We assume that the 90-day pause on reciprocal tariffs will become permanent, keeping tariffs at 10% for most countries except China, which will face a steeper 40% levy. A recession should be avoided, provided Congress can quickly redirect the tariff …
20th May 2025
German office rents made stronger than expected gains in 2025 Q1. But not all markets were moving in line, with Frankfurt’s buoyancy a stark contrast to other cities. While that suggests risks remain on the upside in the near term, we still expect overall …
Rates on hold with CBN in wait-and-see mode The Central Bank of Nigeria left its policy rate on hold at 27.50% today and, with the disinflation progressing slowly and concerns that low oil prices will put downward pressure on the naira, it looks like it …
Sharp drop in headline rate masks hot underlying inflation The removal of the carbon tax sent energy prices tumbling in April, pushing headline inflation below the 2% target. More concerningly, the Bank’s preferred CPI-trim and CPI-median core measures …
Despite the jump in US tariffs this year, China’s exports of the “New Three” reached a record high in April. This was mainly driven by increased exports to non-US markets, such as the EU. Looking ahead, this trend will probably continue as the impact of …
Credit growth in the UAE has boomed, fuelling a sharp rise in property prices, particularly in Dubai. Prices are now at risk of a correction which, in the past, has fed into banking and debt worries in the UAE. But there are reasons to think that banks …
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
RBA cuts by 25bp, leaves the door open for further easing With the Bank growing increasingly concerned about downside risks to the economy, there is a good chance that it will cut rates further than we are currently anticipating this cycle. The RBA’s …
PBOC’s easing will confer only marginal benefits Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) probably won’t be the last this year. But rate cuts are likely to remain modest as the PBOC appears to think they could hinder …
By seeking to extend the “polluter pays” principle to building owners and road users, the ‘sequel’ to the EU’s Emissions Trading Scheme was always likely to run into public and political opposition. The risk for the EU is that any concessions to make ETS2 …
19th May 2025
A strong start to the year The stronger-than-expected 0.7% q/q expansion in Chile’s economy in Q1 on the back of robust domestic demand supports our view that Chile’s central bank will leave its policy rate on hold for a bit longer. But the recent dovish …
April’s surprisingly large jump in services inflation appears to have been entirely an Easter timing effect that will reverse in May. Meanwhile, there are some near-term upside risks to headline inflation from higher food prices, but we still expect the …
The de-escalation of the US-China trade war and the Trump administration’s wider reduction of tariff rates means that a sharp depreciation of the renminbi has become less probable. While we continue to think the greenback will rebound a bit against most …
The decision by Moody’s to downgrade the US government’s credit rating highlights that there are several potential storm clouds on the horizon for Treasuries, even if the downgrade itself doesn’t seem so far to have made much of a market splash. …
After weeks of turbulence, a US-China agreement to slash tariffs has suddenly fuelled hopes that the worst of President Trump’s trade war is behind us. That’s certainly been the interpretation in financial markets, where risk assets have more than clawed …
The unexpected victory for centrist candidate, Nicusor Dan, in the second round of Romania’s presidential election on Sunday marks a major comeback against the far-right, and will ease concerns about the country veering from its pro-EU stance. That said, …
Economic growth in Thailand accelerated in Q1 but we think growth over the rest of the year will be rather weak as the boost from stronger public consumption is likely to be offset by weakness in other components of GDP. The 0.7% q/q rise in GDP in Q1 …
Trade war starts to take its toll After an improvement in March, China’s economy looks to have slowed again last month, with firms and households turning more cautious due to the trade war. While the recent US-China tariff de-escalation will alleviate …
Things are looking up after the US and China de-escalated their trade war, but is the global economy off the hook? In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing tells David Wilder why the tariff …
16th May 2025
Sharp contraction at the start of the year The sharp slowdown in Russian GDP growth from 4.5% y/y in Q4 to 1.4% in Q1 is consistent with a sharp fall in output and suggests that the economy may be heading for a much harder landing than we had expected. …
The softening housing market has mostly flown under the radar, but that is soon likely to change following April’s data, which showed house prices taking another sharp leg down. Combined with the steep decline in manufacturing sales volumes reported for …
There are still a few signs of stress in US financial markets. That’s despite this week’s ongoing rebound in the S&P 500, which has taken it well above its level on “Liberation Day”. It reflects the fact that investors have more to worry about than just …
Tariff man triumphant Following the agreement between the US and China to reverse most of the prohibitive tit-for-tat tariffs imposed a month earlier, stock markets have rallied further this week. The S&P 500 is now closing in on the high reached in …
Consumers remain uneasy despite the tariff pause The weaker-than-expected May print of the University of Michigan consumer sentiment index was driven by a further increase in inflation expectations and suggests households remain wary about the tariff …
