February 28, 2024

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

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.

February 21, 2024

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

  • Bank Indonesia's decision to hold the BI-Rate at 6.00% balances persistent financial market uncertainties against strong domestic economic growth and the need for Rupiah stabilization.
  • Anticipated pressures from the global financial environment and domestic economic activities will dictate the future direction of interest rate policies, with a continued emphasis on ensuring Rupiah stability and controlling inflation within the set targets.
  • The central bank's commitment to leveraging pro-market monetary tools and enhancing financial system digitalization underscores a forward-looking approach to monetary policy aimed at bolstering economic resilience and inclusion.