Tag: Monetary policy
May
Is Bank of Japan already failing?
After being characterized by a lack of potential and passion for years, the Japanese markets have definitely been reinvigorated by the actions taken by the new government and the central bank. However, is the more than doubling in government bond yields undermining the stimulus of the Bank of Japan?
Sweden: Unemployment stays above the Riksbank’s forecast
It is a close call whether the Riksbank will cut rates or not in July. That is the bottom line of today’s figures from the Labour Force Survey.
Norway: Rebound in mainland growth
There is no reason to change view on Norges Bank if we are right, but if growth ends up say below 0.5% we will start thinking about a June cut again.
Buy, buy, buy
Going for carry continues to be the name of the game, while the consideration of the credit risks involved seems once again to be a secondary concern. The risks of a bond bubble are no doubt in the air, but this trend has not run its course.
Dansk renteprognose: Alle døre står åbne
ECB har taget konsekvensen af den fortsatte økonomiske afmatning Nationalbanken ”nøjedes” med en lille nedsættelse af udlånsrenten Risikoen peger mod endnu en rentenedsættelse…men vi venter, at Nationalbanken holder renten i ro i år, og tilpasser sig til ECB i løbet …
Norway: Fragile housing market – prices about to peak
There are now several signs of a weaker housing market compared with the last couple of years. While we cannot rule out further house price rises, we expect prices to level out later this year and possibly drop in 2014. However, what we believe we can rule out is a market collapse.
Norway with inflation target no one wants to pursue
Monetary policy target slipping Lars Svensson would have resigned also if he had been at Norges Bank Norges Bank emphasis financial stability more than the Riksbank Norwegian 2 ½ % inflation target is incompatible with other economic goals Norges Bank …
Norway: Registered unemployment slightly up
Unemployment figures in line with Norges Bank forecast.
Norway: Fading credit growth?
There was one interesting and surprising finding in today’s credit growth figures: a possible sign of weakness in the household credit.
April
Norway: Forget the signs of weakness
Lower retail sales than we had expected, but stronger labour market figures. What will be Norges Bank's conclusion?
Danmark Update: Erfaringer med negative renter
Den Europæiske Centralbank er under et tiltagende pres for at lempe pengepolitikken i Euroområdet. Efter vores vurdering efterlader det ECB med fire muligheder: Hold krudtet tørt og håb på bedre tider – uændret rente (60 pct.) Det sikre valg – …
Ray of light in Euro-zone credit numbers
If you torture the data long enough, it will confess. One can find hope in today’s Euro-zone credit numbers for March, though if you are pessimistic, the data offers a lot for you as well.
Can negative be positive?
The concept of negative nominal interest rates has usually been considered something possible only as a short-term market aberration. Not anymore. Could negative interest rates really save us?
Central Bank Watch Sweden: A dove leaving the Riksbank
• Deputy Governor Lars EO Svensson to leave Executive Board • July rate cut somewhat less likely
Central Bank Watch Sweden: En duva flyger ut
• Lars EO Svensson avgår från direktionen • Sannolikheten för en räntesänkning i juli har minskat något
Ikke enda et rentekutt, Norges Bank
Norges Bank sa på rentemøtet i mars at et kutt i styringsrenten kan bli aktuelt på kort sikt.Nøkkeltall og informasjon siden mars-møtet tyder på at prisveksten kan bli lavere enn sentralbanken så for seg, så da er vel et rentekutt det eneste riktige?
Central Bank Watch Sweden: Riksbank softening
Unchanged repo rate of 1.0%, but rate path lowered sharply Focus back to inflation Downside risks to our forecast of a repo rate of 1.00% at end-2013 and 1.50% at end-2014
Soft Riksbank stays on hold
The Riksbank today sent a soft tone to markets, despite leaving the rate unchanged at 1.00% as widely expected. The reason is that the repo rate path was revised down quite substantially for 2014.
Welcome to the world of wild mood swings
Big market moves have caught a lot of attention in the past few days. Where is the world going?
Central Bank Watch Sweden: The Riksbank on hold
We expect the repo rate to be left unchanged next week as well as the rest of the year. Risks to our repo rate forecast are clearly on the downside
Norway: We still believe in unchanged rates at MPC meeting in May, but rate cut looms
A likely scenario is that Norges Bank keeps rates unchanged at the May MPC meeting, but states that a rate cut was considered.
Deflation and the ECB
That the inflation rate in Greece fell below zero in March for the first time in 45 years gets quite a lot of media attention. The deflation ghost is out of the bottle again – is it really? Or has it …
Norway: Consumers are shopping at home again
Retail sales surprised on the upside with 0.5% growth m/m (seasonally adj.) compared to consensus at 0.3% and Nordea at -0.5%. With strong figures for both January and February we feel more certain that the weakness in Q4 last year was temporary.
BoJ: Sayonara deflation
Bank of Japan’s new governor, Haruhiko Kuroda, was not afraid of introducing bold monetary policy measures at his first policy meeting.
ECB preview – still too early for Draghi to signal near-term rate cut
We expect no changes in key policy rates and no new non-standard measures from the ECB at Thursday’s meeting. Lots of questions about Cyprus, but Draghi will probably not give any answers. Market reaction could be slightly negative again.
March
Norway: Registered unemployment slightly up
The main picture is still that registered unemployment moves about sideways in line with Norges Banks forecast.
Norges Bank: No change, but a dovish report
More dovish than we expected and a kind of easing bias. We have to look more into the report, but so far we will keep our forecast for a first hike in March 2014. The risk of a cut/later hike has however increased.
Norway: Inflation down – but close to Norges Bank
We see the deviation to Norges Bank's forecast to small to have any significant impact on the upcoming new interest rate forecast from Norges Bank.
Norway: Core inflation slightly below Norges Bank – again
Core inflation has on average been 0.1% below Norges Bank’s forecast the three last months if we are right. That is probably not enough to have any influence on the coming interest rate forecast
Norway: Registered unemployment is not giving in
In total the LFS survey and weak GDP figures in Q4 point to a downward revision of the output gap. But that registered unemployment is stable at a low level argues that the revision will be rather moderate.
