Archive for February, 2008
FOMC: No new signals from Bernanke
Overview : The testimony by Bernanke provided little new information relative to recent speeches and the minutes from the January meeting. The FOMC is currently sticking to its script, keeping the primary focus on the downside risks to growth. While the Chairman provided some lip-service to inflation, the speech leaves the impression that further policy easing is highly likely.
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Poland: NBP delivered another hike
The Polish central bank (NBP) today hiked its key policy rate by another 25bp to 5.50%, as we had expected. Polish inflation has moved well above the Polish central bank’s inflation target of 2½% +/- 1 percentage point (4.3% y/y in January) and that, together with a upside surprise in wages, triggered today’s hike.
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Hungary: Goodbye to fluctuation band
As we had expected, the Hungarian central bank (MNB) today decided to leave its key policy rate unchanged at 7.50%. This was also the consensus expectation, however, a fair share of analysts had in fact expected a rate hike today. More notably, the MNB also announced that it has abandoned its FX fluctuation band. We have long expected that this would happen sooner or later, so in that sense it is not a major surprise.
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Market sure of another 50 bp cut
Cheaper credit will not solve all the underlying problems of the US economy (actually it may breed as many), but markets like low interest rates. Unsurprisingly then, they reacted with a lot of optimism to the latest Fed’s minutes confirming that a decisive action on the monetary front is needed – even if it will be soon reversed. At this moment, another 50 bp cut on the next meeting (March 18th) looks more than certain, leaving the target rate at a mere 2,5%. Consequently, stock markets moved
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Poland: Looks like another rate hike in February
The Polish Statistical Office has published consumer price inflation and wage growth numbers for inflation. Inflation accelerated further in January to 4.3% y/y – above our expectation of 4.2% y/y and the consensus expectation of 4.1% y/y. Wage growth also surprised on the upside, coming out at 11.5% y/y – well above our expectation of 9.7% y/y and the consensus expectation of 9.2% y/y.
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Japan: Interest rates unchanged as
In a unanimous decision at today’s monetary meeting, the Bank of Japan (BOJ), as expected, kept its leading interest rate unchanged at 0.5%. In its monthly economic report, the BoJ overall kept its view on the economy unchanged. It still believes the economy is expanding moderately but will slow temporarily, partly because of a drop in housing investments. However, the BoJ has revised its view on the global economy and now believes “…overseas economies are likely to expand, although at a
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Ben S. Bernanke testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate
• Bernanke indicated that downside risks to growth have increased and conditions in the labor market have softened • Bernanke’s baseline outlook involves a period of sluggish growth in the first half of 2008 • The speech is consistent with our current expectations of a 0-25 bp cut in the next FOMC meeting The Fed Chairman’s speech did not change drastically from his previous intervention in front of the House of Representatives budget committee last month. The market was expecting a more
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Turkey: Yet another rate cut no surprises
The Turkish central bank (TCMB) has announced that it has cut its key policy rate by another 25bp to 15.25% – in line with ours and the consensus expectation.
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Iceland: Sedlabanki on hold as expected
Just as expected, the Icelandic central bank, Sedlabanki, has announced that it has kept its key policy rate unchanged at 13.75%. With inflation still running well above Sedlabanki’s inflation target of 2½% +/- 1 percentage point Sedlabanki had no choice but to keep interest rates on hold. Furthermore, the fact that the Icelandic kronur has weakened significantly recently is clearly increasing inflationary pressures.
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Sweden: Ohhh Riksbank
Once again the Riksbank (RB) has made us look like fools – it has hiked by 25bp and taken a pretty neutral stance moving forward. We certainly did not expect a rate hike under the current circumstances. It is no comfort to us, but the fact is that out of 24 analysts in Bloomberg’s survey, 24 said no change. So either we are all stupid or we are in a situation where the communication between the RB and the market has broken down completely. We tend to think it is the latter and that is very
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