Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . The title of last week’s UK Economics Weekly was “Why …
16th June 2023
Despite faltering commodity prices and growing concerns around China’s economic rebound, most commodity currencies have held up reasonably well this year. But we continue to think that will change in the second half of 2023 as advanced economies slow …
More ground to cover The message from the ECB yesterday was decidedly hawkish. The Bank raised rates and more or less promised another hike in July, while the substantial upward revision to its inflation forecasts implied that further tightening could …
How low Fed and ECB policy rates will go, when they are eventually normalised, is at least as important for financial markets as the precise timings of the ends of tightening cycles, in our view. We think both central banks will cut deeper than investors …
Monetary easing alone won’t suffice Data published this week made it clear that the reopening recovery has stalled. Momentum weakened almost across the board in May, and the labour market began to soften again. Broad credit growth also slowed sharply . …
Encouraging news for the BoK The minutes of the Bank of Korea’s May monetary policy meeting, published this week, confirm that the central bank is becoming increasingly concerned about the growth outlook. One MPC member called the economy “sluggish” and …
EM goods exports held up relatively well at the start of the year but more recent data suggest that resilience is waning. With demand from advanced economies set to soften, the boost from auto exports likely to fade and gains in commodity prices likely …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22nd June. Register now . Latest inflation data support our rates cuts view The overarching message from our Q3 India Economic …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . The Bank of Japan left its monetary policy settings and assessment of the economy unchanged today. …
More easing coming in Vietnam Vietnam’s central bank today announced a further 50bps cut to the refinancing rate (to 4.5%) as it aims to support the struggling economy. With inflation on the way down and growth set to remain weak, further cuts are likely …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . Car exports catch up with other exports The external trade figures released this week suggest that …
More inaction to come As was widely expected, the Bank of Japan didn’t make any policy changes to either the short-term policy rate or Yield Curve Control (YCC) at Governor Ueda’s second meeting today. There was also no change to the Bank’s less upbeat …
Mortgage defaults will rise in Australia On Wednesday, the Council of Financial Regulators announced its support for the serviceability buffer set by the Australian Prudential Regulation Authority, reigniting an ongoing debate over the stringency of the …
Policymakers are likely to raise the policy rate by 50bp to 2% next Thursday, despite inflation falling sharply this year. And SNB Chairman Thomas Jordan’s view that Switzerland’s neutral interest rate might be around 2% suggests that there will be …
15th June 2023
We expect the BoJ to leave its policy settings unchanged on Friday US consumer confidence may have risen in June, but probably remained weak (15.00 BST) Sign up to our Drop-In to digest next Thursday’s BoE meeting here Key Market Themes While the ECB …
Although we no longer expect Gilts to outperform in local-currency terms, we do think they’re set to hold up better against Treasuries and Bunds over the rest of this year than they have done lately. Gilts have seen a renewed sell-off lately. The 10-year …
The ECB raised its deposit rate to 3.5% today and President Lagarde all but promised another hike next month. Our baseline forecast remains that interest rates will peak in July and stay there until the middle of next year but the chances of another hike …
Bank of England likely to raise interest by 25 basis points next Thursday, from 4.50% to 4.75% The recent persistence of inflation supports our view that rates will rise to a peak of 5.25% Rate cuts remain a distant prospect The recent persistence of …
Gains in sales & output both muted The 0.3% m/m increase in retail sales included a 1.4% m/m gain in the value of motor vehicle sales, which is very hard to square with the 6.5% m/m decline in light vehicle unit sales already reported by manufacturers. …
In our Focus of Sept ember 2020, we made some assumptions about how the pandemic would impact working from home in office-based sectors across Europe. Almost three years on, we look back at these to assess how they have held up and analyse the …
Sales benefitting from easing supply shortages The resilience of manufacturing sales suggests easing supply shortages are still supporting activity, with the transport sector reaping much of the benefits. Nevertheless, the surveys point to a weaker …
Could SAMA step in again to support credit growth? Interbank rates in Saudi Arabia are running at their highest since 2001 following the monetary policy tightening over the past year or so and, with lingering concerns over the banking sectors liquidity, …
Manufacturing stagnant, but better than the drop back we had expected The 0.2% m/m decline in industrial production in May was due to a 1.8% m/m drop in utilities output and a 0.4% decline in mining. Manufacturing output increased by 0.1% m/m, which …
Inflation edges up and set to soar in June Nigeria’s headline inflation rate rose to a fresh 17-year high of 22.4% y/y and the recent removal of fuel subsidies alongside yesterday’s devaluation of the naira mean that it is likely to surge to more than 30% …
The recent resilience of labour markets partly reflects a lag before higher interest rates feed through fully to economic activity. But employment has also been supported by the industry-led nature of the economic slowdown and by the fact that firms are …
