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 …
Lower iron ore price to weigh on export values The biggest fall in Australia’s trade balance in history partly reflects bad weather that held back coal exports, but the recent fall in the iron ore price hasn’t fully fed through so export values will …
Bank gives little away as it hikes by 75 bp The Bank of Canada remains concerned about the risk of high inflation expectations becoming entrenched but, with the economy now slowing sharply and inflation easing by more than the Bank expected, we still …
7th September 2022
NBP brings its tightening cycle to a close The National Bank of Poland (NBP) slowed down the pace of its tightening cycle again today with a 25bp interest rate hike to 6.75%, and with policymakers seemingly more concerned about the deteriorating economic …
Export volumes rose by more than we expected in July but, with the fall in import volumes painting a weak picture of domestic demand, it still looks likely that GDP growth will slow sharply this quarter. The 2.8% m/m fall in export values in July was the …
Trade deficit narrows as consumer imports slow The trade deficit narrowed to a nine-month low of $70.7bn in July, from $80.9bn, driven by a sizeable drop back in consumer goods imports, although almost half that decline was due to lower imports of …
No respite in sight for German industry German industrial output fell a bit less than anticipated in July but that was mainly due to a rebound in construction activity and there were signs that manufacturing production is starting to be hit hard by the …
Exports drop back amid cooling global demand Export volumes fell by the most since March in a sign that slowing global growth and the normalisation of consumption patterns is starting to weigh on demand for Chinese goods. In contrast, there was a slight …
GDP growth will slow sharply over coming quarters The 0.9% q/q rise in Australia’s Q2 GDP was broadly in line with the RBA’s expectations and won’t move the needle in terms of the size of the next rate hike. That result was a touch below the analyst …
ISM surveys consistent with solid growth in Q3 The slight rise in the ISM services index to 56.9 in August, from 56.7, strikes a further blow against the idea the economy is close to recession, with a weighted average of the two ISM surveys consistent …
6th September 2022
RBA will slow pace of tightening before long While the RBA hiked rates by 50bp today as widely anticipated, it dropped some hints that further tightening will be less aggressive. The Bank’s decision to hike the cash rate by 50bp was correctly anticipated …
GDP growth to slow further over coming quarters The partial GDP data released over the last couple of days suggest that GDP growth was much weaker last quarter than we had anticipated. With the housing downturn now starting to bite, it will slow to a …
Real wages to continue shrinking but spending will be supported by savings Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall …
OPEC+ announced a 100,000-barrel per day cut to production in October at its regular monthly meeting today. The cut is not a complete surprise as there have been mutterings for a few weeks, notably from the Saudi energy minister, Abdulaziz bin Salman al …
5th September 2022
Fiscal plans of Truss may limit depth of recession, but result in higher interest rates The news that Liz Truss will become the new Prime Minister tomorrow suggests that a big loosening in fiscal policy will limit the depth of the recession, but that …
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month, rather than a …
2nd September 2022
Rebound in new orders provides some reassurance The stabilisation in the ISM manufacturing index at 52.8 in August, unchanged from July, provides some further reassurance that the economy is not yet sliding into recession. While the details suggest …
1st September 2022
More signs that growth has stalled The larger-than-expected drop in Caixin manufacturing PMI was more significant than the slight rise in the official PMI , suggesting that downward pressure on industry intensified last month. There is more pain on the …
Capital spending to rebound over coming quarters The continued rise in machinery and equipment investment in Q2 won’t offset a plunge in construction investment, but firms’ optimistic capital plans suggests this will prove short-lived. Today’s capital …
Growth set to slow sharply this quarter The weaker-than-expected second-quarter rise in GDP as well as the preliminary estimate of a small fall in output in July confirm that the economy is slowing sooner than the Bank of Canada predicted. Nevertheless, …
31st August 2022
New ADP index provides little insight into official payrolls The ADP’s revamped employment report showed private payrolls rising by a muted 132,000 last month, but with only limited details as to how they arrived at that number, we have little confidence …
