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Fed Powell Cautioned about Uneven Recovery, Pledged to Maintain Stimulus

At the testimony before the Senate, Fed Chair Jerome Powell cautioned that the economic recovery is uneven. He pledged to maintain sufficient support to achieving the employment and inflation targets. Concerning economic developments, Powell refrained from sending a too optimistic message. He affirmed that the recovery highly depends on the...

RBNZ Preview – Policymakers to Sound Less Dovish with Yields and NZD Strengthened

We expect the RBNZ to deliver a less dovish message in the upcoming meeting. Economic data released since the November meeting have been encouraging, with the price level and the job market on track to reach the target. These should lead to upgrades in the economic projections. Financial conditions...

BOE Upbeat about Inflation Outlook. Negative Rate Seems Unlikely although It is Not Ruled Out

As expected, BOE left the Bank rate unchanged at 0.1%. Meanwhile, the QE program also remains at 875B pound worth of government bonds, and 20B pound of corporate debt. The economic projections reveal that policymakers are more optimistic about inflation projecting it to reach the +2% target this year....

RBA Extends Asset Purchases of AUD 100B Until September

RBA announced to extend the asset purchase program by an additional AUD100B as the current program ends in mid- April. Meanwhile, it has turned more upbeat about the global and domestic economic outlook, and upgraded GDP and employment forecasts. RBA turns more upbeat over the global and domestic economic outlook....

BOE Preview – Awaiting Updates on Negative Rate Policy and Economic Projections

There are several things to watch for this week’s BOE meeting: 1) updates on the review of negative interest rate; 2) adjustment to QE; 3) economic projections. All policy measures will stay unchanged this week with the Bank rate unchanged at 0.1%, and the size of the asset purchases...

RBA to Leave Policy Unchanged and Remain Cautious about Outlook Despite Recovery

The RBA will have its first meeting this year on Tuesday, followed by publication of the statement of monetary policy on Thursday. We expect all policy measures to stay unchanged this month. Policymakers could revise GDP forecast higher and the unemployment rate lower, given the better-than- expected economic data...

Fed Indicated that QE Tapering is Premature and Bar to Adjust Policy is High

The December FOMC meeting contained little news. However, Chair Powell sent a clear indication that tapering is “premature” for the time being and that the bar to adjust the monetary policy is higher. The Fed left all measures unchanged at the meeting. The Fed funds rate stays at 0-0.25%...

FOMC Preview – Cautious about Economic Weakness but Fiscal Stimulus should lend Support

The FOMC meeting in the coming week will not bring any change in the monetary policy. Economic activities have moderated since the December meeting, while resurgence in the coronavirus cases could hurt economic activities more seriously than previously expected. Yet, roll-out of more fiscal stimulus and positive vaccination progress...

ECB Gets Slightly More Hawkish, Revealing that it might Not Use All of PEPP Envelope

The ECB left its powder dry in January. While continuing to warn of the downside risks on the Eurozone and global economy, the central bank delivered a hawkish tweak about operation of the Pandemic Emergency Purchase Program (PEPP). On the monetary policy measures, the central bank left the size...

CAD Extended Rally as BOC Sounded Less Dovish

BOC’s January meeting came in less dovish than expected. While leaving the monetary policy measures unchanged, the central bank has upgraded the economic outlook for 2022. Meanwhile, policymakers hinted QE tapering if confidence over recovery improves. At the meeting, BOC kept the overnight rate at 0.25% and the QE...

ECB Preview – Awaiting More Comments of Strong Euro

While ECB would likely leave its monetary policy measures unchanged this week, the market should focus on several issues: members’ view on recent euro strength, discussions on QE tapering and economic impacts of renewed lockdown. Following the recalibration in December, ECB would leave the size of the Pandemic Emergency...

BOC Preview – All Eyes on Likelihood of Micro Rate Cut

BOC is widely expected to leave its overnight rate at the effective lower bound of 0.25% in January. The size of asset purchases will also stay unchanged at CAD4B/week. Over the past month, there has been market speculations about the possibility of a micro rate cut since November. While...

Euro to Stay Positive against USD in 2021, though with Upside Limited

After gaining almost +10% this year, we expect EURUSD to strengthen further in 2021. While Eurozone continues to struggle with slow recovery and subdued inflation, the broad-based weakness in US dollar is anticipated to support the pair. As we mentioned in the previous report, we are bearish over US...

Fed Pledged to Continue QE Until “Substantial Progress” Seen in Employment and Inflation

The major changes in the December were forward guidance in the asset purchase program (QE) as well as upgrades in economic forecasts. The Fed left the policy rate unchanged at 0-0.25% and asset purchases at US$120B per month. The updated median dot plot suggests that no rate hike is...

BOE Preview – Staying Cautious about Brexit Outlook

For QE expansion at the last meeting, we expect the BOE will keep its powder dry this month. BOE should leave the Bank rate unchanged at 0.1%, and the size of asset purchases (QE) at 875 pound. There have been mixed developments since the November meeting. Economic data released...

