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Riksbank Board increasingly finely balanced Like any good double act, Riksbank Governor Ingves and Deputy Governor Flodén stuck to the same script when they jointly addressed the Bank’s Finance Committee on Tuesday. Both reiterated the view that the …
22nd October 2021
Core inflation still subdued While global financial markets are obsessing over the possible rebirth of inflation, there are precious few signs that it is about to take off in Scandinavia. We learnt this week that the headline rate rose in both Norway and …
15th October 2021
Erdogan playing with fire in push for rate cuts After putting the final nails in the coffin of the Turkish central bank’s credibility with last month’s surprise interest rate cut, the grave started to be dug this week with the firing of three MPC members. …
Perhaps the most significant event of the past week came as markets opened on Monday morning. In response to two hawkish interviews by members of the Monetary Policy Committee (MPC) in the weekend papers – one by Governor Bailey and another by Michael …
Higher oil and gas prices… lower inflation? The rollercoaster ride in European gas prices continued this week, but the big picture is that they remain very high. Meanwhile, oil prices have continued to climb. We think that this will contribute to a bigger …
Moves in wholesale natural gas and electricity prices have continued to dominate this week in the euro-zone, with the price of European natural gas having doubled over the past month and currently trading almost 12% higher than it was just a week ago. …
8th October 2021
Halloween came early this year in Sweden It might not be Halloween until the end of the month but the 3.8% m/m drop in Sweden’s GDP Indicator in August (released on Wednesday) was a horror show in its own right. (See here .) (Incidentally, the fact that …
Poland-EU tensions crank up a notch The decision this week by Poland’s Constitutional Court to rule that some EU laws are in conflict with the Polish Constitution has sent shockwaves through Europe. The ruling gets to the heart of the conflict over the …
Truth be told, neither Boris Johnson’s nor Rishi Sunak’s speeches to the Conservative Party Conference this week contained anything new on the economic front. Instead, the most notable development came in an interview to the BBC in which PM Johnson …
CEE: loose fiscal policy set to persist in 2022 Government budget drafts approved for 2022 this week in Czechia and Poland and further details of social support in Hungary suggest that fiscal policy will remain supportive of growth in Central Europe and …
1st October 2021
The 3.4% euro-zone inflation rate recorded in September (up from 3.0% in August) is probably not the peak. (See here .) Surging European gas prices, which have risen by more than twenty-fold from last year’s lows, prompted us to revise up our forecasts …
Clouds are darkening over the outlook for the UK economy. A combination of broadening shortages, the fuel crisis, less fiscal support and the risk of higher interest rates will make it difficult for the UK economy to perform as well as its European peers. …
United façade at the Riksbank set to be tested Against the backdrop of the recent hawkish shifts by the US Fed and the Bank of England – and the start of hikes in Norway – the release of the minutes from the Riksbank’s last policy meeting underline that …
Appetite for further monetary tightening wanes Central banks have started to slow tightening cycles in recent weeks and, in Turkey’s case, begin cutting interest rates. As inflation pressures ease, this pattern is likely to continue. But the Czech …
24th September 2021
There are two reasons why we now think the Bank of England’s Monetary Policy Committee (MPC) will hike interest rates in 2022 rather than in 2023. First, underlying wage growth and inflation expectations have risen by more than we expected. These are …
This week, some of the world’s major central banks, from the US Fed to the Bank of England , hinted that they will be shifting towards tighter monetary policy in the months ahead. Indeed, the Norges Bank this week hiked its policy rate, the first G10 …
The phoney interest rate ‘war’ in Norway is over Norwegian policymakers would make terrible poker players because they have a habit of telling you what they will do and do not bluff. Accordingly, having finally started the long-awaited and well-signalled …
Energy prices adding to inflationary pressures The recent surge in European gas and coal prices will push headline inflation further above central bank’s targets in most countries in the coming months. European coal and natural gas prices have surged over …
17th September 2021
On the back of the surge in inflation from 2.0% in July to 3.2% in August and the blistering increases in wholesale gas and electricity prices, investors are now pencilling in a rise in Bank Rate from 0.10% to 0.25% in Q1 2022 and to 0.50% at the start of …
Rising inflation eating into spending power Data published this week highlight the twin drags of weak pay growth and rising inflation to households’ real incomes. We expect inflation to fall sharply next year, but the risks to our forecast are to the …
Rule of law dispute escalates in Poland The Poland-EU dispute over the rule of law reached a breaking point this week and raises the threat of potential fines and a significant delay to receiving EU recovery funds in the coming months. This week brought …
10th September 2021
The stalling in the economic recovery in July doesn’t mean the recovery is over. But the 0.1% m/m rise in GDP in July revealed on Friday (see here ) does illustrate that the recovery has entered a slower and more challenging phase. To some extent this was …
Norway is a riddle, in a mystery, inside an enigma Norwegians will go the polls in parliamentary elections on Monday in what has been dubbed the “climate election”. The run-up to the vote has been dominated by a debate over the appropriate speed at which …
For most of the pandemic period, policymakers have been worrying that there will be too much unemployment. But now the fear is that there aren’t enough workers to fill all the jobs! Admittedly, there are still some lingering concerns that when the …
3rd September 2021
