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The National Bank of Poland (NBP) raised its policy rate by another 50bp, to 2.75%, at today’s meeting and, while there was little change in language in the statement, we think a backdrop of strong wage and price pressures will prompt further hikes to …
8th February 2022
If oil prices were to remain at their elevated levels, they could push current account and budget balances into surplus in many of the EM producers. It would also ease any concerns about dollar pegs in the Gulf, although we think the currencies of Angola …
A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more …
4th February 2022
Financial conditions have continued to tighten in Latin America and Emerging Europe and will likely remain restrictive throughout the year, weighing on activity in both regions. Meanwhile, although they have tightened too, conditions in Asia generally …
Today’s appointment of Jens Stoltenberg as the new Governor of the Norges Bank is a slap in the face for the bus driver, plumber, and baker who had applied for the job, as well as the two thirds of Norwegians that favoured Ida Wolden Bache to succeed …
The recovery in Dublin offices has lagged the broader economic upturn. While demand is expected to improve in 2022, with a full supply pipeline, it is likely that vacancy will stay at relatively high levels over the next two years and rental growth will …
Most of the surprise in January’s inflation data came from energy inflation. But core inflation was also unexpectedly strong. With underlying price pressures continuing to build, there is a good chance that the ECB raises its medium-term inflation …
3rd February 2022
The Czech National Bank (CNB) slowed the pace of its tightening cycle for the second consecutive month today and the accompanying communications were less hawkish than expected and suggest that there is little appetite for much more significant …
While the ECB did not change its policy settings today, President Lagarde more than made up for it in the press conference. We now think the ECB will decide in March to taper its asset purchases faster than previously indicated, and are pencilling in 50bp …
While the decisions by the Bank of England to hike interest rates from 0.25% to 0.50% and to start reversing quantitative easing (QE) were both as expected, with four MPC members wanting to raise rates to 0.75% and all members deciding to sell the …
While the recent improvement in world trade is encouraging for industrial demand in the major port markets, we don’t expect an acceleration in rental growth this year. Supply bottlenecks will still take time to unwind and the low availability of space and …
The Q4 GDP data released over the past week underline the fact that the two largest developed markets – the US and euro-zone – have so far experienced very different crises and recoveries. These differences help to explain why economic growth in the …
1st February 2022
The Socialist Party’s victory in yesterday’s election means there will be no substantial change in economic policy, but the government should be more stable. In any case, Portugal’s economy is set to grow rapidly this year, from a fairly low base, as the …
31st January 2022
By re-electing Sergio Mattarella as president and ensuring that Mario Draghi remains prime minister, Italy’s political establishment has achieved what appears to be the best possible outcome. The Recovery Plan should remain on track and Mr Draghi could …
There is a perception that a shift in workspace preferences brought about by the pandemic has redirected demand towards higher quality office space. But while there is some evidence of a flight to quality in Central London office data, the evidence is …
28th January 2022
While we think the direct risks to property from the pandemic have reduced, the uncertain impact of structural change and our expectation that interest rates will now be increased from late this year reinforce our view that Stockholm property returns will …
We expect the major central and eastern European (CEE) currencies to depreciate against the euro this year. We think that the Czech koruna will continue to fare better than the other CEE currencies, although not by as much as last year. To recap, the …
27th January 2022
The early data indicate that Paris offices recovered last year, though much of this reflected strength in the core CBD market. With the economic background supportive and supply relatively contained, we expect further prime office rental growth at a touch …
The sell-off in Russia’s financial markets in response to the reassessment of the likelihood of conflict with Ukraine has pushed up the risk premium on Russian assets to a similar level to that which followed the annexation of Crimea in 2014. There is …
A Russian military invasion of Ukraine would adversely affect the euro-zone economy by further disrupting the market for energy, pushing up inflation and reducing households’ real incomes. However, any economic fallout would probably be fairly small and …
25th January 2022
Euro-zone inflation would be even further above target if owner-occupied housing costs were included in the region’s headline measure. Their formal inclusion won’t take place for a few years yet, but the ECB has pledged to take them into account in the …
Italy’s presidential election, which will begin next week, threatens to reignite political uncertainty that has been quiescent since Mario Draghi became prime minister last year. While we agree that losing Mr Draghi as prime minister would put the …
21st January 2022
The long and detailed account of December’s Governing Council meeting underlines that there are significant differences of opinion about the inflation outlook. We suspect that the balance of opinion will shift in the coming months towards forecasting …
20th January 2022
