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Central Bank - RBA, BoC, RBNZ, ECB, BoE & BoJMarch 04, 2008
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ACM |
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Consensus |
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Current Rate |
| 4th / 03.30 | | Reserve Bank of Australia | | 7.25% | | 7.25% | | 7.00% | | | | | Its universally expected that the RBA will hike rates 25bp to 7.25% this week and accompanying statement hawkish. The Australian economy has been accelerating on all cylinders and we expect Wednesdays GDP growth q/q to be above the 1.0% mark. The boom in commodity prices have encouraged investment spurring growth and putting pressure in prices. In the past, tightening has had little effects on cooling the white hot economy. We are currently anticipating another 25bp in the near term without excluding further tightening for the future. | | | 4th / 14.00 | | Bank of Canada | | 3.50% | | 3.75% | | 4.00% | | | | | We are going against market consensus, which is slightly less then split, and believe the Bank of Canada will cut rates by 50bp to 3.50% after Tuesday’s meeting. The BoC has cited good reasons underlining that a primary risk to the Canadian economy remains the slowdown of the US economy. And Monday’s release of lower then expected GDP figures cemented the downwards trend. With inflation below is target level, core CPI a manageable 1.3% in Jan, and employment remaining firm, the BoC has room to ease. In addition we expect the subsequent comment to be fairly dovish indicating that further easing is still possible. | | | 5th / 20:00 | | Reserve Bank of New Zealand | | 8.25% | | 8.25% | | 8.25% | | | | | As the stagflation type environment gains traction the RBNZ will be in an increasingly difficult position albeit inline with market consensus that is expecting the RBNZ to hold rates at 8.25%. While the structure and bias of the subsequent wording is up for debate we expect the RBNZ to express real concern over inflation expectations which could imply reviewing GDP forecasts and growth prospects. We had expected the RBNZ to lessen their hawkish rhetoric in 2008, but have yet to see this change in tone and don’t expect to hear it over this meeting. However, with NZ economic prospect clearly on the decline and being led by slow domestic growth causing inflation pressures to ease, there are still prospects of further cuts in late 2008. | | | 6th / 12.00 | | Bank of England | | 5.25% | | 5.25% | | 5.25% | | | | | The BoE’s MPC is expected to hold rates steady at 5.25%, however they will be specific on stressing that pressures are mounting on both sides of the equation. On one-hand credit markets have deteriorated since the last meeting and while demand indicators have been mixed the skew is towards the downside. However, a recent shocking producer prices have renewed inflation concerns. While this round will have the committee waiting for more data the eventual decline of growth will need to be addressed by monetary policy. | | | 6th / 12.45 | | European Central Bank | | 4.00% | | 4.00% | | 4.00% | | | | | Of all the central bank meeting this week it will be the ECB’s decision and subsequent comment that will garner the most market scrutiny. We expect the ECB to hold rates steady at 4.00%. The recent surge by the EUR against the USD and GBP brings into light the question of whether the bank can continue to ignore the potential negative impact on growth of a strong euro. So far Trichet has limited his comments on the subject to saying “brutal” movements were unwelcome and this casual stance has been supported by economic data (led by export data) which has stayed relatively buoyant. While the dampening effect on inflation would be welcome the ECB can’t rule out the downside on growth. However it is the uncomfortably high price pressures which will dictate this meeting rate decision. With headline ticking up to 3.2%, well above the ECB 2.0% ceiling and this despite core inflation rate falling from 2.0% to 1.8 %. It will be some time before the ECB truly switches from inflation to growth emphasis. | | | 7th / 00.00 | | Bank of Japan | | 0.50% | | 0.50% | | 0.50% | | | | | We expect the BoJ to hold rates at 0.50% at Governor Fukui’s final meeting this Friday. Despite the fact that the Japanese economy is expected to expand moderately the rebound seems very uncertain given the global economic slowdown - particularly pronounced in the US - and rapid Jpy appreciation. Given the recent Jpy appreciation there is growing speculation that a cut is probable, based not on a logical assessment of Japanese fundamentals but on global sentiment. Should the UsdJpy move quickly towards the 100.0 lvls between now and Friday the likelihood of a cut will increase. | |
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