Looser fiscal policy to send cost of borrowing soaring August’s money and credit figures suggest that in August consumers were starting to adjust their borrowing and savings behaviour in response to higher inflation. The £1.1bn rise in consumer credit …
30th September 2022
RBI continues to frontload tightening The RBI hiked the repo rate by 50bp for the third meeting in a row today, taking it to 5.90%. Further rate hikes are likely over the coming months but, with inflation set to slow, we think the central bank will now …
Smaller economy makes Chancellor’s fiscal plans look even more untenable The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only …
Industry and services both take a hit The surveys suggest that China’s economy continued to lose momentum in September, with the global downturn weighing on exports and virus disruptions dealing a fresh blow to services activity. While the latter should …
Industry to struggle while retail sales outlook improves Both industrial production and retail sales growth quickened in August and while the rebound in industrial production will lose steam, retail sales will continue to expand as the record virus wave …
Labour market will continue to tighten The unemployment rate dropped to a four-month low in August and the continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. The labour force dropped by 70,000 last …
Revisions fail to change picture of economic weakness The annual revision to the national accounts data were more downbeat than we had expected as they show that the previous big gap between GDP and GDI has been narrowed mainly by the latter being revised …
29th September 2022
Growth slowing but economy doing better than feared Strong gains in the natural resource sector will prevent the economy from contracting this quarter but, with the business surveys deteriorating and the global economy facing recession, it looks …
Rate cuts on the horizon The Czech National Bank (CNB) left its policy rate on hold, at 7.00%, for a second consecutive meeting today. With inflation unlikely to rise much further and the economy on the verge of recession, we think interest rates will …
Inflation hasn’t peaked yet The inaugural release of Australia’s Monthly CPI Indicator showed that inflation eased a bit in August, though we still expect a surge in utilities prices to lift inflation closer to 8% this quarter. The Australian Bureau of …
Mini-budget forces BoE to step in to prevent financial crisis The continued fallout this morning from the Chancellor’s mini-budget has forced the Bank of England to step in to avoid the early stages of a financial crisis. It has postponed its plan to sell …
28th September 2022
Thailand: central bank may need to accelerate the pace of tightening The Bank of Thailand hiked interest rates today by 25bp (to 1.0%), but with inflation elevated and the currency coming under further downward pressure, we think the central bank will …
Resilience in consumption will encourage RBA to continue tightening aggressively The eight consecutive rise in retail sales in August will convince the RBA to hike rates by another 50bp at next week’s meeting. The 0.6% m/m increase in retail sales values …
Orders data suggest equipment investment holding up, for now The 0.2% m/m fall in durable goods orders in August wasn’t as bad as we expected and suggests that business equipment investment is, for now at least, still holding up in the face of surging …
27th September 2022
Govt and BoE do the bare minimum, markets may yet force the issue It remains to be seen whether today’s statement by the government and the Bank of England will be enough to ease the markets’ fears about the government’s fiscal policy. The initial …
26th September 2022
Slump in Ifo signals Germany in recession The further big fall in the Ifo Business Climate Index (BCI) in September adds to the gloom surrounding the German economy as worries about energy prices and declining household real incomes dent business …
Right-wing victory not immediate concern, but long-term risks remain The widely-anticipated right-wing coalition victory in Italy’s general election does not pose an immediate risk to bond markets. However, the fact that the country will be governed by a …
BoE needs to get on front foot with big rate hike The further fall in the pound in early trading means that we’ve now reached the point where the Bank of England needs to step in in order to regain the initiative. There are a couple of ways it could do …
Post-virus services recovery underway September’s flash PMIs indicate yet another slowdown in the manufacturing sector, with the manufacturing PMI falling from 51.5 in August to 51. Demand weakened again but this appeared to be mostly caused by domestic …
Chancellor gambles everything on growth The Chancellor claimed that this was a budget for growth. But unless the Chancellor’s gamble pays off and the government’s fiscal policy boosts GDP growth by 0.5-1.0ppts per annum, the risk is that once the …
23rd September 2022
PMIs point to recession and still strong price pressures September’s PMI surveys are consistent with a small decline in euro-zone GDP in Q3. And the increases in the prices indices suggest that inflation is not yet at a turning point. The further fall in …
Govt’s fiscal plans to force the Bank to raise rates to 4.00% The 50 basis point (bps) rise in interest rates today was partly driven by the government’s extraordinary fiscal plans that are expected to be confirmed in a not-so-mini-budget tomorrow. It’s …
22nd September 2022
CBRT bows to political pressure with another 100bp cut Turkey’s central bank continued to bow to President Erdogan’s wishes today as it delivered another 100bp interest rate cut, to 12.00%, even though inflation breached 80% y/y in August. Further cuts …
Japan’s Ministry of Finance has intervened in support of the yen today, with the USD/JPY rate dropping from near 146 to ~143 at the time of writing, a ~2% appreciation in the space of an hour. Today’s decision effectively draws a line in the sand at 145 …
Further tightening to be gradual Taiwan’s central bank (CBC) today raised its main policy rate by 12.5bp (to 1.625%), and with inflation easing and growth set to struggle, further tightening is likely to be gradual. Today’s move came as little surprise …