The 3.0% inflation rate recorded in the euro-zone in August is the highest for a decade but it will not be the peak for this year. We expect the headline rate to reach over 3.5% in the coming months. And in Germany, the national CPI inflation rate could …
Mamma Mia! ABBA are back! Of course, it could just be a coincidence that ABBA announced that they are re-forming the day after we released a Focus with a shameless ABBA pun in the title, but we’d like to think otherwise. We will resist the temptation to …
Poland’s inflation surge splits opinion at the NBP The surge in Polish inflation to a fresh two-decade high in August has shown no sign of prompting a more hawkish shift at the central bank. But with inflation likely to remain stuck above target for some …
Russia dips into the pre-election playbook Russia’s government this week unveiled new lump-sum payments to pensioners and military personnel ahead of September’s election, strengthening our above-consensus views on inflation and rates. The government will …
27th August 2021
This week saw the release of the first euro-zone business surveys for August, which provided reassurance that the region’s economy continued to grow strongly this month despite concerns about the Delta variant. Although the euro-zone Composite PMI and the …
The list of anecdotal reports of labour and product shortages has grown ever longer in the past week and now includes McDonald’s milkshakes and various items at Greggs. These add to the broadening range of sectors, such as hospitality, wholesale and …
July’s fall in CPI inflation from 2.5% in June to 2.0% was the first time since March that inflation has surprised the consensus on the downside. But it probably won’t have provided the Monetary Policy Committee (MPC) with much relief, for two reasons. …
20th August 2021
Norges Bank gets its nose in front The Norges Bank’s “interim” August policy announcement on Thursday did not upset the form book, and the Bank left interest rates on hold at a record low of zero once again. (See here .) The Bank said that economic …
Activity continuing to increase The latest national accounts data confirmed this week that GDP grew by 2% q/q in the second quarter (see here ), but that’s old news now. Timelier data suggest that the economy has continued to grow, with only limited …
Wrapping up a week of instability in Poland Poland's political scene was thrust into uncertainty this week after President Duda dismissed Jaroslaw Gowin, the leader of one of the coalition partners, from his duties and his Agreement party pulled out of …
13th August 2021
The GDP figures for June, which showed that the economy grew by 1.0% m/m after the 0.6% m/m rise in May, was an impressive result given the surge in COVID-19 cases in that month. (See here .) But we warned a couple of weeks ago that the “pingdemic”, which …
With six weeks left until Germany’s federal elections, on 26 th September, opinion polls suggest that things have got more complicated. In brief, and with apologies for the alphabet soup, they show that support for the CDU/CSU has declined compared to …
All eyes on the north Atlantic The world tends to only take notice of Iceland after spectacular events, be it the implosion of its banking sector or the explosion of a volcano . The country has been thrust into the spotlight once again recently following …
NBP’s doves losing their nerve… A slew of comments from policymakers at the National Bank of Poland (NBP) this week suggest that the probability of the central bank delivering a rate hike before the end of this year has increased. Flash July CPI data …
6th August 2021
We learnt three things from this Thursday’s Bank of England policy decision and were left in the dark on two key issues. As a result, some of our forecasts for money market rates and gilt yields have changed. What we learnt First, the Bank of England …
It was a week of more generally good news for the euro-zone economy. The risk that the Delta variant would halt the recovery in its tracks is receding rapidly. Daily infection numbers are now falling consistently in Spain and the Netherlands, which were …
A macroeconomist’s take on the Olympics Rather than just enjoying the spectacle of Norway’s Karsten Warholm storming to victory in the 400m hurdles this week, we found ourselves frustrated by the emphasis that sports reporters put on nominal rather than …
CBRT conceding the fight against inflation? Turkey’s central bank raised its inflation forecasts in its latest Inflation Report and Governor Kavcioglu’s comments suggest that policymakers are unlikely to step up to the plate in the fight against …
30th July 2021
This week brought further signs that the “pingdemic” weighed on economic activity in July. (See here .) The number of people having been asked by the NHS App or Test & Trace system to self-isolate has almost doubled in the past three weeks, reaching 1.3 …
Data published today revealed that the euro-zone economy grew more rapidly than anticipated in Q2, with GDP rising 2.0% q/q whereas the consensus and our forecast were both for 1.5%. As we pointed out earlier , the upside surprise was due to very strong …
The ECB followed up on its new strategy this week by raising the bar for future interest rate hikes. (See here .) The key change is that the Governing Council now says it will leave policy rates at current rates or lower until it sees inflation reaching …
23rd July 2021
Next year’s games will be better for Team N&S While the Swedish women’s football team humbled the USA in the first game of their Olympic campaign this week, Switzerland and the Nordic countries don’t tend to excel in the summer games. Indeed, as shown in …
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
16th July 2021
Earlier today we published our European Economic Outlook , in which we revised up our euro-zone GDP growth estimates this year and next, to an above-consensus 5.0% and 4.5% respectively. The rebound will be faster in the core countries than in the …
You guessed it: no change at the SNB The Swiss National Bank is nothing if not consistent. It has left interest rates unchanged since 2015 and is not shy about using the “copy and paste” function in its press releases. So it seems only natural that …
In response to the jump in CPI inflation from 2.1% in May to 2.5% in June (see here ) and yet more signs that the labour market is bouncing back (see here ), two members of the Monetary Policy Committee (MPC) this week indicated that policy will need to …
