ECB Likely to Hold Rates | Weekly Review and Preview

  • Monday, April 18, 2016

Welcome to Prattle’s “Weekly Review and Preview.” Each week, we analyze the most important communications from the previous week and give our thoughts on upcoming releases.

  • Review

Bank of Japan
In brief: Rate drop imminent
Analysis: Japan’s policymakers defended negative rates, with two of the three citing that rates will go further into negative territory if necessary. This is a clear sign that the Bank of Japan (BOJ) is planning to drop rates further.

BOJApril18

Bank of England
In brief: Held rates
Analysis: As expected, the Bank of England (BOE) held policy steady, citing concerns over global growth and Brexit uncertainty.

Bank of Canada
In brief: Held rates, but with a hawkish outlook
Analysis: The Bank of Canada (BOC) held rates, causing markets to think the bank was dovish as stocks reached a 5-year high and the loonie fell. However, economic forecasts looked good. Our blog post went into more detail on the situation.

Norges Bank
In brief: Emphasizing stability despite outside opinion
Analysis: The Norges Bank insists that the country is not in a crisis, but some analysts suggest they are not seeing the underlying struggles in their economy. Deputy Governor Jon Nicolaisen delivered a hawkish (1.6) speech emphasizing that norway was “not in a crisis.”

  • Preview

European Central Bank
Forecast: Likely to hold rates
Analysis: Mario Draghi looks poised to keep rates from going further into negative territory at this week’s monetary policy meeting due to German and Dutch policymakers’ criticisms concerning the damage negative rates are doing to pension funds.

Swedish Riksbank
Forecast: Will hold rates while priming market for a rate hike
Analysis: The Riksbank is likely to be very happy about strength in the Swedish economy at this week’s monetary policy meeting due to positive results from negative rates. All signs point to a more hawkish stance from the bank, but it is too early to change rates so instead they will likely prime the market for a rate hike (or move to less negative rates) very soon.

Bank of Korea
Forecast: Likely to hold rates
Analysis: This week’s monetary policy meeting will determine how Korean central bankers react to recent political turmoil. Recent trend data suggests slight upward momentum after a decline in March, supporting the likely decision of holding rates with a wait-and-see approach.

BOKApril18

Bank of Turkey
Forecast: Likely to cut rates by 25 bps
Analysis: With new governor Murat Çetinkaya taking office this week, a rate cut of 25bps can be expected at Turkey’s monetary policy meeting. New governors seldom reduce rates immediately, but political pressure and market expectations point toward an imminent rate drop.

Federal Reserve Bank
Forecast: Likely to hold rates at April meeting
Analysis: Several speeches scheduled this week from regional bank presidents will likely confirm that the Fed is unlikely to raise rates in April. Judging by the positive sentiment expressed in speeches taking place over the past week, a rate hike is still on the table for later in the year.

The Prattle Team

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