Hungary is unprepared for normalised monetary policy

2018 ◽  
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Financial Markets ◽  
Central Europe ◽  
Federal Reserve ◽  
Sharp Increase ◽  
Content Type ◽  
Financial Conditions ◽  
Equity Funds

Significance The MNB is bucking the trend of tighter monetary policy across Central Europe by increasing its range of unconventional tools to keep financial conditions loose. This is despite robust economic growth and a sharp increase in wages which threaten to put upward pressure on inflation. Impacts Despite the recent turmoil in financial markets, ‘hunt for yield’ is keeping flows to EM bond and equity funds firmly in positive territory. Brent crude has risen by 12% since early February, driven by mounting geopolitical tensions and signs of producers sticking to supply cuts. The new US Federal Reserve chairman has projected faster-than-anticipated interest rate increases in 2019 and 2020. This will increase the scope for further volatility in markets.

Further Mexico rate hikes likely in 2018

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Federal Reserve ◽  
Content Type ◽  
The Us ◽  
Wage Increases

Subject Monetary policy moves. Significance The Bank of Mexico (Banxico) increased its target interest rate by 25 basis points, to 7.25%, on December 14, responding to a similar move by the US Federal Reserve (Fed) the previous day. The hike was the first to be taken under new Governor Alejandro Diaz de Leon and pushes the rate to its highest level since March 2009. Impacts Tighter monetary policy will weigh on growth in 2018 and may hit the PRI’s electoral prospects. More expensive credit will hit consumption moderately, as interest rates remain relatively low by historical standards. The possibility of wage increases edging up will feed inflationary expectations.

Market nerves roil Turkey and Central Europe

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Markets ◽  
Central Europe ◽  
Euro Area ◽  
Inflection Point ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Policy Guidance

Significance Markets have taken badly the Fed's more hawkish policy guidance for 2017, not expecting such a shift in monetary policy so soon. The shift in US monetary policy comes just as the ECB is preparing the ground for the gradual withdrawal of monetary stimulus. While Turkish assets are the most vulnerable partly because of the severe escalation in political risk, the Polish zloty is also at risk thanks mainly to its status as one of the most liquid EM currencies. Impacts Investors see global financial markets at an inflection point as monetary policy gives way to fiscal policy as the main source of stimulus. This monetary-to-fiscal shift will fuel uncertainty about the direction of asset prices. Rising oil prices will allay concerns about deflation in the euro-area. As major Emerging Europe currencies suffer, the ruble is rising against the dollar amid oil price rises and Trump’s Russia-friendly remarks.

High US government debt does not itself raise risks

2021 ◽  
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Interest Rates ◽  
Federal Reserve ◽  
Government Debt ◽  
Business Investment ◽  
Content Type ◽  
Us Government ◽  
Deficit Spending ◽  
The Government

Significance Some economists are suggesting that, over the longer term, this could cause financial markets to stop buying US debt and charge prohibitively high rates, and cause the dollar to crash. Other economists argue that more deficit spending could fuel output and so keep relative debt levels in check. Impacts The government retirement trust funds will continue to be major buyers of government debt. In the recovery and beyond, financing the debt could raise private borrowing costs, reduce business investment and slow economic growth. High and rising debt might constrain policymakers in their ability to respond to unforeseen events. A higher debt path that boosts interest rates would give the Federal Reserve more flexibility in implementing monetary policy.

Emerging Europe markets will be strong in 2016

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Commodity Prices ◽  
Oil Prices ◽  
Content Type ◽  
Central Eastern Europe ◽  
Equity Funds

Subject The prospects for Emerging Europe assets. Significance Despite record levels of outflows from emerging market (EM) bond and equity funds in 2015, the financial markets of Central-Eastern Europe (CEE) have remained remarkably resilient. They are likely to continue to outperform those of Latin America and Emerging Asia next year, because of a combination of relatively strong fundamentals and liquidity support from the ECB. Impacts Investor sentiment towards developing economies is now shaped almost entirely by dramatic declines in commodity prices. US monetary policy will now prove secondary to the plunge in oil prices. Growth in the CEE region picked up significantly this year and is still expected to remain relatively robust in 2016.

Slowdown may induce Czech loosening despite inflation

2020 ◽  
Keyword(s):  
Central Europe ◽  
Emerging Market ◽  
External Environment ◽  
Commodity Markets ◽  
Bond Yields ◽  
Content Type ◽  
Financial Conditions ◽  
Equity Funds ◽  
China’S Economy

Significance Domestic inflationary pressures have intensified, with headline inflation significantly above the CNB’s 2% target. However, the sharp deterioration in the external environment, exacerbated by the spread of the deadly coronavirus to Italy, is putting pressure on the CNB to reverse the hike in rates it announced this month, and potentially to start easing policy more aggressively if growth slows more sharply. Impacts Falling German bond yields are dragging down yields in Central Europe and contributing to a further loosening in financial conditions. The near-20% fall in Brent crude prices, part of a sharp sell-off in commodity markets, reflects mounting concerns about China’s economy. Investors’ continued ‘hunt for yield’ will still attract significant inflows into emerging market bond and equity funds this year.