A deal is perhaps not so imminent Optimism that India was poised to seal a quick trade deal with the US has faded in the past week. Admittedly, Donald Trump still sounds positive about the negotiations – he claimed yesterday that India had offered a “no …
Copom minutes intensify debate over June meeting The minutes to the Brazilian central bank’s monetary policy meeting last week, at which the Selic rate was hiked by 50bp, have added further fuel to the debate over whether the tightening cycle is already …
Tariffs starting to weigh on residential construction The small rebound in housing starts in April is more troubling than it appears, as it barely recoups the sharp, weather-related decline seen in March and conceals renewed weakness in both single- and …
The agreement to roll back some tariffs reached by the US with both China and the UK raises the question of whether the EU will reach a similar deal before 9 th July, when the pause on the so-called “reciprocal” tariffs expires. We suspect a US-EU deal …
The implications of the government’s latest policies for the economy bring to mind the quote “what the right hand giveth, the left hand taketh away”. The right hand – EU reset In the right hand is the UK-EU reset, which will begin on Monday to much pomp …
Risks now skewed towards hikes rather than further cuts The National Bank of Romania (NBR) highlighted concerns with the uncertain political backdrop and recent pressure on the currency when leaving its policy rate on hold today, at 6.50%. We now think …
GNU will struggle to fill VAT hike-related hole South Africa’s finance minister takes his third stab at delivering the 2025 Budget on Wednesday. Disputes within the ruling GNU seem to have been resolved but this may come at the cost of slippage on …
US-Iran nuclear deal on the table Despite President Trump’s previous focus on pushing OPEC+ to loosen the taps and lower oil prices, there was surprisingly little explicit talk of oil prices during his trip to the Middle East. Instead, the biggest …
We still expect a slowdown this year The tariff de-escalation agreed at the start of this week is good news for Chinese exporters who were facing a collapse in exports to the US. But we haven’t changed our growth forecasts for China’s economy for a few …
The flurry of diplomatic activity by both the US and China this week underscores that geopolitical alliances in parts of the emerging world are fluid. We suspect that most countries in Latin America and the Middle East will try to straddle the China-US …
The polls ahead of presidential elections in Romania and Poland this Sunday point to diverging political paths for the two largest economies in Central and Eastern Europe over the coming years. We’ll be discussing the implications of Sunday’s election …
Slow progress on trade deals Monday’s agreement between the US and China to lower tariffs marks a significant de-escalation in tensions between the two countries. However, the deal addresses none of the issues that caused tensions to rise in the first …
The de-escalation in the US-China trade war gave the dollar a renewed boost against most G10 currencies this week. But, a fall back in Treasury yields has taken away some of those gains as we head into the weekend, and trade talks have been a double-edged …
Weaker growth to prompt rate cuts later this year GDP growth in Malaysia slowed in the first quarter, and we think the economy will struggle this year, opening the door for the central bank to cut interest rates. According to the second estimate published …
Inflationary pressures linger on In case you missed it, our RBA Watch explains why we expect the Bank to cut rates by 25bp, to 3.85%, at its meeting next week. However, we suspect that the cut will be a somewhat hawkish one, with the Board reluctant to …
Lower energy prices will weigh on inflation The truce reached between China and the US over the weekend is a clear positive for Japan’s economy. Even so, we suspect that weak economic activity coupled with an impending plunge in inflation will delay …
GDP growth set to remain sluggish this year With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated. The 0.2% q/q fall in Q1 GDP was …
Growth concerns leave the door open for another 50bp cut in June Mexico’s central bank (Banxico) lowered its policy rate by another 50bp, to 8.50%, at today’s meeting and the accompanying communications underlined that policymakers’ concerns have shifted …
15th May 2025
Explore historical relationships and compare current financial market conditions with past periods of distress. The data tend to be updated once a quarter and on an ad hoc basis. If you would like subscriber access to this dashboard contact …
One month on from the peak of the post-“Liberation Day” market turmoil, calm has largely returned and most key asset markets have recovered much, or all, of the ground lost in the days following 2 nd April. Indeed, core money markets never looked …
The Gulf’s trillion dollar shopping list Headlines have been dominated this week by US President Trump’s dealmaking in the Gulf, striking nearly $1trn of potential deals for investment and trade over the coming years. There’s a big question mark about …
Production flat but positive signs At face value, the stagnation of industrial production in April and the fall in manufacturing output suggest that tariffs are weighing on domestic production. However, some of this is due to an unwinding of tariff …
Retail sales and PPI show few signs of adverse tariff impact Despite fears raised by the slump in sentiment, retail sales edged up by 0.1% m/m in April, following a massive 1.7% m/m gain the month before. Admittedly, control group sales fell by 0.2% m/m …
The impressive progress made by Argentina’s President Javier Milei towards restoring macro stability should set the scene for stronger and less volatile growth than in the past 10-15 years. But we think the analyst consensus has turned too optimistic on …
