Filtered by Region: Europe Use setting Europe
If we are right to think that the Bank of England will begin lowering interest rates in June, the recent fall in mortgage rates should be sustained. The resulting drop in the cost of borrowing will boost demand as some first-time buyers who put their …
22nd January 2024
ECB policymakers still insist that monetary policy will remain tight throughout the first half of the year, if not longer. But we think that weakness in economic activity and lower inflation will prompt them to start cutting in April. And in contrast to …
10th January 2024
The run of softer-than-expected news on CPI inflation and wage growth means we now expect the Bank of England to cut interest rates sooner than before. Our forecast is that rates will be cut from 5.25% in June and will fall to 3.00% in 2025. The markets …
4th January 2024
Investors’ growing expectations that the US Fed will cut interest rates in March next year, as well as the recent soft UK wage and inflation data, have convinced investors that the Bank of England will start cutting interest rates sooner, in May 2024 …
19th December 2023
Inflation and interest rates will fall across Central and Eastern Europe in 2024 and an economic recovery is likely to take hold across the region. But the task of bringing inflation back to central banks’ targets will take time and we think that monetary …
Large downward shifts in interest rate expectations mean that mortgage rates will continue to fall for the next month or two. That will support some recovery in activity and means that price declines are behind us for now at least. As we expect the Bank …
18th December 2023
Property yields rose further in Q3, but with risk-free rates now falling back, we think they will flat-line in Q4. That will help stabilise capital values, but given historically narrow yield spreads, we doubt we will see much yield compression ahead. As …
The rebound in the activity data in November has convinced investors that the first interest rate cut will happen later, in August next year instead of June. Our view that core inflation will ease only slowly explains why we think interest rates won’t be …
28th November 2023
Our Emerging Europe Chart Pack has been updated with the latest data and our analysis of recent developments. Russia and Turkey had a strong first half to the year, but large policy tightening is likely to result in slower growth in 2024. Inflation will …
23rd November 2023
Europe Commercial Property Chart Pack (Q4 2023) …
16th November 2023
The ECB’s recent decision to leave interest rates on hold, and its associated communications, confirm that its tightening cycle is now almost certainly over. But despite inflation having fallen sharply, we believe the strength of the labour market, …
8th November 2023
The recent weakening in employment, easing in wage growth and signs that households are saving more and spending less have provided more confidence that higher interest rates are working. But we think that the restraints on UK labour supply and sticky …
London house prices have fallen by less than we anticipated, and stopped falling altogether in Q3. However, the high level of house prices compared to incomes should mean that higher mortgage rates weigh particularly heavily on demand from mortgaged …
30th October 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5% and 6% until mid-2024. While transactions volumes have only seen a modest decline so far, very weak …
23rd October 2023
Russia and Turkey had a strong first half to the year, but large policy tightening is likely to result in a sharp slowdown in 2024. Inflation pressures look set to keep building and further interest rate hikes lie in store. In contrast, downturns across …
19th October 2023
After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be minimal as …
We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Headline and core inflation should keep falling, but the labour market will remain tight, keeping wage growth …
6th October 2023
Slowing momentum in activity, the recent decline in employment, and the sharp falls in core CPI and services inflation in August are clear signs that higher interest rates are weighing more heavily on the economy. This strengthens our view that the mild …
4th October 2023
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
28th September 2023
Our Emerging Europe Chart Pack has been updated with the latest data and our analysis of recent developments. Russia and Turkey had a strong first half to the year, but large policy tightening is likely to result in a sharp slowdown in 2024. Inflation …
20th September 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% until mid-2024. While transactions volumes have only seen a modest decline so far, we …
19th September 2023
We think the euro-zone economy will go into recession in the second half of 2023, and the subsequent recovery will be weak due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline inflation in the euro-zone will …
15th September 2023
We’ve become a bit more confident in our forecast that the Bank of England will raise interest rates from 5.25% now to a peak of 5.50%, rather than much further, as higher interest rates appear to be weighing more heavily on activity. The peak in UK …
31st August 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% for the next 12 months. While transactions volumes have only seen a modest decline so far, …
25th August 2023
Russia, Turkey and Israel had a strong first half to the year, but growth across Central and Eastern Europe (CEE) remained depressed and we don’t expect a meaningful recovery until 2024. Inflation pressures are building in Russia and Turkey on the back of …
22nd August 2023
The slowdown in rent growth in the first half of this year is likely to persist given the weak economic backdrop. Although the property price correction has slowed, we think stretched valuations will push yields higher and drive further capital value …
