BoI restarts easing cycle as inflation risks ease The Bank of Israel (BoI) restarted its easing cycle at today’s meeting, reducing its policy rate by 25bp, to 3.75%, and we think another cut of the same size is likely in July too. The decision was …
25th May 2026
The chances of a large, broad-based relief rally if a the Strait of Hormuz is re-opened have probably diminished over time, although some markets have more upside than others. One that might benefit is the yen; if nothing else, re-opening the Strait is …
This Weekly Roundup highlights our analysis on how earnings will keep powering the AI rally, why expectations are misplaced for oil flows to return to normal quickly, the growing risks facing the Bank of Japan and more. 1. Nvidia’s latest earnings report …
22nd May 2026
Fed alert to rising price pressures The minutes from the Fed’s late April meeting published on Wednesday were undoubtedly hawkish. (See our initial Rapid Response .) “Almost all” participants were concerned that a prolonged conflict in the Middle East …
Long-term government bond yields have fallen by more over recent days than the recent relationship with oil prices would suggest. This may be a sign that investors are starting to worry about the effect of high energy prices on growth, not just inflation. …
The rebound in headline inflation to a two-year high of 2.8% in April was, counterintuitively, a bit of a relief. Looking past the jump in energy inflation, there was little evidence of broader price pressures, with CPI ex. food and energy barely changed …
This latest wobble in the bond market almost certainly won’t be the last. Group Chief Economist Neil Shearing and Chief Markets Economist Jonas Goltermann join David Wilder on the latest episode of the Weekly Briefing to discuss the forces that have …
Our Emerging Markets Chart Pack has been updated to focus on the implications for EMs of the latest developments in the Iran war. The conflict in the Middle East will lead to sharp falls in GDP in the Gulf economies and weigh on activity in energy …
The risks to the commercial property market from the Iran war are increasing, and the longer risk-free interest rates remain elevated the more likely that will feed through to higher property yields. For now, however, property yields do not appear to be …
Brazil’s economy regains momentum We expect data out next week for Brazil to show that GDP growth picked up from 0.1% q/q in Q4 to 0.7% in Q1. Retail sales and industrial production have gained momentum this year and while the BCB’s economic activity …
Gasoline price surge stunts recovery in household spending The 0.7% m/m fall in retail sales volumes in March was not as large as feared amid mixed signs that the surge in gasoline prices weighed on discretionary spending. Regardless, the advance sales …
We have been saying for some time that the current economic backdrop is much less conducive to a long-lasting bout of inflation than it was in 2022. (See here .) This week’s news only adds to that feeling. The fall in the composite activity PMI to below …
Given the effective closure of the Strait of Hormuz and rise in energy prices, it has become harder to ignore the allure of Russian energy. The US recently extended its waiver permitting countries to import Russian oil stranded at sea. And despite signing …
We got more evidence this week that the Iran war is hitting euro-zone economic activity quite hard. Admittedly, the second estimate of Germany’s GDP confirmed that the economy expanded by a healthy 0.3% q/q in Q1, and showed that this was largely due to …
Decoupling to continue despite Trump-Xi meeting We argued last week that the summit had delivered near-term stability in US-China ties without doing much to address the sources of tension between the two countries. Further details have emerged in recent …
Bank Indonesia surprised markets – and ourselves – by raising interest rates by 50bps at Wednesday’s policy meeting. Consensus expectations ahead of the decision had been split between rates remaining on hold and a smaller 25bps increase. The central bank …
All of our coverage on the Middle East conflict can be found here . Loadshedding over, but Iran war effects hitting South Africa’s state-owned electricity utility, this week, celebrated a full year without power outages. The improvement in electricity …
All of our coverage on the Middle East conflict can be found here . Turkey’s political shock rekindles market fears The decision this week by a Turkish court to annul the opposition CHP’s 2023 congress and remove its leader Özgür Özel triggered a market …
More aggressive policy tightening on the way The slew of data published this week suggests that the case for the Bank of Japan to tighten policy is growing increasingly compelling. To start with, we learnt that Japan’s real GDP expanded by a solid 0.5% …
This page has been updated with additional analysis since first publication. Weakening retail sales and higher public borrowing a sign of things to come The drop in retail sales volumes and the public borrowing overshoot in April highlights the …
Limited macro fallout if rupee drops further The rupee finally got some respite towards the end of this week, but not before falling to a fresh all-time low of 96.8/$ on Wednesday. (See Chart 1.) The rupee is now down by over 7% since the start of the …
India Chart Pack (May 2026) …
Activity slowing but inflation will keep rising Developments over the past week mean that the upside risks to our forecast of another 25bp rate hike by the RBA have diminished. In fact, the financial markets are no longer fully convinced that the Bank …
BoJ still likely to tighten policy further Although inflationary pressures eased in April, they will pick up again before long. Accordingly, we still think the Bank of Japan is likely to resume its tightening cycle sooner rather than later. Headline …
Officials appear content to stay on the sidelines, for now The Central Bank of Egypt left interest rates unchanged at 19.00% for a second consecutive meeting today and, so long as the Strait of Hormuz reopens relatively soon, officials will probably be …
21st May 2026
