers have decided to take more time to gauge the inflation outlook before action. Meanwhile, the unemployment rate has remained elevated while excess capacity in the job market has rendered wage growth weak. The RBA reiterated its rhetoric on the housing market, suggesting conditions 'continue to vary considerably around the country'. Policymakers would be cautious over adopting another rate cut as previous reductions have caused a surge in housing produces and rebound in investment related credit growth. A rate hike is equally unlikely as Australian dollar has remained at historically high levels.
RBA left the cash rate unchanged at 1.5% in May. Yet, the accompanying statement remained dovish, citing sharp deceleration in core inflation, decline in house price and subdued household consumption as key areas of concerns. On the monetary policy...
The BOC left the policy rate unchanged at 1% in December. While acknowledging the strength in the employment situation, it warned of the slack in the labor market. While upgrading GDP growth forecast, it noted that it does not necessarily imply a narrower output gap. While admitting the policy rate would have to increase over time, it reiterated caution over any monetary decision. All in all, the central bank attempted to deliver a neutral to dovish message, so as not to cripple the recovery path – a lesson learnt after two consecutive rate hikes in July and September. Canadian dollar plunged after the announcement, with USDCAD jumping to as high as 1.2777, highest level in three days.
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...
The FOMC minutes for the December meeting revealed that policymakers were optimistic about the path of economic expansion. This was partly a result of the government's fiscal stimulus. On the tax cut, some members judged that it would help boost both capital and household spending, although the magnitude remains uncertain. The December rate hike of +25 bps was data-dependent but a key factor was the strong employment market. While wage growth was still "modest", a few members forecast it to accelerate as the job market tightened further. Many members expected that the tightening labor market would lead to higher inflation in the medium- term, but some continued to judge that core inflation would persistently stay below the 2% target. The rate hike in December was not unanimous as Chicago Fed President Charles Evans dissented.
BOC left the policy rate unchanged at 1.75% in December. The accompanying statement turned more hawkish than October. Despite ongoing trade war uncertainty, policymakers remained upbeat about the domestic economic growth. They also acknowledged that the global economy has...
Although the Fed and ECB have resumed monetary easing, BOC is not expected to follow suit. This is also the key reason for the recent strength in Canadian dollar. At the meeting next week, we expect the central bank...
- advertisement -