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Jump in money supply won’t worry the SNB Swiss money supply data for November, released earlier this week, showed that M3 increased at its fastest year-on-year pace since February. (See Chart 1.) This could, at least in theory, encourage policymakers to …
22nd December 2022
Hungary strikes last minute deal, but risks remain The EU’s approval of Hungary’s COVID-19 recovery plan this week is a welcome development for Hungary’s economy and financial markets, but it won’t immediately transform the near-term outlook. On Monday, …
16th December 2022
ECB a long way from pivot… Thursday’s ECB meeting has sparked significant turmoil in euro-zone financial markets. Ten-year Bund and BTP yields recorded some of their largest one-day rises in the past decade and are up ~25bp and ~50bp respectively from …
We think the three main economic themes of 2023 will be falling inflation, peaking interest rates and recession. We explained these forecasts in detail in our recent UK Economic Outlook , which carried the title a “A tough year”. (See here .) In short, …
Hungary’s fuel crisis reaches breaking point Hungary’s government was forced to abandon its cap on petrol and diesel prices earlier this week as fuel shortages intensified across the country. The cap had been introduced at the end of last year and has …
9th December 2022
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
2nd December 2022
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
25th November 2022
The most eye-catching statistic published this week was the net migration into the UK of 504,000 people in the year to June 2022. That’s a record high. It continued the recent trend of net inflows from the non-EU and net outflows to the EU. And it …
Official data to fall into line with surveys We doubt that the recent strength in some of the official euro-zone activity data will last. GDP posted a small expansion in Q3, whereas both we and the consensus had expected zero growth. (See here .) And …
18th November 2022
US CPI number triggers euro-zone rally Euro-zone financial markets rallied yesterday after US inflation data for October came in lower than expected. Immediately after the data release, Bund yields fell by around 15bp and the euro and DAX rose by 2-3%. …
11th November 2022
NBP divided on the length of its tightening cycle The divergent views among policymakers at the National Bank of Poland (NBP) make it increasingly difficult to tell whether the central bank’s tightening cycle is coming to an end. We expect the NBP to …
4th November 2022
ECB Governing Council members had a busy week, with just under half of them giving speeches or interviews on the outlook for monetary policy. There are four key takeaways from their comments. First, rates will rise further. All policymakers who spoke …
Falling inflation may keep SNB in check The reductions in headline and core inflation in Switzerland in October confirm that inflation has now passed its peak, and both measures look set to continue on a downward path next year. (See here . ) We don’t …
The reports that the Chancellor, Jeremy Hunt, will unveil in his Autumn Statement on 17 th November a fiscal tightening of up to £50bn by 2026/27 (1.7% of GDP) suggest that after a period in which fiscal policy has provided the economy with support, it is …
28th October 2022
In general we think the data released this week are consistent with our three key calls on the euro-zone. The first is that the region is heading for a deeper recession than most anticipate. Our forecast is for a 1.8% decline in GDP in 2023 is below both …
We published our Q4 Nordic & Swiss Economic Outlook this week. The key points are that we expect Switzerland, Sweden and Denmark to suffer recessions, while Norway might escape with only a sharp slowdown. But inflation will remain high in the Nordics and …
The main message from our latest quarterly Euro-zone Economic Outlook , which we published this week, is that we now expect the euro-zone to experience an even more extreme case of stagflation. We now forecast both headline and core inflation to average …
21st October 2022
Governing Council members were out in force this week giving their euro cent’s worth on the monetary policy outlook. Sifting through the various comments, there are three main takeaways. First, even the most hawkish are not prepared, in public at least, …
14th October 2022
A raft of economic data for Sweden published this week added to the evidence that its economy is slowing and, like most of Europe, heading for a recession this winter. The 1.3% fall in Statistics Sweden’s monthly GDP indicator in August was the biggest …
7th October 2022
Strong case for even bigger rate increase The case is growing for the ECB to step up the pace of tightening further at its meeting in three weeks. The account of last month’s ECB meeting, published on Thursday, showed that policymakers expect to keep …
Data released this week brought yet more evidence that the euro-zone is heading for recession. The energy crisis was already weighing on industry in July, with output in the sector contracting sharply, especially among energy-intensive producers. And …
16th September 2022
Drought conditions add to woes By far the biggest problem afflicting Europe’s energy markets is Russia’s decision to cut its natural gas exports, but extreme weather conditions are making things worse. Water levels on the Rhine are already close to their …
12th August 2022
Activity turning downwards The data published this week add to the evidence that a recession is just around the corner. Retail sales fell sharply in June and are on a clear downward trajectory. Admittedly, that might partly be because households are …
5th August 2022
According to Google it’s “kanariefugl i kulminen” Against the backdrop of heightened tensions between China and Taiwan, and ongoing question marks over whether the US economy is in recession or not, it’s fair to say that the precipitous plunge in the …