February
Norway: Finally a solid rebound in retail sales
January retail sales figures were more in line with Norges Bank’s strong consumption growth forecast than the very weak figures last autumn. Still we believe that Norges Bank will revise down its forecast for GDP growth, but the downward revision would probably have been even bigger if today’s figures had been on the weak side.
Norway: Higher unemployment – again
The LFS figures could be an indication that growth is slowing and capacity utilization stabilizing. The main argument for higher rates then weakens.
Not such a big rush this time
The ECB announced today 356 banks would return a total of EUR 61bn of the 3-year money they took from the central bank in the second 3-year LTRO early last year. The numbers illustrate that a considerably amount of excess liquidity will remain in the system for a long time, keeping overnight rates close to current levels. The banking system in general will heal only slowly.
Fed divided – should we worry?
Yesterday’s Fed minutes showed a central bank increasingly divided about the future of asset purchases, even though most participants found the purchases effective in easing financial conditions and helping stimulate economic activity. Still, the Fed clearly wants to be careful not to start removing accommodation too soon or too fast.
Now for the second big one
The other bigger one-time repayment of ECB 3-year loans will take place next week, when the second 3-year LTRO will have its first repayment date. The repayment interest is likely to come below the EUR 137bn seen in the first operation. That said, as we have seen a notable correction lower in short interest rates since the first repayments, risks are tilted towards higher rates and a steeper money market curve ahead of Friday’s data.
Norway: GDP growth weak and well below Norges Bank
All in all today’s figures makes us more certain that Norges Bank will revise down its interest rate forecast in the coming March report. We still do not believe in a cut, but the uncertainty has clearly increased
Norway: Inflation up – close to Norges Bank
Strong NOK and the possibility of tighter monetary conditions due to regulations are the main reasons why we believe Norges Bank will postpone the first hike to early 2014.
January
Norway: Retail sales figures a tiny positive surprise, but trend still weak
December retail sales figures were weak and probably weaker than Norges Bank’s forecast.
An era coming to an end
In this analysis we present an updated forecast on Danish yields. In here we find that: Mounting pressures on the krone prompted the Danish central bank to sanction an independent rate hike, marking the beginning of the end of an …
Banks rush to repay the ECB – at least initially
The ECB announced that 278 banks will repay a total of EUR 137bn of the 3-year loans taken from the central bank. The amount paid was higher than many had expected, and has put upward pressure on rates. However, one should not draw the conclusion that monetary policy was about to see an abrupt tightening and that rates would be heading higher for good.
Swedish Week Ahead
The most important figure ahead of the Riksbank’s rate decision 13 February is due next week, namely unemployment according to the Labour Force Survey (Thursday).
ECB to start buying soon?
When the ECB announced its Outright Monetary Transactions (OMT) programme last autumn, Spain was expected to take advantage of the programme rather quickly. The activation of the OMTs would have required an aid programme for Spain, which the country was reluctant to apply for. Could Ireland become the first direct beneficiary of the programme?
We don’t want your money
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to give rise to pricing of higher short rates and cause some jitters of tightening policy. Despite the repayments, plenty of excess liquidity will remain, keeping short rates very close to current levels.
A change in view – no hike in 2013
We have changed our forecast for key rates in Norway. We no longer forecast a hike in October 2013, but have postponed the first hike to March 2014.
Norway: What happened to the Norwegian consumer?
Retail sales showed a disappointingly low growth in November with only 0.2% m/m (s/a), much weaker than both consensus at +0.9% and Nordea at +1.5%.
Norway: Core inflation slightly on the downside in December
Core 0.1% points below consensus and Norges Bank will have no effect on the market.
Riksbank minutes: A 50 bp rate cut was considered
Riksbank minutes from the 17 December monetary policy meeting strengthens our view that the Riksbank will cut rates again in February by 25 bp.
December
Some pigs can fly
What do Portugal, Ireland and Italy have in common? Their government bond markets have all produced a return of more than 20% in 2012. These numbers handily beat the around 4% return from German bonds. In fact, among larger Euro-zone countries, Germany has been the worst performer in 2012.
Expect one more rate cut
As generally expected, the Riksbank announced a repo rate cut to 1.0 percent. We maintain our forecast that the Riksbank will deliver another rate cut in February.
Räkna med en räntesänkning till
Som allmänt förväntat meddelade Riksbanken att reporäntan sänks till 1,0 procent. Vi står fast vid vår bedömning att Riksbanken sänker räntan igen i februari.
Norges Bank on hold
We see the policy rate on hold at 1.5% and we expect the bank to consider trends since its latest meeting to be largely as projected. If we are right, not much is likely to happen in the market.
Sweden: The Riksbank signals some further easening
Today’s signal from the lowered rate path supports our forecast of yet another rate cut by 25 bps in February.
Many Euro-zone countries with sizable borrowing needs also in 2013
2012 is drawing to a close. Despite worries of the contrary, both Spain and Italy have been able to satisfy their borrowing needs via the bond market – albeit with quite a lot of help from the ECB. Still, the issuance picture suggests especially Spain will face notable challenges ahead.
Fed makes new rate pledge and prints more money
The Fed extends its asset purchases into 2013 and adopts unprecedented numerical thresholds to convey how long it expects to leave short rates at near-zero.
New instrument could extend low interest rates
From 2013, Norges Bank must prepare a decision-making basis and give advice about a new instrument – a counter-cyclical capital buffer in banks. If this new instrument is put into use already next year, this could mean that the key interest rate is kept at a lower rate than forecasted by Norges Bank in the Monetary Policy Report (Pengepolitisk rapport) in October.
Nytt virkemiddel kan gi lav rente lenger
Norges Bank skal fra 2013 utarbeide beslutningsgrunnlag og gi råd om et nytt virkemiddel, motsyklisk kapitalbuffer i bankene. Tas det nye virkemiddelet i bruk allerede neste år kan det bety at styringsrenten holdes lav lenger enn det Norges Bank så for seg i Pengepolitisk rapport i oktober.