Prospects for the US economy to end-2016

2016 ◽  
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Federal Reserve ◽  
Content Type ◽  
Financial Volatility ◽  
Us Economy ◽  
The Us ◽  
The Eu

Subject Prospects for the US economy to end-2016. Significance A disappointing employment report for May, with only 38,000 jobs added, has fuelled speculation that the US economy may be in for a year of slowing economic growth in 2016. The Federal Reserve (Fed)'s decision on June 15 to delay further any interest rate hike only highlights that concern, which now is also exacerbated by the financial volatility induced by the United Kingdom's vote to leave the EU.

US Fed’s independence is likely to stay

2018 ◽  
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Political Capital ◽  
Donald Trump ◽  
Content Type ◽  
Rate Policy

Significance This comes after a July 19 interview in which President Donald Trump expressed discontent with the Fed’s upward interest rate trajectory and speculated that it could choke the economic growth on which hangs much of his political capital; on July 20, the president tweeted that tightening monetary policy “hurts all that we have done”. The interventions have caused concern that Trump will not allow full Fed independence. Impacts The Fed will likely hold to its course of two more rate rises this year. Markets will pay more attention to the dollar's level than to Trump's public remarks on Fed rate policy. If Trump intervened with the Fed more forcefully, Congress might push back, but could struggle to agree on how.

Investors may be underpricing more US Fed tightening

2019 ◽  
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Federal Reserve ◽  
Economic Activity ◽  
Emerging Market ◽  
Oil Price ◽  
Content Type ◽  
The Us ◽  
Equity Funds ◽  
Global Growth

Subject Financial markets. Significance The US stock market has rallied by 11.8% this year, buoyed by the US Federal Reserve (Fed) executing a dovish policy reversal in late January. Slower global growth prompted the turnaround, but at the same time, US economic activity still has momentum. Reflecting the uncertainty, a week ago futures investors saw a 20.0% chance of the Fed's next move being a rate cut and a 3.5% chance of a hike by January 2020. Expectations have since shifted, to a 7.0% chance of a cut and a 6.9% chance of a hike, respectively. Impacts The dollar is 1% higher since the Fed turnaround at end-January; much larger concerns about Europe than US activity will keep it rising. Emerging market (EM) bond and equity funds are attracting consistently high inflows, but sharply lower Chinese growth would be contagious. The Brent oil price has risen more than 20% this year, but weaker global growth will limit further gains.

Does monetary policy affect economic growth: evidence from Malaysia

2018 ◽  
Vol 34 (1) ◽  
pp. 2-20 ◽  
Author(s):  
Ergin Akalpler ◽  
Dilgash Duhok
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Positive Relationship ◽  
Developing Economies ◽  
Policy Instruments ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this paper is to investigate the relationship between monetary policy and economic growth in the light of a developing economy, with the main focus on Malaysia. Primarily, the research will concentrate on the interactions between interest rates, inflation, money supply and growth in GDP, which will serve as the instrument for measuring economic growth. Design/methodology/approach The research will apply quantitative analysis to determine the relationship between GDP growth and monetary policy instruments, particularly interest rate, money supply and level of inflation. Given the advancement and achievement in econometric analysis and computer software creation, the least-squares estimates analysis will be used to investigate the relationship and significance between these variables. Findings It is observed that relationship between economic growth and inflation is positive. This entails that a 1 percent change in inflation will result in a 77 percent increase in the level of economic growth in this economy. The linkage between economic growth and interest rates has also been observed to be positive. A positive nexus can be observed between economic growth and money supply. The coefficient value of 0.02 for money supply growth shows that it has the smallest effect on economic growth amongst the variables tested in the model. Research limitations/implications Based on the findings of this study, the following recommendations can be made, which could serve as policies instruments for Malaysian economic development. This does not mean that the findings can be generalized for other developing economies. Practical implications Observations from the test for economic application significance are based on the signs of the parameters. It was observed that inflation, interest rates and money supply all have a positive relationship with economic growth, which is in line with the a priori expectations. This means that monetary policy has positively affected the economic growth. Social implications The results of the OLS analysis reveal that the monetary policy instruments used for the model demonstrated that monetary policy has a positive relationship with economic growth in Malaysia. A breakdown of the individual monetary policy instruments shows that the interest rate, inflation and money supply all have individual positive relationships with economic growth. Originality/value A positive relationship exists between economic growth in Malaysia and all selected monetary instruments, namely, inflation, money supply and interest rate. The results show that the results show that inflation, interest rate and money supply will cause the economy to grow but their contribution to the developments is affected from other policy instruments which are used by the governments.

Central European monetary policy may stay ultra-loose

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
European Monetary ◽  
Content Type ◽  
Central European ◽  
The Core ◽  
Equity Funds ◽  
National Bank ◽  
European Monetary Policy ◽  
Nationalist Government

Significance Financial markets in Central Europe (CE) are closely correlated with those in the core of the euro-area and their central banks are the most dovish in emerging markets (EMs), mostly because of subdued inflationary conditions. Hungary's National Bank (MNB) is likely to cut its main policy rate further, possibly as soon its next meeting on March 22, while Poland's new Monetary Policy Council (RPP) may eventually turn to unconventional easing measures to combat persistent deflation. Impacts The 65% plunge in Brent crude prices since mid-2014 will provide a fillip to domestic demand in CE, an oil-importing region. EM equity funds -- one of the market's hardest-hit segments -- are recording their first inflows since September 2014, JP Morgan says. Concerns will remain about the policies of Poland's new nationalist government.

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