More tightening to come Even after today’s widely-expected 50bp rate increase by the Norges Bank, taking the policy rate to a 10-year high of 2.25%, the Bank has not finished tightening yet. The policy statement accompanying the rate hike said that “the …
New interest rate forecasts for Indonesia Bank Indonesia (BI) today raised interest rates by a further 50bp (to 4.25%) and signalled that further tightening was likely as it aims to clamp down on rising inflation. While a rate hike today was never in …
SNB adds to the crop of bumper rate rises The Swiss National Bank continued its tightening cycle today, delivering a 75bp rate hike as we expected. Further rate rises are likely at the next couple of meetings, but we think that investors have got ahead of …
Further hikes likely in the near term, but tightening cycle to be over by end-2022 The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bp (to 4.25%), and signalled that further hikes were likely in the near term. The …
Bank of Japan won’t tighten even as inflation rises well above target The Bank of Japan kept policy loose and retained its easing bias today and we think it won’t tighten policy even as underlying inflation reaches its 2% target. As widely anticipated, …
A hawkish 75bp hike The Fed may have stuck to the script by delivering a 75bp rate hike at its September meeting, but it still managed to deliver a hawkish message with the accompanying projections, which imply an additional 75bp hike in November and a …
21st September 2022
Borrowing trend still worrying, despite recent improvement The public finances figures brought some cheer for the new Chancellor, Kwasi Kwarteng, after the run of fairly poor outturns seen so far this fiscal year. That said, the government’s big fiscal …
Headline and core both moving in right direction The larger-than-expected falls in headline and core inflation in August lend some support to our forecast that the Bank of Canada will drop down to a 25 bp hike in October, particularly with the labour …
20th September 2022
Inflation in final stages of ascent Headline inflation jumped in August to yet another high since 1991 and it still has a stretch higher to climb. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. Headline …
Easing cycle entering a slower phase The decision by Russia’s central bank to cut the policy rate by a smaller 50bp, to 7.50%, confirms that, having already lowered rates sharply since April, the easing cycle is entering a slower phase. The decision was …
16th September 2022
Downward momentum gathering The 1.6% m/m drop in retail sales volumes in August (consensus -0.5%, CE -2.0%) supports our view that the economy is already in recession. Retail sales will probably continue to struggle as the cost of living crisis hits …
Economy set to remain weak due to zero-COVID and property woes China’s economy held up slightly better than anticipated last month, but momentum still weakened relative to July amid renewed virus disruptions and factory closures due to power shortages. …
Manufacturing struggling under global malaise Manufacturing output edged up by 0.1% m/m in August, as notable gains in petroleum & coal, machinery and electronics were partly offset by a drop back in motor vehicles and parts. With global manufacturing …
15th September 2022
Consumers reluctant to spend gasoline savings The stagnation in underlying retail sales in August suggests that plunging gasoline prices are not providing any significant boost to real consumption. But that could change over the coming months as consumer …
Unemployment rate may yet fall a bit further While the first rise in Australia’s unemployment rate since last year’s Delta lockdown should be followed by a renewed fall, it will encourage the Reserve Bank of Australia to slow the pace of tightening to …
Deficit to shrink as import prices ease Japan’s trade deficit widened to yet another record high in August, but the peak shouldn’t be far away now. Commodity prices continue to ease, and the yen should end the year stronger than its current lows, which …
GDP growth will slow sharply as higher interest rates bite Despite a large rise in Q2, New Zealand’s GDP remains well below its pre-virus trend and that shortfall will widen as the surge in interest rates weighs on activity. The 1.7% q/q rise in …
Inflation has not peaked yet The easing in CPI inflation from 10.1% in July to 9.9% in August (consensus forecast and CE 10.2%, BoE 9.9%) is a bit of a relief after yesterday’s US CPI shocker, but overall and core UK CPI inflation haven’t peaked yet. As …
14th September 2022
Business investment to remain strong this quarter Although the surge in “core” machinery orders growth in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming …
Only faint signs of a loosening in the labour market The further fall in the unemployment rate to a new multi-decade low of 3.6% in July together with the extra pick-up in wage growth will increase the pressure on the Bank of England to deliver another 50 …
13th September 2022
Rise in headline rate paves way for another 50bp hike this month The rise in Indian CPI inflation in August to further above the RBI’s 2-6% target range should ensure that the central bank delivers another 50bp hike to the repo rate (to 5.90%) in its …
12th September 2022
Inflation will remain below government’s ceiling this year Consumer price inflation fell in August and remains below the PBOC’s preferred ceiling of 3%, leaving room for the Bank to ease policy further. Meanwhile, producer price inflation declined to its …
9th September 2022
Lower inflation and smaller recession, but higher interest rates and more govt debt It seems that the size and structure of the Prime Minister’s policy to freeze utility prices is broadly as expected and will reduce inflation and limit the size of the …
8th September 2022
Further tightening to be “measured and gradual” Malaysia’s central bank (BNM) today raised its main policy rate by 25bp (to 2.5%), and with inflation likely to remain elevated, further hikes are likely. Today’s move came as little surprise and was …