November
Norway: Strong GDP growth also in Q3
The overall picture is that the mainland economy continues to grow strongly. Q3 growth was slightly stronger than Norges Bank’s forecast but on the other hand the previous quarters were revised somewhat down. In total today’s figures should be more or less in line with Norges Bank’s view.
Norway: GDP figures expected more or less in line with Norges Bank
Be aware that electricity production will pull down this week's Q3 GDP figures, but Norges Bank usually ignores such fluctuations.
More rate cuts in the pipeline
We adjust our forecast for the Riksbank’s repo rate. The reasons are surprisingly low inflation and a hike in our unemployment forecast.
Fler räntesänkningar i pipeline
Vi justerar vår prognos på Riksbankens reporänta. Orsakerna är överraskande låg inflation och en uppskrivning av vår prognos på arbetslösheten.
Monetary policy already tightening in the Euro zone
While the ECB has continued to introduce new measures to make its monetary policy more accommodative, in some respects policy has actually become tighter, and may continue to do so going forward. More specifically, the excess liquidity in the Euro-zone banking system has fallen quite clearly already from its highs.
Norway: Inflation pretty much in line with forecasts
Inflation was slightly on the low side to Norges Bank’s forecast but should not have any impact on the rate outlook.
Poland: Better late than never
The Polish MPC reduced interest rates by 25bps. Given reluctance of Polish central bankers to respond earlier to threats to economic growth, one could say better late than never. We think the monetary easing in Poland will be continued with two more steps by 25bps in December and January. However, given the recent news improving inflation outlook, we see increasing probability that reduction in rates will be larger.
ECB in wait-and-see mode
The outlook has not changed and hence new easing measures are not justified at this point. If anything, the ECB could be considering new measures to improve monetary transmission in the periphery. We view tomorrow's meeting as market neutral.
Q&A on market implications of the US election
Ahead of tomorrow’s presidential and congressional elections some updated thoughts on the potential market implications, in Q&A form.
Global Week Ahead – Focus turns to elections in the US (and in China)
Elections in US and in China will dominate headlines. Central bank meetings at the ECB and the Bank of England. First independent Danish rate hike in almost four years, weak Swedish production numbers and low Norwegian core inflation.
October
Norges Bank on hold and first hike postponed
Norges Bank kept its key rates unchanged at 1.50% as widely expected. Its new interest rate forecast is consistent with a first hike at the earliest in March or later sometime in Q2 or Q3.
Norway: Norwegian figures somewhat on the weak side
All in all somewhat weaker figures than expected. It could be a first sign that growth is slowing. However strong growth in household income and a still tight labour market argues for stronger consumption figures looking ahead. Today’s figures will have no impact on today’s rate decision
Euro-zone banks not about to boost a recovery any time soon
The results from the ECB’s latest bank lending survey (Q3) only add to worries that credit growth is not going to support an economic recovery any time soon. The results thus add to downside risks for the economy. The dark clouds hanging over the Euro-zone economy are not going disappear any time soon.
More QE from Bank of Japan
Bank of Japan decided today to expand its asset purchase program and left the key policy rate unchanged. At the same time, it pledged to provide funding to financial institutions in order to enhanced domestic lending. A dovish tone remained, so further accommodative actions in the future are still a possibility.
Central Bank Watch: Norges Bank accepts lower money market rates
Stronger NOK, lower rates abroad and lower inflation argue for a downward revision of the coming Norges Bank interest rate forecast. Significantly lower money market rates due to lower spread in the money market will dampen the downward revision. We believe Norges Bank will forecast a first hike in the second part of 2013.
Riksbank ready to cut rates
As expected, the Riksbank left its policy rate unchanged at 1.25%. The repo rate path was lowered, also in line with expectations.
Riksbanken öppnar dörren
Riksbanken lämnade som väntat styrräntan oförändad på 1,25 procent. Räntebanan sänktes, också det väntat. Vi är stärkta i vår uppfattning att Riksbanken sänker reporäntan i december.
Central Bank Watch: Riksbank under pressure from low inflation
We believe that the Riksbank will leave the repo rate unchanged at next week’s monetary policy meeting. However, the rate path will probably be lowered, paving the way for the rate cut that we anticipate will come in December.
Låg inflation pressar Riksbanken
Vår bedömning är att Riksbanken lämnar reporäntan oförändrad vid nästa veckas penningpolitiska möte. Däremot sänks troligen räntebanan, vilket öppnar upp för den räntesänkning som vi räknar med kommer i december.
How would ECB bond purchases affect the level of interest rates?
The effect of the ECB’s bond purchases should be felt also outside the bond markets directly targeted by the interventions. The purchases should put in general downward pressure on the maturity segment targeted, but cause upward pressure in longer maturities (on average).
Regjeringen sto imot fristelsen
Mandag denne uken ble statsbudsjettet for 2013 lagt frem. I forkant hadde jeg ventet meg et budsjett med en moderat ekspansiv innretting, men der tok jeg feil. Budsjettet var overraskende moderat.
Navigator – centralbankslikviditet lyfter marknaden
Tillståndet i Europa fortsätter att vara synnerligen besvärligt men det resulterar inte i någon krasch. Så har det varit i fyra år och det kan fortsätta i minst fyra år till. ECB har tagit över IMF:s roll som finansiär av Europas problemskuld. Pengar betalas ut så länge länderna står ut med Angela Merkels taggiga omfamning.
Norway: The inflation gap decreased
Somewhat lower inflation and a stronger NOK argue for a later hike, but lower money market rates argue for higher key rates. All in all the Norges Bank's October interest rate forecast will probably be little changed compared with the June forecast, but the first hike will probably be a bit later
ECB staying put – time for the governments to act
The ECB seems rather comfortable with the current situation, and clearly sees it is up to the governments to take the next steps. The more important next step will be an aid request from Spain, but it might still take at least several weeks for such a request to surface.
G10 Weekly: No doubt, central banks are dominating asset markets
Our view on rates are unfortunately unchanged and we cannot see any particularly convincing strategic arguments to fight the central banks as far as 0 – 5yr maturities are concerned. On equities, we remain fundamentally bearish, but have a huge respect to the fact that the market is driven by unconventional factors.
