Central Bank Views
BOE Stays Put But Warns of the Market Volatility in Case of Further Brexit Delay
BOE voted 9-0 to leave the Bank rate unchanged at 0.75%. It also maintained the asset purchase program at 435B pound and corporate purchase at 10B pound. BOE also made detailed discussion on the problems stemmed from Brexit uncertainty.
The members warned that “shifting expectations about the potential timing and...
SNB Raises Exemption Threshold for Negative Rate; CHF Rises on No Rate Cut
SNB left the policy rate unchanged at -0.75%. It reiterated the commitment to “intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration”. Additionally, the central bank adjusted the interest charged on banks’ excess reserve. The rationale is similar to ECB’s tiering system...
FOMC Cut Rate by -25 bps. Third Cut Still Possible Despite Sounding Less Dovish
Fed lowered the policy rate by -25 bps to 1.75-2.00%, although market expectations of a rate cut diminished markedly ahead of the meeting. The decision was not unanimous. Yet, it revealed a more divided Fed. The updated median dot plot shows a significant minority favoring one more cut by...
FOMC Preview – Focus on Dot Plot for Potential Third Rate Cut
Another rate cut, by -25 bps, is a done deal this week, although the market has trimmed its expectations to 66% from 92% a week ago. This would take Fed funds rate's target range to 1.75-2%. The focus of the meeting is the number of members in support of...
ECB Cuts Deposit Rate to Historical Low of -0.5%, Resumes QE
ECB has announced a new package of stimulus measure as inflation weakens. At the same time, the central bank revised lower both GDP growth and inflation outlooks for coming years. EURUSD initially plunged to as low as 1.0927 before a strong rebound.
1. Rate Cut: Deposit rate is reduced by...
ECB Preview – Awaiting New Easing Package
We expect ECB to deliver a easing package at this week’s meeting. Economic developments since the last meeting have remained steady. However, growth is limited and risk is skewed to the downside. The latest economic projections will show downgrades in both GDP growth and inflation outlook.
We expect the easing...
BOC Sounds Less Dovish than Expected, as Housing Market and Wage Growth Improve
BOC left the policy rate unchanged at1.75%. Policymakers’ monetary policy stance was less dovish than previously anticipated. While showing more concerns about US-China trade war and downplaying GDP growth in the second quarter, the members described the current monetary policy as appropriate. They also appeared upbeat about the situation...
RBA Left Rate Unchanged, More Flexible on Future Policy Decision
As expected, RBA left the cash rate unchanged at 1% in September. The accompany gin statement is largely unchanged from the previous one. RBA has not made any hints about a rate cut next month. Policymakers might want to take more time to observe after seeing positive signs from...
RBA Preview – Staying Put before Further Easing
Although the market generally expects RBA to leave the cash rate unchanged at 1% this week, the chance of a surprise cut is not negligible. Despite mild pickup in confidence after the back-to back rate cuts in June and July, risks to economic outlook remains to the downside. Policymakers...
BOC Prepares for Insurance Rate Cut
Global economic slowdown, escalations of US- China trade war and further Fed funds rate cut have heightened speculations that BOC would have to lower its policy rate in coming months. We agree on this assessment but expect that the insurance cut would come in October.
US- China trade war has...
FOMC Minutes Explained the Rationale for Precautionary Rate Cut. Further Reduction Likely in Coming Months
The FOMC minutes for the July meeting explained that the key reasons for the rate cut are slowdown in global economic outlook and subdued US inflation. An insurance reduction was needed to prevent these factors from dragging US economy. Yet, the decision to lower the Fed funds rate, by...
RBA Minutes Indicates Data- Dependence in Future Policy. Further Rate Cuts Likely Given Limited Decline in Unemployment Rate
RBA’s minutes for the August meeting indicated that future monetary policy action would be data-dependent. While acknowledging some improvements in the economic developments after the two consecutive rate cuts, spare capacity in the labor market remained significant. The country’s unemployment rate would stay above the longer-term target for some...
RBNZ Cut Policy Rate by -50 bps, Hinting Negative Interest Rate
RBNZ surprised the market by reducing the OCR, by -50 bps, to 1%. The market had only anticipated a -25 bps cut. The aggressive rate cut is "necessary" to help support employment and inflation in the country as downside risks are growing. Governor Orr also signaled that negative interests...
RBNZ Preview – Another Rate Cut is Needed to Boost Inflation and Support Employment
We expect RBNZ to cut the OCR, by -25 bps, to 1.25% in August. Given the disappointment in the inter-meeting data flow, the central bank would likely signal further easing later in the year. Meanwhile, the policy statement might focus on the downside risks on domestic economic growth outlook,...
RBA Preview – Pausing (Not Ending) after Two Consecutive Rate Cuts
Following two consecutive rate cuts, RBA is widely expected to leave the cash rate unchanged at 1% in August. Incoming economic data since the last meeting have also supported the pause. Yet, given the aggressive target in the longer-term unemployment rate, downside risks to growth and ongoing uncertainty in...
FOMC Review – Market Disappointed as Powell Described Rate Cut as “Mid-Cycle Adjustment”
Fed announced to lower the policy rate by -25 bps to 2-2.25% in July. US dollar jumped while Wall Street declined although the decision came in widely anticipated. The market was probably disappointed by the lack of commitment of future rate cuts. The members remained confident about the domestic...
BOE Preview – Standing On Sideline and Sending More Neutral Bias
We expect BOE to leave the Bank rate unchanged at 0.75% and keep the size of the asset purchase program at 435B pound. Heightened risk of no-deal Brexit, downside risks to economic outlook, market pricing of a rate cut later this year, and easing bias from the Fed and...
FOMC Preview – Expecting -25 bps Cut From a Divided Fed
We expect the Fed to announce a rate cut of -25 bps, bringing the Fed funds rate target to 2-2.25%, this week. Yet, this decision is unlikely unanimous. Although there has been voice suggesting a deeper cut is needed, we do not it will happen this month. The plan...
ECB Review – Hinting Easing Without Giving Details
The July ECB meeting aims at preparing the market for further easing in September. As expected, the members hinted that interest rate could fall to lower level. They also discussed about the possibility of restarting QE and the two-tiered interest rate system. The announcement was not without surprise. The...
ECB Preview – Expecting Change in Forward Guidance and Hints on QE Resumption and Tiering
We expect ECB to implement more easing measures to stimulate the economy, and the timing would likely be in September. The July meeting, scheduled later this week, would be used to prepare the market further the easing package. Over the past month, ECB has sent strong signals that a...