Omicron probably won’t trigger lockdown In recent weeks new Covid-19 cases have been exploding. More people have tested positive in the past two weeks than in the rest of the pandemic combined. While a lower share of Omicron patients suffer severe …
7th January 2022
OPEC+ stays the course This week’s OPEC+ meeting turned into a fairly straightforward affair with the group opting to raise its quota by the planned 400,000bpd in February and supply is likely to increase further over the coming months. But if we’re right …
6th January 2022
Our hits and misses from a volatile 2021 2021 was another whirlwind year for Latin America. The economic recovery has been bumpy, financial markets have underperformed, and Lionel Messi finally won the Copa América (sorry Brazil fans). In the final Weekly …
17th December 2021
Handbrake off The November external trade data showed an impressive rebound in car exports, but they were still 14% below their 2019 level. (See Chart 1.) Indeed, the recovery has further to run. Despite briefly closing a couple of factories last week …
The activity data released this week suggest that the economy was in a strong position in the fourth quarter and the price data imply that inflationary pressures are broadening. The surge in coronavirus infections, however, means there are growing …
Poland: overheating fears, but NBP stepping up Concerns that Poland’s economy is overheating will have only been reinforced by figures this week that showed a surge in nominal wage growth and a sharp widening of the current account deficit in October. But …
Market pricing suggests investors remain unconvinced that the now-hawkish Fed will hike interest rates as high as officials are projecting, either because inflation will drop back more quickly or because real economic growth will falter. In this case, we …
African officials keeping virus-fighting gloves off Three weeks after the detection of the Omicron variant in South Africa, the government is showing no signs of changing course from its approach of minimising virus-related restrictions even as COVID-19 …
Twelve months ago we said that 2021 would bring a “quicker and fuller” recovery, still-loose monetary policy and that the pandemic wouldn’t leave a large permanent dent in the economy and the public finances. (See here .) So we have managed to notch a …
It is two years since a cluster of cases of severe pneumonia started to draw attention in Wuhan. Chart 1 maps economic developments in China since then. The blue bars show cumulative growth since late-2019. The black outlines show growth over the …
The majority of this week’s multiple central bank decisions turned out to be a little more hawkish than most had anticipated, and the ECB was no exception. We commented on its decision here , but a couple of points are worth underlining. First, the ECB …
Fed rate hikes pose little threat to Asia With the start of US monetary tightening drawing near, questions have been asked about whether Asia’s central banks will respond with tightening of their own. Hong Kong and Singapore will: their exchange rate …
Shifting sands at ECB change landscape for the SNB As expected, Thursday morning’s SNB announcement did not throw up any surprises, and the ability of Swiss policymakers to play a straight bat puts England’s openers to shame. However, the mildly hawkish …
Some notable hits, but growth forecast a miss We will be publishing our Key Calls for 2022 in due course but, in our last Weekly of 2021, we take a look at what we got right and wrong this year. On balance, there were more hits than misses (the calls can …
The end is coming for QE In a speech this week, RBA Governor Lowe noted that the RBA’s central forecasts were consistent with the Bank tapering its bond purchase programme in February, and ending it altogether in May. But he also acknowledged two other …
A deep-dive into Saudi Arabia’s ‘austere’ budget The Saudi 2022 Budget released earlier this week revealed that the government expects to cut spending to help it run a budget surplus for the first time since 2013. But the true fiscal stance is being …
16th December 2021
Virus and vaccine tales from the Omicron hotspot.. South African officials seem to be pushing vaccine take-up to curb the latest Omicron-induced virus outbreak rather than tightening restrictions on activity. With pressure building on the health system, …
10th December 2021
Copom waiting for expectations to fall The Brazilian central bank’s (BCB’s) meeting this week was, on balance, a hawkish one. There was another 150bp hike in the Selic rate, to 9.25%, and policymakers didn’t engage in the debate about whether higher rates …
QE to end sooner and more rate hikes in forecast Following Chair Jerome Powell’s markedly more hawkish tone at his recent congressional testimony, markets are braced for the Fed to pivot hard at next week’s FOMC meeting. Futures pricing suggests there is …
The Bank of Canada’s increased concerns about wage and cost pressures suggest it will start to tighten policy in April, especially if the government loosens fiscal policy in next week’s fall fiscal update. Bank to turn more hawkish in January In the …
We are sceptical that commodity demand growth in China is about to reignite, despite this week’s cut to the required reserve ratio (RRR) for most banks and data showing surprisingly strong imports of key commodities in November . After all, both …
Controlled easing The Central Economic Work Conference that we wrote about a week ago concluded today with a statement that called on “all parties to actively launch policies that are conducive to macroeconomic stability.” Whereas July’s RRR cut wasn’t …
Sanctions threat rears its ugly head again The newswires have been abuzz this week with reports of a potential Russian military conflict with Ukraine and a renewed threat of US sanctions. The proposed sanctions are at the more aggressive end of the …
The government’s recently-imposed “Plan B” COVID-19 restrictions mean there is a good chance that the economy contracted in December. If the pressure on the NHS increases, restrictions might be tightened further, implying substantial downside risks to Q1 …
