Solid rise in GDP not a sign of things to come The stronger-than-expected 0.4% m/m rise in GDP in January, along with an upward revision to the December outturn, shows the economy still had solid momentum at the start of this year. The weak February …
28th March 2025
Tariffs – UK still not very exposed The announcement of US reciprocal tariffs on 2 nd April will dominate next week. The UK has mostly flown under the radar of Trump’s tariffs and its economy is naturally less exposed than others – our Trade War Dashboard …
Inflation too hot and spending too cold The third consecutive above-target gain in core PCE prices in February, of 0.37% m/m, reinforces our view that the Fed is unlikely to cut interest rates this year. Admittedly, officials are likely to be concerned by …
Overview – Economies across Sub-Saharan Africa are amongst the least affected EMs by the protectionist shift that the US is embracing. And growth in the region is set for a modest pick-up on the back of lower inflation and easing monetary policy. But …
In a further escalation of his trade war, US President Trump on Wednesday announced a 25% tariff on assembled motor vehicles and some key components: engines and engine parts, transmissions and powertrain parts, and electrical components. (See our initial …
Autos now in the crosshairs The Trump administration’s announcement of a 25% import tariff on autos and some auto parts will have a particularly large impact on Hungary and Slovakia. Our detailed response on Thursday to the tariff news can be found here . …
Exports will take a hit soon The US vehicle tariffs announced this week will do little damage to China as its auto exports to the US account for less than 0.05% of GDP. But the “ reciprocal tariffs ” that President Trump is due to announce on Wednesday …
Net immigration to the euro-zone has been very high in recent years, and the risks are skewed towards it exceeding the European Commission’s projection of 0.3% per year over the long term. The historical trend suggests it could average 0.4%-0.5% while a …
Autos in the firing line Donald Trump’s announcement that he will impose 25% tariffs on all automotive imports into the US from 3 rd April could be a big deal for parts of Asia. Korea and Japan are the most vulnerable. Exports of these products to the US …
This publication has been updated with additional analysis Growth still weak, but price pressures remain The EC survey for March shows a deterioration in business and consumer sentiment in the euro-zone, consistent with GDP doing little more than stagnate …
Given our view that the rise in yields outside Germany will not match the recent increase in Bund yields anytime soon, we are revising down our forecasts for euro-zone spreads. That said, we still expect spreads in France, Italy, and Belgium to widen due …
Concessions to Trump may not prove enough All eyes are now on the Trump administration’s reciprocal tariff plans, due to be unveiled on Wednesday 2 nd April. There is still huge uncertainty around what form reciprocal tariffs will take. The administration …
This page has been updated with additional analysis since first publication. Bumper rise in retail sales suggests households may be spending more freely Today’s deluge of data confirmed that the economy was weak even before the full effects of higher …
RBA will cut two more times this year Australian Prime Minister Anthony Albanese confirmed today that the next general election will be held on 3 rd May. The announcement comes closely on the heels of the government’s 2025/26 Budget , which includes an …
Time to act decisively has come The US this week announced a 25% tariff on auto imports and Japan will be among those economies most affected. (See here .) While PM Ishiba has said that “all options are on the table” when it comes to Japan’s response, our …
While US tariffs are a headwind, the continued acceleration in consumer prices will only heighten concerns among Bank of Japan’s Board members about inflation overshooting its 2% target. As the Bank should have a rough sense of the severity of US trade …
Door is open for another 50bp cut in May The statement accompanying the Mexican central bank’s (Banxico’s) decision to lower its policy rate by another 50bp cut, to 9.00%, today suggests that growth concerns are rapidly overtaking inflation concerns. …
27th March 2025
Overview – We’ve raised our GDP growth forecasts across most of the region for this year and think that Central and Eastern European (CEE) economies will pick up pace going into 2026, despite the headwind from US tariffs. An end to the war in Ukraine …
Emerging Markets Capital Flows Monitor (Mar. 2025) …
Table of Key Forecasts Global Overview – We expect the world economy to grow a touch slower in the next couple of years than it did in 2024. Trump’s policies will drag on US growth, policy support will not prevent a slowdown in China’s economy, and looser …
Despite President Trump’s pro-fossil fuel stance, the uncertainty caused by tariff policy and his aim for lower oil prices is weighing on sentiment among fossil fuel producers. Sentiment will continue to sour as oil prices underperform producers’ …
Equity investors have stopped ignoring US President Donald Trump’s tariffs announcements. We think they are right to do so. Donald Trump announced yesterday that all finished motor vehicle imports will be subject to a 25% tariff from next Thursday. This …
Following the series of US tariff announcements in early April, we have revised our forecasts. You can find the updated forecasts here . Overview – We have raised our assumption for the average US tariff rate that Canadian exporters will face, to a level …
DOGE-led layoffs of approximately 25,000 junior federal employees will be a modest drag on March payrolls, but they should be offset a rebound in weather-sensitive sectors. We forecast a smaller yet still healthy 140,000 employment gain and the …