The longer the disruption to energy flows through the Strait of Hormuz continues, the more complex any eventual pick-up in energy flows will be. Oil prices could clearly fall back sharply as/if/when any US-Iran deal transpires, reflecting a likely …
The acceleration in producer price (PPI) inflation so far this year has been narrower than was the case during the initial stages of the post-pandemic surge, which limits the risk of consumer price inflation taking off to the same extent. Nonetheless, the …
Plunge in consumer confidence since war began suggests spending will fall The drop in consumer confidence since the Iran war began, together with the weakness in the business surveys, suggests that the euro-zone economy might contract in Q2. The small …
All of our coverage on the Middle East conflict can be found here . US President Trump declared this week that he had refrained from restarting strikes on Iran at the behest of the Gulf states in order to give more time for negotiations. Axios reported on …
None of the three leading candidates to replace Starmer as Prime Minister advocate an increase in total housing supply, not least due to the fiscal constraints. But Rayner and Burnham may be more inclined to pivot towards social housing construction and …
Any unravelling of the AI-related boom in earnings would upend the S&P 500. But even though there are reasons why that could conceivably happen, our base case is that the boom won’t turn to bust this year. S&P 500 earnings have soared since the end of …
The creation of a state-owned export monopoly may help Indonesia’s government capture a greater share of commodity revenues, but it risks deterring investment, undermining confidence in policymaking and adding to pressure on Indonesian financial markets. …
Muti-family strength masks weaker underlying picture The small fall in housing starts in April masks a weaker underlying picture, with a surge in volatile multi-family starts offsetting a material weakening in single-family groundbreaking, albeit from a …
While FX intervention dominated the headlines a couple of weeks ago, Japan’s bond markets have come under increasing pressure. This Update argues that most of the past rise in yields has been benign, but that the market is approaching a point – if it’s …
This page has been updated with additional analysis since first publication. Weakening in activity may be starting to restrain price rises By suggesting that weaker activity may be starting to restrain price rises, May’s Flash PMIs are the third set of …
Recession risks and price pressures building The further fall in the euro-zone Composite PMI provides more evidence that the euro-zone economy is at risk of contracting in the second quarter while the increase in the input and output price components …
While much has been made of the potential threat to equities from soaring bond yields, recent developments suggest there’s a case that the equity rally, or at least the associated investment boom, is itself a medium-term risk to bonds. At the time of …
Surge in unemployment complicates picture for the RBA The strong pickup in Australia’s jobless rate in April makes it all but certain that the Bank will leave rates on hold at 4.35% at its June meeting. However, with underlying inflation set to accelerate …
PMI points to resilient activity and inflation returning to post-pandemic highs The composite PMI suggests that economic activity is softening rather than collapsing, while inflation could soon become as strong as it was after the Ukraine War. According …
Plunging crude oil imports will result in rapidly declining stockpiles Most of the recent strength in exports reflects soaring export prices, while the closure of the Strait of Hormuz resulted in a record plunge in crude oil imports. The 14.8% annual rise …
Hawkish minutes suggest Fed will soon shift away from its easing bias The minutes from the Fed’s late April meeting were even more hawkish than expected based on the initial post meeting communications, which had been largely unchanged despite some …
20th May 2026
Our Emerging Europe Economics Chart Pack has been updated with the latest data and our analysis of recent developments. The energy shock presents a headwind to most of Emerging Europe by worsening terms of trade and raising inflation. So far at least …
One consequence of the US stock market’s resilience to the recent sell-off in Treasuries has been a decline in the US equity risk premium (ERP). Nonetheless, the US stock market’s relative valuation is still far less stretched than before the dotcom …
If energy prices gradually ease in the second half of this year, as in our baseline, GDP growth should average 2.1% this year and pick up to 2.3% next year. Higher gasoline prices will weigh on consumption, but stronger AI-driven investment should largely …
CBN content to remain on the sidelines The Central Bank of Nigeria sounded relatively sanguine on the inflation outlook as it kept its policy rate unchanged at 26.50% today and it is unlikely to follow some other EM central banks by tightening policy. …
Upgrades to expectations for euro-zone prime office rental growth this year and next have moved the consensus forecast closer to our own and are consistent with our view that prime office rents will be largely resilient to the impacts of the Iran war. The …
Inflation across Asia is beginning to diverge sharply, driven largely by differences in how governments are managing rising energy costs. Some economies have allowed higher fuel prices to pass through to consumers, while others have relied on increasingly …
While China’s solar panel and lithium-ion battery exports fell back from record highs in April, the surge in battery electric vehicle exports meant that China’s overall green tech exports remained elevated. Demand for Chinese-made green tech has continued …
ECB policymakers have pointed to second-round effects in the labour market as a key indication that they would need to tighten monetary policy. As things stand, we suspect that wage inflation will pick up a little in the euro-zone, but not for many months …
Higher energy costs have pushed up fuel prices in the euro-zone while the impact on other components of the consumer price basket has so far been very small. But the inflationary effects of the Iran war will soon broaden, and with the oil market …
