Archive

March 06, 2024
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Canada Policy Interest Rate 5.0% (consensus 5.0%) in Mar-24

  • The Bank of Canada's decision to hold the policy rate at 5% aligns with economic consensus. It was influenced by a global economic slowdown, easing inflationary pressures, and modest domestic growth below potential.
  • Despite CPI inflation moderating to 2.9%, concerns over persistent core inflation and elevated shelter costs underscore the need for continued vigilance. The Bank anticipates inflation to stay close to 3% in the near term before gradually easing, with a full return to the 2% target expected by 2025.
  • The Bank remains open to adjusting the policy rate if inflationary surprises occur. Its current focus is on monitoring wage growth, demand-supply balance, inflation expectations, and corporate pricing behavior. The decision process incorporates domestic conditions and global economic dynamics, ensuring readiness to act to maintain price stability.

February 28, 2024
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New Zealand Policy Rate 5.5% (consensus 5.5%) in Feb-24

  • The Reserve Bank of New Zealand's decision to maintain the OCR at 5.50% is predicated on a strategic imperative to curb inflationary pressures amid a complex interplay of domestic capacity easing and sustained global economic challenges.
  • Global economic uncertainties, coupled with geopolitical and environmental risks, notably in shipping costs, present nuanced inflationary pressures that the MPC is poised to address through sustained restrictive monetary policy.
  • The ongoing assessment of fiscal policy impacts, alongside the vigilance towards domestic and global economic developments, will critically inform the MPC's future policy decisions, underscoring a commitment to steering inflation towards the target range while fostering economic stability.

February 27, 2024
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Why Neutral Rates are High

  • Market interest rates still price a mean reversion, albeit with less imminence than earlier this year. Resilient economic data imply the prevailing neutral rate is higher.
  • Slow GDP growth suggests opportunity is low, depressing the consensus view of neutral, but rising time preferences in the post-pandemic regime would also drive rates up.
  • We find reasons for this structural shift and are mindful that another regime change is unlikely outside of a recession. This still provides a hawkish anchor to our forecasts.

By Philip Rush


February 22, 2024
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Korea Policy Rate 3.5% (consensus 3.5%) in Feb-24

  • The Bank of Korea's decision to maintain the Policy Rate at 3.5% reflects a careful balancing act between controlling inflation and fostering economic growth amidst significant domestic and global economic uncertainties.
  • Future interest rate decisions will be significantly influenced by the trajectory of inflation, the state of the global economy, including major economies' monetary policies, commodity price movements, and geopolitical developments.
  • The bank's policy formulation will continue to prioritize financial stability, closely monitoring domestic economic indicators, financial and foreign exchange market dynamics, and household debt trends to guide its approach to achieving medium-term inflation targets.