Archive

BoE Hawks Read the Writing on the Wall

• The BoE held the Bank rate at 5.25%, with only one dissent for a cut as the two hawks stopped pushing for a hike that was not going to happen, given broad resistance.
• An extended period of restrictive policy is still envisaged, with persistent inflationary pressures rather than the spot CPI rate guiding when rate cuts begin.
• Wage and service inflation is not seen returning to target sufficiently rapidly yet, and we expect that problem to persist, leaving our call for the first cut back in Feb-25.

By Philip Rush

Norges Bank Policy Rate 4.5% (consensus 4.5%) in Mar-24

• The Norges Bank decided to keep the policy rate at 4.5% to balance inflation control and economic growth amid slowing but above-target inflation and modest economic activity.
• Inflation is now expected to decelerate somewhat faster than anticipated, economic growth is more subdued in the first half of 2024 before improving, while unemployment rises slightly less than previously expected.
• The Committee is ready to adjust the policy rate in response to evolving economic and inflationary trends. It aims to steer inflation towards the 2% target by the end of 2027 while navigating prevailing uncertainties.

Indonesia Policy Rate 6.0% (consensus 6.0%) in Mar-24

• Bank Indonesia unsurprisingly maintained the BI-Rate at 6.00% amid a cautiously optimistic global economic outlook and strong domestic growth projections for 2024.
• Future policy decisions will continue to emphasize Rupiah stability and keeping inflation within the 2.5 ± 1% target amid external uncertainties and internal pressures from volatile food prices.
• Bank Indonesia remains committed to supporting sustainable economic growth and expanding financial inclusion through macroprudential relaxations and advancing payment system digitalization, alongside strengthening international cooperation and policy synergies at the national level.

US Fed Funds Target Rate 5.25-5.5% (consensus 5.25-5.5%) in Mar-24

• The FOMC has decided to keep the Federal Funds target rate unchanged at 5.25-5.5%, reflecting solid economic growth and a strong labour market amid easing but still elevated inflation levels.
• Despite recent disinflationary progress, the Committee does not yet see enough progress to alter course. A tight policy setting is needed to effectively address inflation risks.
• The FOMC emphasizes a flexible, data-driven approach to future policy decisions. It is prepared to maintain or adjust the current level of policy restraint based on incoming economic data and the evolving outlook, particularly regarding inflation and labour market conditions.