Overview – Following upward revisions to our forecasts for policy rates and bond yields, we have raised our forecasts for prime property yields in Europe and now expect increases of around 20-25bps by the end of 2026. Meanwhile, despite a slightly …
Egypt: a wider budget deficit, but tight fiscal stance Egypt’s cabinet approved the FY2025/26 Budget this week which showed that a primary surplus will be maintained, reiterating that policymakers will stick to the tight fiscal stance that will help to …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
Overview – GDP growth in the Middle East and North Africa will pick up over the next couple of years supported by rising oil and LNG output from the Gulf. However, lower oil prices will result in tighter fiscal policy in parts of the Gulf, particularly …
Inflation rises again, more rate cuts on the cards The further rise in Brazil’s headline inflation rate to 5.3% y/y in the first half of March means that, with Copom shrugging off the weakness of the latest activity data and inflation likely to rise …
Data released this morning showed that euro-zone money and lending growth continued to accelerate in February, supporting the case of those at the ECB who would prefer to pause interest rate cuts in April. The narrow M1 measure of the money supply – which …
With GDP growth set to struggle and inflation to remain low, central banks are likely to continue to cut interest rates over the coming months. Overall, we expect most central banks to cut rates by 50bps-200bps between now and the end of the year. US …
This morning’s decision by Norges Bank not to follow through with the rate cut that it signalled in January was no surprise. The Bank also revised its interest rate projection up. We forecast two interest rate cuts this year, taking the policy rate down …
Norges Bank to cut very cautiously, if at all This morning’s decision by Norges Bank not to follow through with the rate cut that it signalled in January was no surprise. The Bank also revised its interest rate projection up. We forecast two interest rate …
Trump imposes 25% tariff on auto imports Following media reports at the start of this week that product-specific tariffs would be deferred, President Donald Trump has changed tack once again and announced that all finished motor vehicle imports will be …
26th March 2025
Table of Key Forecasts Overview – EM GDP growth picked up towards the end of last year, but the outlook is increasingly challenging – and not just because of US import tariffs. Weaker capital inflows, lower commodity prices and tight policy will all drag …
Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger changes lie ahead. Indeed, the pressure to raise both defence and other public spending is only likely to …
The protectionist shift in the US will weigh heavily on Mexico’s economy, which at best might just eke out positive growth this year. The rest of the region is less exposed to tariffs, but tight policy and worsening terms of trade will weigh on growth, …
Overview – Increased US tariffs will exacerbate a broader slowdown in exports. China’s economy will also face continued drags from the property downturn and wider deflationary dynamics. A sizeable fiscal loosening will provide a partial offset but won’t …
Easing cycle paused, and space for additional rate cuts narrows The Czech National Bank (CNB) left its policy rate on hold today, at 3.75%, and we think that the scope for further interest rate cuts this year has become more limited. We had previously …
Physical retail demand has not only been shaped by online shopping, but also by shifting working patterns which have redistributed where we spend our money since COVID-19. Nevertheless, we expect a more even retail performance with the worst-hit …
For updated and more detailed analysis see here . Markets may be concerned about unfinished fiscal business Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger …
Tariff effects help lift core orders Stronger orders for primary metals and fabricated metal products in February suggest that tariff effects helped to drive up core durable goods orders last month, while transportation orders also did better than we …
We think China’s tech stocks could rally a bit further yet, and perhaps outperform those globally for a while. The breakneck rally in China’s tech stocks has come to a shuddering halt lately. Thanks to a couple of sharp falls they’ve now made no ground …
The outlook for EM GDP growth appears increasingly challenging and our growth forecasts for this year generally sit below the consensus. Monetary easing will continue although, outside Asia, high inflation means that interest rate cuts will be smaller …
This page has been updated with additional analysis since first publication. Temporary dip in inflation may not help the BoE or Chancellor much The dip in CPI inflation from 3.0% in January to 2.8% in February (CE & consensus 2.9%, BoE 2.8%) is a bit of a …
The Reserve Bank of Australia will leave policy settings unchanged at its upcoming meeting that ends on 1 st April and will probably still sound hawkish. However, with inflation set to soften a touch faster than the Bank had anticipated, we still expect …
Weakness in Australia’s underlying inflation points to May rate cut The weakness in underlying inflation means that the RBA will probably cut rates again 25bp in May and creates some downside risks to our forecast that the Bank will only cut rates to …
While the drop and partial rebound in the US stock market over recent weeks has in many ways followed a familiar pattern, it has also seen some relatively unusual characteristics that point to the potential for a wider and sustained reset in financial …
25th March 2025