Sverige och kronan – kronan ett bekymmer
Givet var vi befinner oss i konjunkturcykeln så är den starka kronan en belastning för svensk exportindustri och potentiellt även för Riksbankens inflationsmål.
Nordea WebTV: Forventninger til statsbudsjettet for 2013
Statsbudsjettet for 2013 ventes å bli moderat ekspansivt selv om oljepengebruken fortsatt vil ligge godt under handlingsregelen. Se intervju med Nordeas Sjeføkonom Steinar Juel om statsbudsjettet for 2013 på Nordea WebTV
Tough questions, few answers
Both the ECB and the Bank of England will announce their latest monetary policy decisions tomorrow, but neither is expected to do much new at this stage. Draghi will probably dodge the toughest questions on the ECB’s announced bond purchase programme, while BoE is more likely to take the decision on expanding its bond purchases next month.
Later hike from Norges Bank
• Lower inflation and stronger NOK... • .. but lower money market rates • First hike postponed
NEMO: From crisis to crisis
Nordea Economic and Market Outlook: Our latest take on Nordic and Global financial markets and economies.
Riksbank’s interviews: Companies signals low inflation
The Riksbank’s company interviews are further evidence that the Swedish economy has lost momentum, increasing pressure on the Riksbank to cut rates.
Norway: Credit growth marginally down
Corporate credit growth was weak in August but we doubt that Norges Bank got worried given the strong volatility in these figures.
September
Euro-zone inflation still stubbornly high
Despite expectations of limited price pressures, Euro-zone inflation surprisingly accelerated from 2.6% y/y to 2.7% vs. the Bloomberg consensus estimate of 2.4%. Even though inflation is not really the main thing on the ECB’s radar at the moment, especially the more hawkish members of the Governing Council will pay attention to these numbers.
Norway: Weak retail sales
The labour markets seems to develop as expected, but weak retail sales argues for downward revision of Norges Bank’s forecast for consumption in the upcoming October monetary policy report.
G10 Weekly: To reiterate, QE will become futile
The very moment when financial markets realize that the marginal return of additional QE gradually approaches zero will coincide with a severe risk off environment. We expect this moment to appear sooner rather than later.
Beware of easy money – unintended side effects loom
The likely meagre benefits of the Fed’s new easing effort risk being outweighed by potentially significant costs in the longer run. The potential costs include not only the loss of the Fed’s credibility but also economic instability.
Norway: LFS unemployment stable but details a bit weak
Norges Bank’s forecast is a stable unemployment rate at 3.0% in 2012 and 2013, so today’s figures are pretty much in line with the central bank’s view. Norges Bank will however probably take notice of the somewhat weaker details.
Webcast: Governor Øystein Olsen on monetary policy in turbulent times
Governor Øystein Olsen held a presentation on monetary policy at our premises today. After the presentation he gave an interview to Nordea WebTV where he answered questions in connection to the theme: "Monetary Policy in turbulent times".
Webcast: Sentralbanksjef Øystein Olsen om pengepolitikk i urolige tider
Sentralbanksjef Øystein Olsen har i regi av CME holdt et innlegg i våre lokaler. Få med deg hovedpunktene i vår webcast.
Euro-zone manufacturing PMIs mostly good news
Confidence in the Euro zone remains depressed and implies weak economic performance will continue. That said, it is positive we saw more signs that confidence would have at least stabilized. Germany and France saw very divergent development.
Riksbank minutes neutral
We find the tone in the Riksbank’s minutes from the 5 September monetary policy meeting as neutral. If anything, the minutes strengthens our view that a rate cut is not likely in October.
Navigatøren – Sentralbanker til unnsetning
Med renten nær null og dårlige vekstutsikter har sentralbankene bestemt seg for å foreta ekstraordinære pengepolitiske tiltak. Det vil være positivt for markedene i tiden som kommer.
This time is different – no quick rise in yields in sight
Previous bond purchase programmes by the Fed have led to a rather quick rise in yields. This time there are a number of factors arguing that history will not repeat itself. As a result, any rise in yields is likely to be very gradual for now.
Swedish August CPI well below the Riksbank’s view
Inflation was 0.3% point below the Riksbank’s forecast in August. Coupled with rising unemployment, this supports our view of further rate cuts.
Navigator september – aldrig har räntor varit så låga, för så många, så länge
I vår prognos över svensk ekonomi så ser vi att tillväxttakten under det andra halvåret ska försvagas och tätt följa Europa. Vår prognos på EURSEK är en fortsatt stark krona som dock försvagas i framtiden men som förblir stark i en historisk jämförelse.
Navigator september – aldrig har räntor varit så låga, för så många, så länge
I vår prognos över svensk ekonomi så ser vi att tillväxttakten under det andra halvåret ska försvagas och tätt följa Europa. Vår prognos på EURSEK är en fortsatt stark krona som dock försvagas i framtiden men som förblir stark i en historisk jämförelse.
Norway: Inflation much lower than Norges Bank’s forecast
Inflation continues to be an argument for a lower rate path at the MPC meeting in October, but on the other hand money market spreads are sharply lower. We stick to our forecast of a first hike in March 2013.
Continued lower inflation than Norges Bank forecast
Lower inflation than Norges Bank's forecast, but next move will be a hike
Is unlimited limited after all?
The likely amounts involved in the ECB’s OMT programme are unlikely to be huge, at least initially. However, it usually takes some time to win confidence back, meaning also the ECB will have to put some money behind its words.
Riksbank succumbs to pressure
The Riksbank's rate cut of 25 bp should be seen in light of the heavy pressure on the bank lately. Today's rate cut replaces the one that we previously expected in October. However, we reiterate our forecast of a 25 bp cut in December, leaving the repo rate at 1.00% at the turn of the year.
Riksbanken föll för trycket
Riksbankens räntesänkning med 25 punkter ska ses i ljuset av det hårda tryck som har varit på Riksbanken den senaste tiden. Dagens sänkning ersätter den som vi tidigare såg i oktober. Vi står fast vid att Riksbanken sänker i december med 25 punkter och att reporäntan är 1,00 procent vid årsskiftet.