Interview coaching for SNB candidates This week’s announcement that Fritz Zurbrügg – one of the three members of the SNB’s Governing Board – will retire at the end of July 2022 sounded the starting gun to appoint his successor. We are not privy to the …
This week brought yet more bad news for the euro-zone economy. Although German industrial output grew by 2.8% on the month in October, driven by a rebound in the struggling auto sector, this followed months of declines and left production 6.5% below its …
Higher food prices could test RBI’s resolve The key event this week was the RBI’s policy meeting , during which rates were left on hold, as widely expected. But there is concern in some quarters that the central bank is being complacent about inflation. …
Rates to stay on hold throughout most of next year The central bank of Taiwan (CBC) is likely to leave interest rates unchanged at its meeting on Thursday (both the consensus and ourselves expect no change), but with the economy operating well-above its …
New tax proposal may boost low-skilled pay While PM Kishida’s new plan to offer firms more generous tax deductions for raising wages isn’t a game changer, we think it may push some smaller companies into slightly more aggressive wage hikes. Finalised …
Treasurer Josh Frydenberg will be giving himself a pat on the back when he presents the Mid-Year Economic and Fiscal Outlook (MYEFO) on Thursday. After all, the federal underlying cash balance was $8bn smaller in the four months to October than predicted …
Iran nuclear deal talks hit (another) bump The seventh round of talks to revive the Iran nuclear deal resumed today, having been halted on Friday as both sides failed to make headway. It appears that an agreement is a long way off, which could put upwards …
9th December 2021
Lockdown 101: Lessons from South Africa The emergence of the Omicron variant has put South Africa at the centre of the world’s attention, but we know surprisingly little about how policymakers there intend to respond if the variant is as bad as feared. A …
3rd December 2021
More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
As the labour market is nearing a full recovery and wages are rising strongly, we now expect the Bank to hike interest rates in April, rather than waiting until July, as we previously expected. Fourth-quarter GDP growth not as strong as it looks …
Powell signals turning point in inflation fight Fed Chair Jerome Powell’s congressional testimony this week was markedly more hawkish. We wouldn’t characterise it as a full-blown Volcker moment. But there could be parallels with former Chair Alan …
Omicron not yet likely to stop further rate hikes One of the key talking points this week has been the spread of the Omicron variant, which has sparked renewed fears about the effectiveness of vaccines and tighter restrictions. Recoveries are likely to …
CEWC to discuss policy easing amid slowdown China’s leadership will gather soon for the Central Economic Work Conference (CEWC), an annual meeting that sets economic targets and policy priorities for the coming year. The discussions are private but a …
Immunity to high inflation won’t wane While there are still far more questions than answers surrounding the new Omicron variant, in a worst-case scenario we think it would temporarily derail Japan’s economic recovery and cause underlying inflation to …
Omicron is reducing socialising Just one week after the emergence of the Omicron COVID-19 variant there are lots of anecdotal reports of Christmas parties being cancelled and some tentative evidence that activity has softened. In the week before the …
Rising inflation piles pressure on CBSL The economic situation in Sri Lanka is going from bad to worse, with a surge in inflation undermining the credibility of the central bank (CBSL) and making a debt default all the more likely. Data released earlier …
“You shall not pass!” [the CHF 1.04 per euro mark] We were ahead of the curve in arguing that the SNB would wave goodbye to the implicit ceiling of CHF 1.05 per euro that it defended in earnest during the early stages of the pandemic. (See here .) …
In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. Indeed, Vice President Luis de Guindos said this week that “the high rate of inflation we’re experiencing …
A week ago we argued that the reopening of the border was unlikely to ease labour shortages much. Indeed, the government has now delayed the re-entry of the 235,000 visa holders stuck overseas until mid-December to ward off the Omicron variant. However, …
Finance Ministry could respond to new virus wave India reported its first cases of the Omicron variant yesterday. Plenty of uncertainty remains about the new variant, but we outlined some of the key factors that could determine the extent of the economic …
Low vaccine coverage and large tourism sectors mean that the non-Gulf economies are particularly vulnerable to the emergence of the Omicron variant. Meanwhile, the drop in oil prices and the likelihood that OPEC+ raises oil output more slowly than …
2nd December 2021
New face but same gradual tightening at Banxico Mexican President López Obrador delivered another (unhappy) surprise to markets this week by unexpectedly changing his nomination for Banxico’s next governor from Arturo Herrera to Victoria Rodríguez. But we …
26th November 2021
Turkey tumult Safe to say that this week has been dominated by the collapse in the Turkish lira and we’ve been helping clients navigate through the crisis and its implications across our services. All of the research that we’ve published can be found here …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
For most of this week our Europe economics team have been re-evaluating their forecasts due to the prospect of more COVID-19 restrictions on the continent. We weren’t. That’s because a combination of higher infections since the summer, high vaccination …
Canada avoiding another winter wave Winter is coming but, unlike Europe and the US Midwest too, Canada hasn’t seen a new wave of coronavirus infections. By this time last year there were already signs of a rapid pick-up in the most-populated Canadian …
