Archive

BoE Errs Towards Cutting Too Early

• The BoE’s unsurprising decision to maintain the Bank rate at 5.25% was accompanied by rare pushback against prevailing market pricing. MPC members are more dovish.
• June’s outcome will depend on developments in their inflation persistence assessment, including wage settlements where the current data are tracking excessively high.
• That upside seems unlikely to discourage the MPC for long, so we now expect the MPC to start cutting in August but with a pause in February and a risk of a reversal.

By Philip Rush

Cipollone - Tokenisation of financial instruments and central bank money settlement

Slides by Piero Cipollone, Member of the Executive Board of the ECB, at a seminar organised by the Italian Companies and Exchange Commission (CONSOB) in Rome


In the speech by Piero Cipollone, the main insights regarding the monetary policy outlook are presented. The speech suggests a cautiously optimistic view and expects interest rates to remain unchanged in the near future. It emphasizes the expectation of subdued inflationary pressures, which opens up the possibility for maintaining an accommodative monetary policy. While acknowledging global economic uncertainties, the speech expresses confidence in proactive measures taken by the central bank to mitigate these risks.



- Positivity: 85
- Uncertainty: 70

Malaysia Policy Rate 3.0% (consensus 3.0%) in May-24

• The decision by Bank Negara Malaysia to maintain the OPR at 3.00% aims to balance the need to support economic growth while managing domestic inflation amid complex global economic challenges, including persistent inflation and geopolitical tensions.
• Moderate inflation levels in early 2024 and a positive economic growth outlook underscore the effectiveness of the current monetary policy—however, the policy trajectory links to developments in subsidy and price control measures and global economic conditions.
• The ringgit's valuation and stabilization are critical concerns for the MPC, influenced by external monetary policies and geopolitical factors, with ongoing strategic interventions to align the currency more closely with Malaysia's economic fundamentals.

Brazil Policy Rate 10.5% (consensus 10.5%) in May-24

• Copom reduced the Selic rate by 25 basis points to 10.50% in a calibrated response to mixed domestic economic signals and persistent global uncertainties, with a continued commitment to inflation targeting amid labour market pressures.
• Inflation remains above target despite a disinflation trajectory, with projections indicating a slow convergence towards the target by 2025, influenced by domestic activities and global economic conditions.
• The decision highlights the importance of a contractionary monetary stance and credible fiscal policy in stabilizing inflation expectations, with future rate adjustments contingent upon evolving economic dynamics and budgetary discipline.