Central banks: Changes to current policy rates and forecasts - HSBC

Research Team at HSBC, summarises the changes in policy rate forecasts made by HSBC’s economists.

Key Quotes 

• “In Japan, we expect another 10 bps rate cut in September, when previously we expected rates to remain on hold until the end of 2017. We also now expect a JGP purchase range of JPY 70- 100 trn to be announced at the meeting on 21 September.

• In India we forecast a 25bp cut to 6.00% in Q4 2016 followed by another 25 bps cut in Q1 2017. Previously we forecast a rate cut to 6.00% but then rates remaining on hold until the end of 2017.

• In Malaysia, Bank Negara Malaysia left its overnight policy rate unchanged at 3.00% on 7 September. Previously we expected them to cut, and so we now postpone our expected cut and forecast a 25bp cut in Q4 2016.

• In Thailand, the BoT left its policy rate at 1.50% in line with our expectations. However, due to lower GDP growth expectations, we now expect BoT to pause until Q4 2016 where we expect a 25 bps cut. Previously we had forecast another 25 bps cut in Q3 2016.

• In Russia the CBR cut its policy rate by 50 bps to 10.00% on 16 September. As the CBR stated there would be no more cuts this year we no longer expect a December cut, we now expect the CBR to resume easing in March 2017, achieving a 7.50% policy rate by end-2017.

• At its September meeting, Banco de la República Colombia ended its tightening cycle leaving rates on hold at 7.75%. We expect 100bps in cuts in the first half of 2017.

Current key forecasts

• In the US we see a rate rise occurring in Q2 2017 taking the policy rate to 0.50%-0.75%.

• In the Eurozone we see rates remaining on hold until at least end-year 2017. However, we still expect the quantitative easing programme to be extended by 6 months before the end of the year.

• In China we forecast three 25bp policy rate cuts occurring in Q3 2016, Q4 2016 and Q2 2017, then the policy rate remaining on hold at 3.60% until at least end-year 2017.

• In the UK the Bank of England kept rates on hold on 15 August. We still expect a second cut of 15bp to 0.10% in November.”