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Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
7th March 2024
Note: Andrew Burrell will be answering questions and highlighting key issues around the size and scale of the recovery in commercial property in a Drop-In on Tuesday, 12th March . Register here for the 20-minute online briefing. Completions in Europe …
5th March 2024
Our view that the Bank of England will become less concerned by the most persistent part of services CPI inflation suggests that it will cut interest rates in the summer, perhaps in June. But the risk is that non-energy intensive services inflation stays …
4th March 2024
We have traced the government’s target of building 300,000 new homes a year in England back to the 2004 Barker Review. Rerunning the calculations two decades on suggests 385,000 new homes a year would now be necessary to achieve the same aims. In the 2017 …
Recent media attention has focused on the downturn in Germany and the travails of its lenders exposed to the crash in property values both domestically and in the US. While the focus on Europe’s largest market is justified, other major euro-zone markets …
1st March 2024
Romania’s large twin budget and current account deficits remain a key concern. One near-term risk is that fiscal policy stays very loose (or is loosened further), particularly in view of elections taking place later this year. This could cause risk …
28th February 2024
We expect strong returns from European equities in the next couple of years, but we think they will continue to underperform those in the US. The MSCI Europe Index has underperformed all other MSCI major regional indices so far this year, in both …
The disinflation story is largely over in Switzerland, and rising rent inflation may actually cause headline inflation to increase in the summer. However, this will not stop the SNB from cutting its policy rate on the 21 st March by 25bp to 1.5%. …
This is an updated checklist which takes into account our latest expectations for the Spring Budget. The checklist helps clients keep track of the key policies and forecasts announced during the Chancellor’s Spring Budget at 12:30pm (GMT) on Wednesday 6 …
Monthly industrial production data have been overstating the decline in German industry. Nonetheless, the more accurate gross value added measure still shows that activity has been falling. German industrial production has been on a clear downward trend …
27th February 2024
January’s money and credit data are consistent with our view that the improvement in the data towards the end of last year was not the beginning of strong recovery. After falling sharply throughout most of last year, the money and credit data improved a …
The outlook for the UK economy is unlikely to be very different depending on which of the possible combinations of UK Prime Ministers and US Presidents this year’s elections deliver. Even so, there may be some nuances. This Update establishes a framework …
26th February 2024
The stalling in services disinflation in recent months is largely due to technical factors and one-offs. If services prices continue to increase at their recent pace in month-on-month terms, the year-on-year rate will fall a little further in the coming …
22nd February 2024
Carbon price not out of the woods yet …
Euro-zone construction output picked up in December, but remained well below last year’s peak. We expect it to drop again in 2024, in part due to a continued dismal performance by the sector in Germany. Data released today showed that euro-zone …
20th February 2024
Data published today show that negotiated wage growth in the euro-zone remained strong at the end of last year. But these data won’t stop the ECB from cutting interest rates in April – as we are forecasting – as long as other indicators continue to point …
This week we held a Drop-In on commercial property distress across the US, UK and Europe. Clients can access a recording here and find related analysis on our dedicated landing page . This Update provides answers to several questions on the UK and …
16th February 2024
The Czech economy has had the weakest performance of any EU country since the pandemic, and we think that growth will disappoint expectations again in 2024. This will keep inflation contained and put pressure on the central bank to loosen monetary …
Chairman Thomas Jordan’s recent comments about the franc raise questions over whether the SNB might use FX interventions to loosen monetary conditions. But we think policymakers will use the policy rate as the main tool to achieve price stability, and …
13th February 2024
A robust labour market will support Spanish office occupier demand to a greater extent than elsewhere in the euro-zone in the next few years. As a result, we think prime office rent growth will outperform the rest of the region. However, upgrades to the …
12th February 2024
CNB steps up its easing cycle The Czech National Bank (CNB) accelerated the pace of its monetary easing cycle today with a 50bp interest rate cut, to 6.25%, and the post-meeting communications support our view that an even larger interest rate cut is on …
8th February 2024
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
5th February 2024
Given the rise in rents and the recent decline in mortgage rates, the financial benefit of buying over renting is increasing. This will boost buyer demand and cause tenant demand to soften this year. As housing is a necessity, households must either rent …
Euro-zone investment improved a little in Q4, but that did not prevent it experiencing its worst year in a decade. While we have raised our forecast for through-year growth, we still expect a weak start to 2024 and think that by historic standards it will …
At face value, the rebound in European equity REIT prices over recent months suggests that capital values could be nearing their trough. But the past relationship is weak and REITs have benefited from the stock market rally. We therefore don’t see the …
2nd February 2024