ECB more or less as expected
The ECB keeps key interest rates on hold. ECB President Draghi announced some details of the ECB's new intervention mechanism called "Outright Monetary Transactions" (OMT) and easier collateral requirements.
The Riksbank yet again delivered a surprise
The Riksbank decided to cut the repo rate by 25 bps to 1.25%. Main motivating factors to the rate cuts were are lower inflation pressure, via stronger SEK and higher productivity.
Poland: Rate cut just around the corner
The Polish MPC kept interest rates on hold, but wording of the post-meeting statement and comments at the press conference signal that the first rate cut is just around the corner.
Euro Area: Restore confidence to end recession
Here is a presentation of our new Economic Outlook for the Euro area – Restore Confidence to End Recession.
New financial forecast: On your mark, get set…
We are confident that i) ECB will follow Draghi’s lead and ii) this will cause risky assets to perform into the end of the year. However, we are not totally convinced this will be the ultimate game changer in the Euro-zone. Our latest macro forecasts point to a continued slow economic upswing. Bond yields are to stay low and the USD to strengthen.
Mildly disappointing ECB on Thursday
The ECB is likely to disappoint financial markets mildly at this week’s meeting. Still, looking ahead, I believe ECB interventions will come and will be decisive.
Swedish PMI plummets
August PMI dropped to 45.1, which was the lowest reading since May 2009. It was significantly lower than July (50.6) and consensus which stood at 50. Looking at the sub-indices, order intakes fell sharply to 41.1 which bodes ill for development in the months ahead. Also, planned production fell below the 50-mark.
August
With the foot on the accelerator
We believe that the Riksbank will leave the repo rate and rate path unchanged at next week's monetary policy meeting. The main reason is the surprisingly strong domestic economy.
Riksbanken med foten på gasen
Riksbanken lämnar såväl reporäntan som räntebanan oförändrad vid nästa veckas penningpolitiska möte enligt vår bedömning. Huvudorsaken är den överraskande starka inhemska ekonomin.
Major event risks ahead for the Euro area
During the coming week's there are a number of major event risks on the Euro-area calendar. Here is a short presentation with my take on what to expect
Euro-zone bailout fund struggling to find demand
The EFSF barely received sufficient orders for its new EUR 3bn 10-year bond issue. This suggests, at least, the EFSF will have to pay a higher premium for future bond issues, which will also turn into higher funding costs for countries receiving financial aid.
Norges Bank – No change in rates or view
All in all exactly as expected. We stick to our forecast of a first hike in March 2013.
Draghi on the future of the EUR
The ECB President Mario Draghi is one of four key Euro area leaders that have been given the task to come up with a vision for the future of the Euro area. A short article on the subject has just been released.
Norges Bank’s main message will be: “On hold”
We believe Norges Bank will judge the overall development since June to be broadly in line with its forecast. That will indicate that it sticks to its June interest rate forecast where rates were on hold through 2012 and then very gradually raised.
Swedish July unemployment below forecasts
Once again the Labour Force Survey surprised and came out better than forecast.
Dovish FOMC minutes keep QE3 hopes alive in markets
An extension of the Fed's forward guidancce of low rates into 2015, but no QE3, is a likely outcome of the next FOMC meeting in September, in my view.
Another strong GDP figure from Norway
A growth figure just over 1% will strengthen our belief that no rate cuts will be implemented despite the somewhat stronger NOK and somewhat lower inflation. The recent drop in the spread between money market rates and key rates also strengthen our belief.
New Financial Forecasts: Big Bertha about to fire…
We are lifting our short-term interest rate forecasts but keeping the 2013 forecasts. We’re in the midst of updating our macro forecasts and will introduce 2014 financial forecasts in a fortnight.
Skattereform kan betyde færre statsobligationer
Regeringes forslag til en ny skattereform kan give staten en stor utilsigtet éngangsindtægt. Det kan betyde, at Nationalbanken vil udstede færre danske statsobligationer end ellers planlagt
Norway: Inflation back on track, but for how long?
For now core inflation is broadly in line with Norges Banks view. But it could fall below forecast again the coming months.
Inflation – mind the gap
If we are right, the gap between actual inflation and Norges Bank’s forecast will shrink from ½ to ¼% point. In that case the domestic arguments for a rate cut disappear.
Danish central bank strategy works
We expect the Danish central bank to follow in the footsteps of the ECB, cutting rates in September – but the Danish rate cut will be less aggressive to prevent the lending rate from moving into negative territory.
Nationalbanken holder fast
Vi har opdateret vores danske renteprognose. I den nye renteprognose konkluderer vi, at: Den negative rente på indskudsbeviser har svækket den danske krone over for euroen. Vi forventer, at Nationalbanken følger ECB med en rentenedsættelse i september – dog bliver den danske …
ECB hints intervention, but gives few details
(Last update 16:12) The ECB is ready to buy bonds directly in the markets. The details remain unclear. Moreover the ECB is likely to cut interest rates in September.
July
ECB intervention possible
Some actions are possible at Thursday's ECB meeting, but a high degree of political uncertainty makes us believe that verbal support is what we will get. Intervention hints are possible.
Sweden: Surprisingly strong GDP growth in Q2
Swedish GDP grew in Q2 by a full 1.4% q/q, following the robust growth in Q1. This was far above both ours and the Riksbank’s view, strengthening the view that the Riksbank will stay on hold in September.
No signs of a credit crunch, but still weak loan demand
ECB’s lending survey and the Ifo reading point to weaker growth momentum in the Euro area and support the view that the ECB will cut interest rates again.
New Financial Forecasts
We have updated our financial forecasts. We keep our forecasts unchanged calling for a further gradual weakening of the common currency and bond yields to move basically sideways.
Finland not about to leave the euro
Concerns that Finland will soon leave the euro are largely misplaced. The government remains very committed to the euro and not even the opposition parties are calling for an exit. Still, Finland will continue to play hard ball in future crisis management operations.
