Gasoline-driven fall in headline inflation The downward surprise to CPI inflation in March, along with the first target-consistent gains in CPI-trim and CPI-median in eight months, at the margin raise the odds of a rate cut by the Bank of Canada tomorrow. …
15th April 2025
Although the EU is likely to respond to US tariffs at some point, recent developments reinforce our view that it will move slowly and that any retaliation will be moderate. This should limit the damage from the trade war for Europe and is one reason why …
The ongoing fallout across financial markets from President Trump’s “Liberation Day” announcement has resulted in a sharp fall in the dollar and what looks increasingly like a generalised loss of confidence in the US as a safe haven in currency and bond …
Further fall in inflation paves way for more interest rate cuts The larger-than-expected fall in Indian consumer price inflation in March, which pushes it further below the Reserve Bank of India’s (RBI’s) 4% target, reinforces our view that the central …
Outlook clouded by tariff tensions This publication has been updated with additional analysis The increase in euro-zone industrial production for a second consecutive month in February is not a sign of a sustained recovery for the sector. Instead, it is …
The ECB’s Bank Lending Survey paints a positive picture of the housing market. Conditions for consumer credit and corporate loans were less encouraging, and the tariff chaos of the past two weeks might have made banks more cautious about lending and …
Broad-based strengthening of price pressures Saudi Arabia’s headline inflation rate picked up to 2.3% y/y in March, the fastest pace since the middle of 2023. (See Chart 1.) And inflation strengthened across most categories of the CPI basket, suggesting …
This page has been updated with additional analysis since first publication. Jobs growth weakens with more to come While the jobs market weakened further, there were few signs this is feeding through to slower wage growth. But if the more uncertain …
Japan's economy will be hit less hard than many other large economies by the recent escalation of the trade war. While mounting uncertainty will keep the Bank of Japan on the sidelines for a few months, we expect the labour market to remain tight and …
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
Available data don’t give a definitive answer to whether sales by Chinese institutions contributed to the recent volatility in the US bond market. But China’s state managers of foreign assets still appear to have more than half of their portfolios …
Argentina’s latest IMF programme and the move to partially dismantle some capital controls and liberalise the exchange rate suggests policymakers are moving more quickly than we’d anticipated to restore macro orthodoxy. The parameters of the exchange rate …
The recently-announced fiscal plan in Bahrain is a welcome shift towards fiscal consolidation, but there’s a high risk of slippage and the public debt dynamics are alarming. Although other Gulf states would almost certainly step in if Bahrain faced major …
The IMF’s Resilience and Sustainability Facilities with Egypt and Pakistan will incentivise policymakers to implement climate adaptation and mitigation policies. That said, both countries still need to attract significant amounts of private investment to …
Nobody knows where US tariff policy will ultimately land but one thing is starting to become clear: the Trump administration has China in its sights. The exemptions for various electronic goods, including smartphones and laptops, announced over the …
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
A final hurrah Export growth accelerated in March, as manufacturers rushed to ship goods to the US ahead of “Liberation Day”. But shipments are set to drop back over the coming months and quarters. We think it could be years before Chinese exports regain …
Loan growth no longer slowing Bank loan growth accelerated for the first time in over two years last month, helping to take broad credit growth to a 10-month high. While some further gains are likely, we still expect a more modest pick-up compared to …
Singapore’s central bank loosened monetary policy again today and with inflation set to remain low and the economy weak, further easing looks likely in the coming quarters. The MAS conducts monetary policy by targeting the nominal effective exchange rate …
The tariff exemptions reported in the dead of night by the CBP on various electronics goods, including smartphones, semiconductors, electronic circuits and TVs, represent a partial de-escalation of President Trump’s trade war with China. The 20 product …
12th April 2025
As the dust settles after another of week of dramatic policy shifts, the picture that has emerged is a familiar one from Trump's first term: China is the main target after all. China isn't taking Trump's tariffs lying down. Instead, it has hit back tariff …
11th April 2025
After another tumultuous week across financial markets, the dollar is on track for one of its worst weeks on record. At this point, the main question for the dollar is no longer what the direct effects of President Trump’s tariffs (many of which were …
With the Swiss currency having experienced its largest two-week appreciation since the “Frankenshock” in 2015, the SNB may already have started selling francs in the FX market. We have a 25bp cut pencilled in for June, but the risks are that policymakers …