Sales soft, despite suspicious increase in vehicle sales The 0.3% m/m increase in retail sales included a 1.4% m/m gain in the value of motor vehicle sales, which is very hard to square with the 6.5% m/m decline in light vehicle unit sales already …
ECB hikes and signals more to come The ECB raised interest rates by 25bp today, as expected, and the press release implies that we can expect at least one further hike in July. We might get a bit more colour in the press conference, but whatever hints we …
The tightening of labour markets across Latin America in the past year or so has fuelled rapid wage growth in many economies and wage growth is likely to remain uncomfortably high for a while yet. Against this backdrop, even as central banks kick off …
We think the Norges Bank will follow through on its plan to raise its policy rate by 25bp next week, to 3.50%, although there is an outside chance of a 50bp hike. Either way, we think it will push its interest rate forecast up, showing a peak in the …
Taiwan’s central bank (CBC) today kept its main policy rate unchanged (at 1.875%), but with the economy struggling and inflation set to fall further, we expect it to start cutting rates in September. The decision today was correctly predicted by 19 of …
Will the Bank of Japan respond to this inflationary surge? Why is India’s near-term looking less positive? Which Asian central bank will be next to cut rates? Following publication of our Q3 Economic Outlooks, our Asia economists held a 20-minute online …
EMs experienced a strong first quarter as GDP growth picked up almost across the board, but growth is likely to have slowed in most major economies in Q2 and we think it will remain soft in Q3. We don’t expect a substantive recovery in EMs until much …
Stage set for rate cuts later in the year Taiwan’s central bank (CBC) today kept its main policy rate unchanged (at 1.875%), but with the economy struggling and price pressures set to ease further, we expect the central bank to start cutting interest …
We will update the linked webpage with additional analysis during the next hour. Inflation edges up, but should resume slowdown over the rest of the year Saudi Arabia’s inflation rate rose a touch to 2.8% y/y in May, as an acceleration in non-food …
As expected, the Fed held its policy rate unchanged at between 5.00% and 5.25% today, but it made clear in the accompanying statement that pause was only to allow officials to “assess additional information and its implications for monetary policy”. In a …
This page has been updated with additional analysis and charts since first publication. We discussed the state of China’s post-zero-COVID recovery, what we're expecting in response from policymakers, and the implications for markets, in an online briefing …
Tight labour market will prompt more monetary tightening With the labour market still firing on all cylinders, we’re happy with our forecast that the Reserve Bank of Australia will lift the cash rate all the way to 4.85% by September. The 75,900 rise in …
Stagnant exports a prelude of downturn to come The trade deficit narrowed for an eighth consecutive month in May as both import prices and volumes continued to fall. “Core” machinery orders rebounded in April, but that still points to a fall in capital …
Struggling exports a prelude of downturn to come Export values inched up by just 0.6 y/y in May. That translated into a 3.1% m/m fall in seasonally adjusted terms. With export prices having risen by 2.0% m/m in May, volumes probably saw a sharp fall, …
Recession will drive RBNZ to cut rates by Q4 The contraction in Q1 GDP means that a recession is now well under way in New Zealand. Accordingly, we’re sticking with our forecast that the RBNZ will shift gears and start cutting rates before year-end. The …
Recession will drive RBNZ to cut rates by Q4 With New Zealand now in recession, we’re more confident that the RBNZ will start cutting rates by Q4 of this year itself. The -0.1% q/q contraction in production GDP was in line with what most, including …
Fed pauses as expected but, in hawkish move, eyes 50bp in additional rate hikes As expected, the Fed held its policy rate unchanged at between 5.00% and 5.25% today, but it made clear in the accompanying statement that pause was only to allow officials to …
14th June 2023
While headline CPI prints have been encouraging in recent months, policymakers will be nervous about the stickiness of core inflation. Average headline inflation in major advanced economies had dropped from 8.5% late last year to below 6% in April, and …
Florida and other parts of the Sunbelt (notably major cities in Texas) will likely face the most severe physical climate risk over the next 30 years. While this is unlikely to come as a major surprise, we don’t believe that this risk is being consistently …
The Fed is likely to “skip” a hike (Wednesday) ECB policymakers will probably raise their policy rates by 25bp (Thursday) We expect the PBOC to lower its 1-year MLF rate from 2.75% to 2.65% (Thursday) Key Market Themes Investors may be right about the …
Policy shift continues, but reasons to remain cautious Reports that the Central Bank of Nigeria has devalued the naira would, if confirmed, represent another positive policy step by the new Tinubu administration. But we retain our reservations this is a …
After dodging recession, economy made decent start to Q2 April’s activity data out of South Africa suggest that, after dodging a technical recession in Q1, the economy made a bright start to the second quarter. But external and domestic headwinds, …
Output will weaken despite increase in April The uptick in industrial production in April was mostly driven by strong growth in Ireland, with many other major euro-zone economies recording a fall in output. We expect industry to struggle this year as …
Resurgence in activity unlikely to last Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . The 0.2% m/m rise in …