Better risk appetite alone not enough to lift yields
In the past weeks, bonds perceived to be the safest have performed at the same time as equities have. Despite the small pick-up on risk appetite, the safest bonds are likely to perform well also going forward, as the huge liquidity coupled with uncertainty about the future of the Euro-zone will continue to provide support.
No new policy signals from Bernanke – further stimulus not imminent
It seems the Fed needs more weak data, before it will provide additional stimulus. Our baseline scenario sees US economic data picking up later this year, in which case the Fed could stick with Operation Twist. Still, in the short run, weak data may continue, supporting further easing.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
The plunge in the ECB’s deposit facility usage does not really tell us anything new
The usage of the deposit facility does not tell us anything about lending to the real economy in the short term. The money cannot disappear from the banking system: as long as banks borrow more from the ECB than is needed to fulfill the reserve requirements of the banking system, there will also be excess liquidity.
Fed still prepared to do more
Weak data would likely need to continue for the Fed to embark on new stimulus measures in the short term, and our baseline remains that US data will start to improve again soon. But, in light of yesterday’s minutes, the Fed remains prepared to act.
Danish central bank: more in the pipeline?
We have updated our forecasts on Danish yields. We now expect the Danish central bank to lowering the lending rate once more while keeping the deposit rate unchanged.
Norway: Core inflation way below Norges Bank
We see no reason to change our view. Norges Bank will be on hold this year. Inflation might be somewhat on the downside, but not as much as indicted by today’s figure. And growth figures have been somewhat on the upside.
Norway: Inflation up – temporarily
There is good reason to believe in a rise in core inflation. We and consensus forecast core inflation at 1.6%, up from 1.4% last month, while Norges Bank’s forecast is 1.7%.
ECB’s 25bp rate cut unlikely to be the final easing step
The ECB's easing measures are not likely to be over yet. However, it sees limits to what it can do, so Euro-zone governments need to do a big part of the heavy lifting, with the ECB making sure that its monetary policy helps the process.
BoE delivers more, as Euro-zone tensions weigh
The Bank of England, as expected, expanded its asset purchase programme by GBP 50bn while the Bank Rate was kept at 0.50%. We do not expect these measures to materially change the outlook for the UK economy, and this may not have been the final expansion in the asset purchase programme.
Poland: Much too early for a rate cut
Wording of Polish central bankers has become less hawkish, as they are increasingly worried about economic growth prospects. When will the first rate cut be possible?
The Riksbank leaves repo rate unchanged
The Riksbank decided to leave the repo rate unchanged at 1.50%. As at the previous meeting, the Executive Board was divided in its decision. Dep. Governors Ekholm and Svensson voted for a repo rate cut to 1.00%.
A small tightening step from the ECB before more easing
We expect the ECB to cut the refi-rate by 25 bp at the meeting tomorrow but perhaps more interesting we also expect to see a cut in the deposit rate to 0.10%.
What if the deposit rate becomes negative?
We expect that the ECB will try to come to the rescue of the ailing economy by trimming its deposit rate on Thursday. With the continued DKK strength, the Danish central bank will as a minimum be forced to follow suit, which will mean a negative CD rate in Denmark.
Fresh European PMI data a small ray of hope
The UK manufacturing PMI surprisingly jumped and handsomely beat the consensus expectations. This was a welcome sign amidst generally disappointing economic data lately, but does not change the view that BoE give another dose of easy money on Thursday.
FX Comment: new record set
The rally after the Greek elections and the Spanish bailout lasted just a few hours. But the third attempt didn't lie - after the surprise outcome of EU Summit on the night to Friday got the markets insanely happy for the rest of the day. Poor are those who took on additional EUR short and USD long positions earlier in the week!
June
Week ahead: more weak data but do not worry – central banks are rushing to help
After all eyes being in Euro-zone events lately, next week’s heavy US data certainly has potential to catch the attention again.
The US: Summertime blues, but nothing more
I believe there are good reasons to expect a rebound in US activity in late summer or early autumn. If this prediction proves right, we should see an improvement of risk appetite in financial markets before long.
Norway: Higher unemployment – probably not a trend
Higher unemployment than expeted. But if we are right and this is not the start of an upward trend it will matter little to monetary policy. Norges Bank forecast unchanged unemployment through the second part of 2012.
ECB already doing more
The calls for the ECB to do more have become ever louder lately, while the central bank has tried to play down expectations of more bond purchases or further extra-long refinancing operations. Nevertheless, at the same time the central bank has been increasing its support via its more conventional refinancing operations.
New Financial Forecasts
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
FX Comment: no quick fixes, but a bit of optimism
Yet another EU summit this week will not change trends. Moderate optimism on FX front - EM and commodity currencies to recover in the coming weeks.
Turkey: still comfortably flexible
Turkey keeps the interest rates of its "unconventional" monetary policy unchanged, enjoying the flexibility... for now. Lower rates ahead when risks to TRY weakening are reduced. TRY is to remain a stable outperformer backed by CBT.
No NOK pain threshold and it has never been any
The talk of a target or pain threshold for NOK is misleading. NOK is important not in itself, but because it affects growth and inflation.
Norges Bank: First hike moved somewhat forward
All in all very much as we expected, but probably somewhat more hawkish than expected by the market.
Norges Bank – sterkere norske tall mot eurokrise
Artikkel publisert på E24 Litt tidligere økning, men små endringer i renteprognosen.
Norway: Rate hike a little closer – despite euro unrest
The probability of an interest rate adjustment at the 20 June monetary policy meeting is very small.
Do not over-interpret the plunge in the ZEW survey
The German ZEW survey of financial experts showed sentiment plunging from 10.8 to -16.9 in June. But there are a couple of reasons why we would not over-interpret the message of the survey.
Russia: preparing to fight inflation
The Central Bank of Russia decided to keep the benchmark interest rates unchanged today, which came as no surprise. The times of "easy ride" for the CBR are over.
Russia: preparing to fight inflation
The Central Bank of Russia decided to keep the benchmark interest rates unchanged today, which came as no surprise. The times of "easy ride" for the CBR are over.