Pause on reciprocal tariffs reduces risks for CEE President Trump’s 90-day pause on “reciprocal” tariffs has reduced the scale of downside risks to the global economy, and our new working assumption is that US tariffs on most economies stay at the 10% …
Canadians shun the US, but will they spend at home? It’s been two months since Canadians began boycotting US goods and services in the wake of the aggression from President Trump over tariffs and his apparent desire to make Canada the 51 st state. The …
As we suggested in our Update from last weekend, it was only a matter of time before the increasingly adverse market reaction forced President Donald Trump to reconsider his plan to levy prohibitive reciprocal tariffs on all major trading partners. He was …
The extraordinary tariff chaos over the past week and associated fallout in the financial markets (see our coverage here ) have increased the chances that the damage to the UK from the US trade war will be larger and that inflation and interest rates will …
China rather than US trade big concern for Africa Africa’s direct damage from tariffs imposed by the US should be limited, but the indirect hit will be larger if global growth weakens, and financial spillovers materialise. After US President Trump dialed …
Stagflation on consumers’ minds The further fall in the University of Michigan Consumer Sentiment Index in April along with the rise in both one- and five-year inflation expectations, suggests that the tariff-related fears which had soured sentiment over …
Crisis is not over, but winners could emerge Most of Asia outside China breathed a sigh of relief when Donald Trump announced a 90-day pause on his “reciprocal” tariffs. However, the crisis for the region is far from over. Exports from Asia to the US …
China’s tit-for-tat retaliation in its rapidly escalating trade war with the US exerted some renewed pressure on equities and the dollar today, with bonds still buffeted by expectations of monetary easing and signs of market dislocation. Our base case …
Tariffs continue to buffet commodity markets Changes in US tariff policy continued to drive dramatic swings in commodity prices this week – Brent crude oil prices briefly hit a four-year low of $58.5pb in intraday trading on Wednesday. There is still a …
One step forward after two steps back and with a mountain ahead Following the favourable CPI and PPI data, we estimate that the core PCE deflator rose by a below-target 0.05% m/m in March. Even taking into account a likely upward revision to the rise in …
This week’s historic changes in US trade policy and the associated market fallout point in the direction of a weaker euro-zone economy, lower inflation and looser monetary policy. While US tariff policy has become extraordinarily volatile, we are assuming …
Inflation rises again, Copom to deliver a bit more tightening The jump in Brazil’s headline inflation rate to 5.5% y/y in March looks set to be followed by further increases towards 6% y/y over the coming months. Copom will almost certainly deliver a bit …
This week’s coalition agreement sets the stage for a substantial fiscal stimulus which should eventually get Germany’s economy growing again. But the new government will have to deal with new challenges from the US which mean there is unlikely to be much …
Argentina & the IMF – 23 rd time lucky? The IMF announced this week that it had reached a Staff-Level Agreement with Argentina on a 48-Month Extended Fund Facility totalling $20bn – if approved, it would be the 23 rd IMF deal in Argentina’s fraught …
At some point a partial rollback in tariffs is likely… The effective US tariff rate on China started the year at 11% (based on 2024 weights). It is now at 145%. Earlier this week we noted that tariff rates above 100% would cause Chinese exports to the US …
Opportunities for India amid tariff chaos All of our analysis of the latest twists and turns in the trade war – notably President Trump’s decision to postpone reciprocal tariffs (bar China) for 90 days – can be found here . Of course, things are subject …
This page has been updated with additional analysis since first publication. Surprisingly strong growth to prove short-lived, as rises in tariffs and taxes bite The surprisingly strong 0.5% m/m rise in GDP in February (consensus +0.1%, CE 0.0%) and the …
Australian economy should hold up As one might have expected, the fallout from Trump’s trade war continued to dominate the headlines this week. In short, a deep rout in US bond markets appears to have convinced Trump to pare back tariffs on several …
BoJ will stay on sidelines for now The relief that followed the suspension of reciprocal tariffs for all countries except China on Wednesday proved short-lived as bilateral tariffs between China and the US are still being ratcheted up to eye-watering …
Downside risks to the economy that prompted March cut have eased Meanwhile, underlying inflation pressures are far too strong for comfort Bank likely to pause next week, but we still expect further cuts this year Despite the economy facing the existential …
10th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
The US-China trade war and OPEC+’s surprise oil output hike has sent oil prices tumbling and are now below breakeven fiscal and external levels for the many Gulf oil producers, notably Saudi Arabia. If oil prices stay low or even fall further, governments …