18th August 2023
We think the euro-zone economy will contract in the second half of 2023, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline inflation in the euro-zone will continue …
3rd August 2023
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
1st August 2023
Russia and Turkey have had a strong first half of the year, but growth across Central and Eastern Europe (CEE) remains depressed and we don’t expect a meaningful recovery until 2024. While inflation pressures are building in Russia and Turkey and further …
26th July 2023
The further increase in mortgage rates to around 6% has left affordability particularly stretched in London. On top of the shift to remote working, which has allowed buyers to consider more affordable areas, that is likely to mean that buyer demand in …
10th July 2023
We think the euro-zone economy will remain in recession over the coming quarters, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline euro-zone inflation will …
7th July 2023
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
6th July 2023
The risk is that interest rates rise above our current peak forecast of 5.25%. Persistent core inflation has driven up UK market interest rate expectations and has lifted the 2-year gilt yield above its peak after the “mini-budget”. But we think there is …
3rd July 2023
Investors generally revised down their interest rate expectations across Central and Eastern Europe (CEE) over the past month, partly reflecting weaker-than-expected inflation prints and more dovish communications from central bankers. Investors are now …
28th June 2023
Higher mortgage rates have not only priced many buyers out of the market altogether, but also reduced the size of mortgage those still able to buy can take out. (See Chart 1.) The latest surge in mortgage rates to almost 6% means that, for the same …
The euro-zone has fallen into recession, albeit only by the finest of margins – the economy contracted by 0.1% q/q in both Q4 last year and Q1 this year. The consensus view is that the worst is now behind us and that growth will accelerate, presumably in …
9th June 2023
Growing evidence that UK price pressures are becoming increasingly domestically generated has driven up market interest rate expectations and at one point pushed the 10-year gilt yield up to 4.38% in late May, close to its peak seen after the …
1st June 2023
There has been further evidence over the past month that resilient export growth, weak domestic demand and lower energy prices have helped to improve current account positions across Central and Eastern Europe this year. This has been particularly …
31st May 2023
In contrast to the rest of Europe, CEE yields not only rose, but increased more sharply in Q1 than the previous quarter. (See Chart 1.) Strong rental growth cushioned the blow to all-property capital values, but that did not prevent a partial reversal …
24th May 2023
The larger than anticipated rebound in mortgage approvals in March and a slowdown (or even partial reversal) of house price falls suggested that the housing market downturn may have ended much earlier than we anticipated. The unwinding of some of the …
19th May 2023
Capital value falls slowed in Q1 as the surge in euro-zone all-property yields cooled. But, with rent growth decelerating across all sectors, the increase in yields was still enough to drive another 4% q/q fall in capital values. (See Chart 1.) Although …
April’s inflation data provided little sign that underlying price pressures are easing. Admittedly, the core rate edged down from 5.7% y/y in March to 5.6%, which was the first decline in 15 months. But that was entirely due to a decline in core goods …
5th May 2023
We’ve been surprised that the rise in Bank Rate from 0.10% in November 2021 to 4.25% hasn’t triggered a contraction in GDP at the start of this year. Indeed, while higher interest rates were a further drag on net mortgage lending in March, the …
4th May 2023
All-property yields have stabilised since the start of the year and alongside continued rental growth, that means total returns were more-or-less flat during Q1. (See Chart 1.) But, while the worst is over, the economy is still set for a mild recession, …
28th April 2023
We think disappointing global growth will be a headwind for “risky” assets in developed markets (DMs) during the second half of this year. So far, this month has been a tale of two halves . Over the first part of the month, investors looked like they were …
27th April 2023
Inflation has finally turned a corner. Headline inflation rates fell in March in all 14 economies that we cover, the first synchronised drop in more than a decade. This partly reflects base effects resulting from the sharp rise in prices after the war in …
26th April 2023
EM central banks have, in general, remained in hawkish mood over recent weeks. Tightening cycles have continued in Mexico, Colombia and South Africa in response to high inflation, while policymakers in Egypt and Pakistan among others have raised …
24th April 2023
We think that the recent stress in the banking sector has had little impact on the outlook for monetary policy in the euro-zone. While there were significant outflows of bank deposits in the five months ending in February, that was due to higher …
11th April 2023
The Land Registry report that London house price growth slowed to 3.2% y/y in January and more timely data based on mortgage approvals show a 2.2% y/y fall in prices in Q1. The detail suggests that affordability is becoming the primary driver of pricing. …
6th April 2023
Recent data suggest the economy’s resilient end to 2022 was sustained at the start of this year. But while the worst of the falls in real household incomes are in the past, we still think around two-thirds of the drag on real activity from the rise in …
5th April 2023