FX Comment: Lehman ahead…or not
The minute I read that Spain's Prime Minister's comment that he can now with light heart take off to the football championship this weekend ("now that the situation is resolved"), I knew the EURUSD would be relieved. And here it came, a jump to 1.2671 yesterday night. Or, was it because Germany and Denmark won this weekend? ...
Inflation up – from the temporary dip
May core inflation will probaly end up at Norges Bank forecast.
Inflation up – from the temporary dip
May core inflation will probaly end up at Norges Bank forecast.
Poland: Lower probability of next rate hike
The Polish MPC kept rates on hold and wording of Polish rate-setters indicates the most likely scenario is no change in monetary policy parameters until the year-end.
ECB kept rates unchanged
Contrary to our expectations, the ECB kept interest unchanged at today’s meeting. We expect a rate cut in July.
Q3: Will the euro survive in the longer term
Politicians have started to show a sense of urgency, but decisive measures will take years to implement. Still the EU summit on 28-29 June might give some rough sketch of a road map for further integration.
Norway: Network report shows economy is heating up
Norges Bank's Regional network report confirms the impression of strong growth in the Norwegian economy and growth somewhat on the strong side to Norges Bank.
Poland: MPC will wait and see as Poles watch Euro 2012
On Wednesday, the Polish central bank will announce its decision on rates, just two days before the opening game of the Euro 2012 in Warsaw. Could the MPC surprise again as it did last month by raising borrowing costs?
FX Comment: expecting more liquidity
Soon after the dismal Friday's US non-farm payrolls report the EURUSD was taken more than 100pips higher. The obvious reason for that is that of expectation for QE3 from Fed coming, which we had warned about multiple times...
Week ahead: the ECB to deliver?
After this week’s heavyweight US economic data, the spotlight is even stronger in the Euro zone again next week.
May
Norway: Healthy growth in retail sales, but not as strong as it looks
Despite somewhat weaker than expected unemployment figures and retail sales, the conclusion that growth in the Norwegian economy is higher than Norges Bank expected is still valid.
LTRO support for Italian and Spanish bonds behind
April data from the ECB revealed that Spanish banks actually decreased their government bond holdings by some EUR 3bn vs. average net purchases of some EUR 20bn in the prior three months. With a dark cloud hanging over the Euro zone at the moment, yields may need to rise notably to attract new investors to the markets.
Beware of curve flattening
Many have missed the upward move in short Spanish and Italian short yields lately. The rise in short rates is worrying both because it means that the country in question is facing high funding costs throughout the curve and since it signals increased shorter-term worries.
ECB to cut interest rates
After another round of disappointing survey data we believe the time has come for the ECB to cut interest rates.
Week ahead: US data to disappoint
We expect US economic data to continue to come in on the weak side, putting renewed pressure on risk appetitive and continuing to support the safest assets.
Norway GDP – very strong
Our forecast implies that capacity utilisation increases somewhat faster than forecasted by Norges Bank.
Week ahead: Central bank intervention looming?
All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.
ECB intervention looming
With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.
Norway: More expansionary budget
The change in the deficit seems to be about ¼% point above Norges Bank’s forecast from the March MPC report, i.e. somewhat more expansionary, but probably not enough to have a strong impact on Norges Bank’s view.
Week Ahead: Most focus still on politics while economic data to weaken
The Greek situation will continue to grab the headlines. Euro-zone Q1 GDP will likely confirm the zone has fallen into another recession, while US April retail sales growth likely weakened notably compared to March.
Norges Bank: No significant change in view
Norges Bank therefore concludes that it has not changed view on interest rates significantly
Norway: Inflation fell even more than expected
Norges Bank will most likely conclude that inflation is broadly in line with its forecast.
Litt for rask Olsen – men det innrømmer du ikke ennå
Det er tid for rentemøte i Norges Bank og denne gangen kan du stole på analytikerne. Det blir ingen renteendring
Sharply lower inflation- air fares again
April inflation will not influence the rate deci-sion. But a reading differing strongly from Norges Bank’s forecast could have an im-pact on the wording at the press conference.
Central Bank of Russia – status quo for now, tightening in H2
The Central Bank of Russia will not change rates and will stay on hold in the coming two months at least.
No change, perhaps a bit more optimistic?
Unchanged interest rates are fully discounted and the signals from Norges Bank will de-termine whether we will see any reactions from the market.
Norges Bank: Ingen endring, men litt mer optimistiske?
Møtet blir trolig en non- event, men erfaring har lært oss at vi ikke kan utelukke markedsdrivende uttalelser på pressekonferansen
Somewhat stronger business survey
Norges Bank April Regional network (business survey) says growth has been “somewhat stronger than expected”.
Weak US jobs report, but not bad enough to force the Fed’s hand
While the soft April employment numbers leave the door open for further monetary easing, the report isn’t bad enough to force the Fed to announce QE3 at the 19-20 June FOMC meeting.
Norway: Drop in unemployment, but the trend is still sideways
The Labour Force Survey (LFS) unemployment rate was 3.2% in February compared to 3.3% in January (revised up from 3.2%). Consensus and Nordea was 3.2%.
Norway: Norges Bank to hike in October
Our latest update on Norges Bank, NOK rates and FX.
NEMO: Europe heats up over the Summer
Our latest take on Nordic and Global financial markets and economies.
Not much new from the ECB
The ECB decided to keep interest rates unchanged at today's meeting and gave no new signals.
Draghi to strike a mildly dovish tone today
Additional crisis measures are not on the cards at the ECB meeting today – but we see an increasing risk of an additional rate cut if the expected recovery of the Euro area fails to materialise.
April
Øk sparingen og unngå rentehopp
Rentekuttet fra Norges Bank i mars kom overraskende på både markedet og de fleste analytikere. Knallsterke tall for detaljomsetning og vareforbruk nå på starten av året kan imidlertid bety at Norges Bank ligger for lavt med rentene.
Norway: Booming retail sales – earlier hike more likely
The March figures for retail sales and consumption of goods show a strong momentum in private consumption at the beginning of 2012. There might be some “Easter effects”, but still Q1 is very strong and stronger than Norges Bank’s forecast for growth in private consumption.