While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent a signal that the next move will be a cut, but it pushed back strongly against the idea that rates will be cut soon or far. Our forecast that inflation …
1st February 2024
The Riksbank signalled unequivocally in today’s policy statement that interest rates may be cut sooner than they previously anticipated. While a March rate cut is possible, particularly if the January and February inflation data come in below …
MNB errs on the side of caution The Hungarian central bank’s (MNB’s) communications following its meeting today confirm that the decision not to accelerate the pace of its easing cycle was due to the recent ratcheting up of tensions between the government …
30th January 2024
January’s European Commission business and consumer survey, released this morning, supports our view that the euro-zone economy will stagnate in Q1. But recent increases in services firms’ price expectations could prompt policymakers to wait a little …
We think the recent falls in long-dated government bond yields across developed market (DM) economies will extend over the remainder of this year, as central banks generally cut by more than investors currently expect. We project most of those yields to …
29th January 2024
Were the EU to block Hungary’s access to funds (if it vetoes financing for Ukraine at this week’s summit), as reports on Sunday suggested, this would probably have a smaller direct impact on Hungary’s economy and financial markets than most would think. …
The Riksbank is set to leave its key policy rate unchanged next week but we think it will begin to cut rates in the second quarter and reduce them faster than policymakers are forecasting. As a reminder, the Riksbank left its policy rate at 4.0% at its …
25th January 2024
The ECB kept interest rates unchanged and stuck to the argument that a first rate cut is most likely in the summer. An earlier move is still possible if the inflation data are weak in the next few months, but the risks are shifting towards rates staying …
The latest RICS survey offered tentative signs that we could be past the worst of the property downturn in Europe, as both occupier and investment demand balances picked up slightly. However, the big picture remained one of a very weak market. Investor …
Minor improvements in all sectors, but very gradual recovery ahead Having deteriorated for the best part of 2023, sentiment over all-property occupier demand and rents improved in Q4. However, the balances remain negative, pointing to subdued demand and …
Our new Fiscal Headroom Monitor uses a simplified version of the Office for Budget Responsibility’s (OBR’s) model to estimate how changes in market interest rate expectations and gilt yields are influencing the scope for the government to announce new …
Norges Bank today reiterated that it will leave its policy rate at 4.5% “for some time”. But we think that inflation will fall rapidly this year, so when the Bank does start to cut rates, it will do so more quickly than its forecasts suggest. The decision …
The long boom in residential investment has been severely dented by soaring interest rates. Solid fundamentals mean investor interest will remain strong, but it is unlikely residential yields have peaked, or that relative performance will be as stellar as …
24th January 2024
History suggests that when one Monetary Policy Committee (MPC) member votes to cut interest rates, a majority of the nine members will agree about two meetings later. There have been 14 turning points in Bank Rate since the MPC’s inception in 1997, by …
23rd January 2024
Lenders ready to meet increasing mortgage demand The latest Credit Conditions Survey showed a rise in the availability of mortgage credit in Q4 as financial market interest rates fell, but demand for mortgages slipped as mortgage rates took time to catch …
18th January 2024
We think Norges Bank will keep its policy rate unchanged at 4.50% next week but, given the weakness in the krone and tight labour market, retain a hawkish bias in its guidance. Further ahead, we think rates will be cut sooner than the Bank expects as …
The Bank of England’s Q4 Credit Conditions Survey suggests the worst of the drag on economic growth from higher interest rates is fading. That suggests an economic recovery will begin later this year. The net percentage balance of banks’ supply of …
Early prime office yield data for Q4 suggest that the property correction deepened at the end of 2023. The sharp rises in yields occurred despite a more favourable market interest rate environment. This suggests that property pricing still has further to …
17th January 2024
The downward trend in the EU carbon price since early 2023 has been driven by lower demand for pollution permits on the back of industrial weakness and growth in cleaner energy sources. With energy-intensive activity in the bloc set to stay weak, and …
The resilience of euro-zone rental growth last year surprised us. But our analysis indicates that better-than-expected economic activity explained much of that strength and as recession looms in 2024, all-property rents are likely to slow more decisively. …
16th January 2024
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
15th January 2024
There was a wide disparity in house price growth across regions in 2023 and little reason to think that this year will be any different. Following the recent decline in mortgage rates, we suspect the largest rises in prices will be in the regions that …
Much has been talked about a ‘flight to quality’ in the office sector given the structural shift to hybrid working. However, while there is evidence of this in relative rental performance, a look at the yield data suggests that the opposite has been true …
11th January 2024
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
The lagged effects of the weak economy and high interest rates may mean that loan default rates rise in the coming months. But the prospect of interest rate cuts later this year will mean they won’t rise much. Higher interest rates and the weak economy …