FOMC Preview – Fed to Update Forward Guidance on QE

At the last meeting of the year, we expect the Fed to be more cautious about the near-term outlook, while more optimistic over the longer-term. The focus of the meeting will be on the adjustment of the forward guidance about the asset purchase program. It will be a qualitative,...

ECB Extends PEPP, APP and TLTROs to At Leaset Until Mid-2022

As promised, the ECB “recalibrated” the existing monetary policy measures at the December meeting. The aim is to ensure that the current level of stimulus remains in presence through to 2020. On the economic projections, the staff revised lower the GDP growth forecast for 2021 but higher for 2022....

BOC Upbeat about Vaccine but Remained Cautious about Slow Global Recovery

As widely anticipated, BOC left all its monetary policy measures unchanged. Policymakers acknowledged the economic recovery since the last meeting. Yet they cautioned about the resurgence in coronavirus cases and the potential impacts on related restrictions on the economic outlook. The central bank welcomed the vaccine news but warned...

BOC Preview: Keeping Powder Dry While Reiterating Stimulus will Last For Years

After the adjustment in asset purchases in October, we expect BOC to keep the powder dry this week, at its last meeting in the year. Policymakers will caution about the rising number of coronavirus cases and economic impacts of tighter restrictive measures, while noting positive news about vaccine. The...

ECB Preview – Policy Recalibration to Focus on PEPP and TLTRO

Given the strong hint in the October meeting, the ECB is prone to add monetary easing measures at Thursday’s meeting. We expect to see increase in the size of PEPP and adjustment of TLTRO. As the policy rates have been staying in the negative territory for years, it is...

RBA Preview: Cautiously Optimistic over Recovery; QE Expected to Increase Further in 2021

After some big moves in November, we believe the RBA will stay put at this week’s meeting. Given the good news about vaccine and the steady decline in the country’s coronavirus cases and, we do not feel surprise if the members turn more upbeat this month. Economic data released since...

FOMC Minutes: Fed Seriously Considered Adjusting QE

The minutes for the FOMC meeting in November shows that policymakers were cautiously optimistic about the economic recovery and the impacts of the monetary policy tools on the economic outlook. As negative interest rate has been ruled out, the Fed's future policy tool is dependent on asset purchases (QE)....

RBA Minutes Affirm that Future Monetary Policy will Rely on QE

The RBA minutes for the November contained little news. After cutting the policy to a new low of 0.1%, policymakers suggested the policy tool in the future will mainly be asset purchases. While the members remained reluctant to lower interest rates to negative, they might have to follow if...

Chance of Negative OCR Reduces as RBNZ More Confident About Economic Outlook

RBNZ announced that a Funding for Lending Program (FLP) will be implemented in “early December” with an initial size of about NZD 28B. Further details will be announced in coming weeks. The program aims at providing loans to commercial banks at low cost (e.g.: 0.25%). The central bank left...

RBNZ Preview – Introducing New Lending Program with Dovish Tone Maintained

The focus of this week's RBNZ meeting is on details of the Funding for Lending (FLP) program. We expect this program would be implemented before the end of the year and would be the key policy tool of the central bank in the future. Concerning other monetary measures, the...

Fed Discussed Options to Adjust QE, More Details Probably Out Next Month

As widely anticipated, the Fed left the policy rate unchanged at 0-0.25% and asset purchases at US$120B per month. The decisions were made unanimously. The members acknowledged that economic recovery remained under way. Yet, they warned of the downside risks to growth amidst the huge uncertainty of the coronavirus...

BOE’s QE Expansion Exceeds Expectations as Economy Heads for Double Dip

While leaving the Bank rate unchanged at 0.1%, BOE raised the size of asset purchases (QE) by +135B pound to 875 pound. Both decisions were made unanimously. The expansion came in larger than we had anticipated. The staff also revised lower GDP growth outlook, now expecting the economy to...

FOMC Preview – Fed to Discuss Asset Purchases Arrangement as Balance Sheet Surpasses US$ 7 Trillion

We do not expect any change in the monetary policy at the November meeting. That is, the Fed should leave the policy rate unchanged at 0-0.25% and the asset purchases program unchanged at US$120B/month. The central bank will maintain a dovish stance, warning that risks to growth are skewed...

RBA Cuts Rates and Increases QE Purchases for at Least 6 More Months

As expected, RBA announced further monetary easing at today’s meeting. RBA cut the cash rate to 0.1%, from 0.25% previously. Similarly, the target for the yield on the 3-year government bond yield and the interest rate on new drawings under the Term Funding Facility were also lowered to 0.1%....

BOE Preview – Expanding QE Size while Keeping Rate Unchanged at Record Low

At the meeting this week, we expect BOE to increase the size of asset purchases (QE), by 100B pound, to 845B pound. The Bank rate will stay unchanged at 0.1%. Economic data released since the last meeting suggest that the members’ forecasts in August were too optimistic. A downgrade...