A tournament to forgot for Nordic football fans Of course, Sweden measures up well against the UK in many ways, including on the economic and political fronts. After all, the estimated 1.4% q/q rise in Swedish GDP in Q2 (data released on Thursday) is in a …
29th July 2022
Almost exactly ten years on from Mario Draghi’s “whatever it takes” speech, the ECB this week had another attempt at keeping a lid on peripheral bond spreads as it kicked off its first tightening cycle in more than a decade with a bigger-than-expected …
22nd July 2022
Danish policymakers won’t be rushed Given that Denmark’s Nationalbank operates an exchange rate peg with the euro, it was no surprise to see it mirror the 50bp rate hike by the ECB on Thursday afternoon. If anything, the only surprise was that it took …
The apparent race to the bottom on taxes slowed this week with the candidates that had pledged to loosen fiscal policy the most if they became Prime Minister either withdrawing from the contest or being eliminated in the first two rounds of voting by MPs. …
15th July 2022
Monday went from bad to worse in Norway Monday proved a day to forget for Norwegian economists and football fans, with another increase in core inflation in the morning compounded by an 8-nil drubbing by England in the evening. Admittedly, the increase in …
Energy rationing now a growing downside risk Governments ramped up efforts this week to prevent possible shortages of energy during the winter. But with the threat of lower Russian gas flows increasing, there is a growing risk of energy rationing that …
New forecasts We published our quarterly European Economic Outlook this week, which contains all of our latest forecasts for the euro-zone, its member states and the ECB. In this Weekly , we will highlight three of our key calls on the economic outlook. …
MNB pulls out all of the stops to support the forint Hungary’s economy is now under substantial pressure. The forint has slumped and interest rates have been hiked aggressively. The only way through this is to accept the pain of a weak currency and …
8th July 2022
Headwinds to strengthen in H2 The 0.7% m/m increase in Statistics Sweden’s GDP Indicator in May (data released on Wednesday) was stronger than we had expected and means the economy is all but certain to have grown more quickly in Q2 than the 0.6% q/q rise …
At time of writing, the euro is at its weakest in almost two decades, hovering above our end-year forecast of parity with the US dollar. As our Global Markets team explained earlier this week in the Capital Daily , the euro’s depreciation has reflected …
Weak economy may lead to looser fiscal policy There are two reasons why whoever fills Boris Johnson’s shoes as Prime Minister after his resignation this week is unlikely to significantly change the path of policy or the economy. First, all PM hopefuls …
Threat from Turkey’s corporate FX debts grows Plans announced late last week by Turkey’s banking regulator add to the growing risks stemming from corporates’ large FX debt burdens. Late last Friday, the regulator announced that corporates will no longer …
1st July 2022
Surveys of pricing intentions suggest that firms are confident of being able to both make recent price rises stick and to follow them up with further big increases over the next year. So the news that consumers have a slightly smaller savings buffer than …
Riksbank eyeing a sharp but short tightening cycle The Grand Départ of the Tour de France from Copenhagen today is the first time that the race has started in a Nordic country. Fittingly, it comes in a week when the Riksbank shifted up a gear with its …
The world’s leading central bankers were in a hawkish mood when they gathered for the ECB’s conference in Sintra this week, and President Lagarde was no exception. In her most emphatic rejection of the transitory view so far, Lagarde said she doesn’t …
New ECB forecasts Fears about a possible US recession have prompted investors to revise their interest rate expectations down this week, but we have pushed ours up. We now forecast the deposit rate to peak at 2% next year. (See Chart 1.) Chart 1: ECB …
24th June 2022
This week’s economic news didn’t appear to satisfy the criteria of “indications of more persistent inflationary pressures” that the Monetary Policy Committee (MPC) said last week would prompt it to act “forcefully”. As a result, market interest rate …
Hello “faster rate rises”, Goodbye “gradual” Chart 1: Use of “Gradual” in Norges Bank’s Monetary Policy Assessment or Equivalent (Number) Sources: Norges Bank, Capital Economics All eyes were on Oslo on Thursday morning as the Norges Bank delivered a …
Assessing the risks from a more hawkish US Fed The 75bp interest rate hike by the US Fed this week and expectations for further large hikes in the coming months have caused turmoil in global markets and will have ripple effects across Emerging Europe. We …
17th June 2022
A shock, albeit with a small “s” It goes without saying that the FX market reaction to yesterday’s surprise 50bp rate hike by the SNB was far more muted than that in the days following the Frankenshock in 2015 (when the franc surged by about one-fifth …
Words need to be followed by actions The ECB pulled off a neat trick this week: arresting the sell-off in peripheral bond markets without announcing very much at all. But there’s only so long that markets will be soothed by encouraging words about a …
Turkey: anything but rate hikes The Turkish lira remained under pressure this week and officials unveiled on Thursday a raft of measures aimed at tackling inflation and bolstering the currency. The Treasury revealed that it will issue lira-denominated …
10th June 2022
Farewell Stockholm, hello Basel It was announced this week that Cecilia Skingsley will up sticks from Stockholm to Basel in August and leave her role as First Deputy Governor of the Riksbank to head up the BIS’s Innovation Hub. It’s fair to say that Ms …