Fed: QE3 is still on the table
Federal Reserve chairman Bernanke said Wednesday that further bond purchases by the Fed remain “very much on the table”, if the economy needs further support. But it will require weak economic data for QE3 to be announced in June. And this is what I still expect to see.
Risk-off as the Fed says no to QE3?
At this week’s two-day FOMC meeting that concludes on Wednesday, the Fed will signal no change in the current policy stance. The Fed’s no to QE3 risks triggering a further sell-off in risky assets and a stronger USD.
To QE or not to QE
The big central banks have turned out to be much less inclined to QE than expected. We no longer expect QE from the Bank of England in May.
New French President may be less focused on budget discipline
Presidential elections due on 22 April and 6 May. Conservative Sarkozy and Socialist Hollande are neck to neck for the first round, while Hollande looks like a winner for the run-off.
Central Bank Watch Sweden – Passive Riksbank pausing
The main reason why rates were left on hold today is that in the Riksbank’s view, monetary policy is already expansionary. Also, the Riksbank seems unwilling to cut rates further and this leads us to raise our repo rate forecast, with the repo rate now bottoming at 1.00% instead of 0.75%.
Norges Bank: new considerations, new rate path
The decision not to bring inflation back on target faster through lower interest rates is, according to Norges Bank, based on its wish to secure financial stability.
The firewall never going to be big enough to work on its own
The G20 finance ministers will likely agree on increasing the resources of the IMF later this week. Such a decision, though not insignificant, is unlikely to change the course for markets.
Spanish banks well-prepared for upcoming redemptions
Most news stories only report the jump in overall central bank borrowing by Spanish banks in March, but miss the increase in funds Spanish banks have in reserve to meet future funding needs. The funding position of Spanish banks – like that of the Spanish sovereign – is actually relatively good at the moment.
Italian T-bill yields jump but alarm bells not ringing particularly loud yet
Even though the recent rise in Italian yields is worrying, the threat of an immediate funding crisis remains limited. Still, the pressure on Italian bonds is likely to continue in the near future.
Liquidity boosting the safest assets again
The huge liquidity sloshing around is boosting the safest asset classes again, while Spanish and Italian bonds remain under pressure. This is likely to continue, until we see some better economic data again.
Fed minutes play down the chances of further QE
Yesterday's Fed minutes sent a signal that the central bank is not tilted towards more quantitative easing any more. Such a message opens more room for espcially longer US Treasury yields to rise from current levels.
Differences in collateral rules increasing Euro-zone worries
The differing collateral policies implemented by national Euro-zone central banks put banks in various parts of the Euro-zone in different positions. Such policies increase worries about the cohesion of the Euro zone.
Risk-reward favours 2-5-year flatteners
The huge amount of excess liquidity in the Euro-zone banking system is still favouring a flatter curve, carry is positive for flatteners, while the curve tends to flatten, when short rates start to rise. The 2-5-year curve should still have flattening potential left.
March
Spain and Italy still deep in the woods – German bonds to remain supported for now
Spanish and Italian bond yields are likely to continue to creep higher, as the support from domestic bank buying fades. Such market action will likely increase general worries about the course of the debt crisis, keeping German bonds well-supported.
Italian and Spanish banks continue government bond buying spree in February
Fresh data from the ECB show that Italian and Spanish banks continued to purchase solid amounts of government securities in February. No doubt the ECB’s 3-year LTRO is the main reason behind this move – driving Italian and Spanish yields lower.
ECB bond purchases only a shadow of their former self
The ECB's bond purchases have been very modest recently. Arguably, bigger purchases would not even have been necessary lately. However, the Securities Markets Programme of the ECB has become more of a blunt weapon also in general, and has less potential to fight the debt crisis, if the need arises again.
The Euro area: The ECB has done its part – now it’s up to politicians to solve the debt crisis
The ECB kept all interest rates unchanged at todays meeting. At the same time Draghi used the press conference to signal stable rates ahead, while further 3-year LTRO’s are off the table.
Euro area update: Target 2 imbalances worries the Bundesbank
After the record breaking allotment of EUR 523 bn in the ECBs second 3-year Long Term Refinancing Operation, attention has once again turned to the build-up of Target 2 balances.
February
Spanish and Italian banks went on a bond binge in January
Ahead of the ECBs next 3-year LTRO it is interesting to note that the first 3-year LTRO from December prompted Italian and Spanish banks to go on a bond purchasing spree in January.
Q4 GDP – marked deceleration
The outcome of today’s Q4 GDP is important ahead of the Riksbank’s interest rate decision in April. Our GDP forecast is considerably below the central bank’s, suggesting an easier monetary policy stance.
Labour market decisive
As expected, today the Riksbank announced its decision to trim the repo rate by 25 bp to 1.50%. In motivating its decision, the bank notes that inflation is low and that Swedish economic growth has slowed more than anticipated.
Surprise acceleration in Chinese inflation
Contrary to expectations, inflation broke a five-month easing trend in January. Monetary easing still expected, but pushed back.
Few alternatives for the Riksbank
A downward adjustment of the GDP forecast and prospects for a poorer labour market, in combination with low inflation, give the Riksbank few alternatives other than to cut the rate by 25 points at next week's monetary policy meeting.
Czech Republic – Resilient to old risks, vulnerable to new
The Czech economy has been seen as the safe haven or the Switzerland of Central and Eastern Europe. However it is very vulnerable to new risks!
January
Expect rising unemployment
Recent weak Swedish data motivates a downward revision in our Q4 GDP forecast. In turn, this will lead to lower employment and higher unemployment in 2012.
Moderate inflationary pressure in 2012
Inflationary pressure is deemed moderate this year, which opens up for further rate cuts from the Riksbank. The year starts with a 0.6% m/m dip in CPI in January.
The Riksbank’s simple rule of thumb
The Swedish Riksbank follows labour market trends closely and has adjusted its repo rate in correlation to the unemployment rate in no less than 95% of cases over the last 10 years. Based on this, we have formulated a simple rule of thumb for the Riksbank.
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