The looming squeeze on real wages means that the near-term outlook for consumption and GDP has weakened. That said, we don’t expect anything as bad as the squeeze in 2008-14. In fact, real household disposable income may well recover by early 2023. Real …
The industrial sector had its best year in over three decades in 2021 as demand soared and supply struggled to keep up. Although we expect the sector to perform well again this year, we don’t think that yields can continue to fall at the rate seen in …
Turkey’s central bank (CBRT) followed kept its one-week repo rate on hold at 14.00% today and, even though inflation is likely to breach 40% in the coming months, President Erdogan is unlikely to permit interest rate hikes. We think it’s more likely that …
After twelve years in the job, Øystein Olsen was never going to spring a surprise at his last meeting in charge of the Norges Bank. Instead, the Bank left its policy rate unchanged at 0.5% and reiterated that it “will most likely be raised in March”. We …
With the notable exception of Turkey, net capital outflows from emerging markets have eased over the past month. However, the global backdrop for EMs this year will be challenging, particularly for those countries where external vulnerabilities are high …
19th January 2022
A breakdown of house price growth over the past two years confirms that remote working has altered the nation’s housing needs. But what households can afford, rather than what they desire, will be a more important driver of house prices over the next few …
The shift to current account surpluses in Indonesia and South Africa suggest that these economies may be better placed to weather any fallout from rising US interest rates than in the past. But current account deficits have become an increasing cause for …
18th January 2022
While we now expect the ECB to start its tightening cycle earlier, we don’t think the change is significant enough to prevent further property yield compression over 2022-23, albeit at a slower pace than in 2021. We recently revised our ECB policy view …
Having been hit hard in 2020, improving economic conditions supported flexible office take-up in 2021, albeit caution and consolidation limited the net increase in space. While we expect take-up to remain low compared to the pre-virus period, we think it …
17th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
14th January 2022
Real estate potentially has a significant role to play in helping achieve ambitious climate targets. We have estimated the size of the risks in the transition to net zero for the commercial property markets that we cover. This risk varies widely across …
Recent data have reinforced concerns about inflation risks in the UK. We remain of the view that property investments provide only limited long-term protection against higher prices, but of the individual asset types, we think industrial and residential …
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
13th January 2022
We expect policymakers in Denmark and Switzerland to match the 50bps of interest rate hikes that we now forecast in the euro-zone next year. And against the backdrop of rising global interest rates, we now think that the Riksbank will start a tightening …
We think that emerging market (EM) equities will continue to underperform their developed market (DM) peers over the next couple of years, even if that underperformance is far less stark than it was in 2021. EM equities underperformed those in the …
With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise …
12th January 2022
While the general perception is that higher inflation is unambiguously good for the public finances, the reality is a bit more nuanced. The Chancellor will almost certainly be gifted with a lower public debt ratio. However, inflation will probably mean …
We doubt that “fiscal dominance” – worries about the impact of higher interest rates on debt sustainability – would stop the ECB from raising interest rates. But it might encourage the Bank to backstop the bond market even after raising rates by …
11th January 2022
We think GDP growth will come in below expectations this year. Even so, inflation will ultimately settle at a higher level than is currently appreciated and this feeds into our hawkish interest rate forecasts. We expect currencies to struggle in an …
10th January 2022
An expected improvement in spending is encouraging for prime high streets this year. Nevertheless, with a growing share of retail turnover made online and city-based retail more vulnerable to remote working, prime high street rental growth is generally …
Omicron will reduce economic activity in the coming weeks due to tighter restrictions, consumer caution and absenteeism. Our best guess is that economic activity in the euro-zone will decline in January but for now we assume it will rebound in February. …
6th January 2022
We think that GDP growth in Switzerland and the Nordics will be slower than most anticipate this year, and the boosts to inflation from energy prices will subside over the year. But while the SNB will keep interest rates on hold at a record low, …
Strong demand will ensure that house prices maintain their momentum in the first half of the year. But rising mortgage rates will weigh on demand further out, causing prices to cool. The three key forces that have driven house prices higher over the past …
Our new forecasts for 2022 envisage CPI inflation rising further than most expect to a peak of 7% and the Bank of England raising interest rates quicker, from 0.25% now to 1.25% by the end of the year. COVID-19 has the capacity to spring more surprises. …
We don’t expect slower near-term economic growth to derail the property upturn in 2022. Rather, we think that continued falls in property yields and a rebound in all-property rents will support further increases in capital values. That said, the pace of …
We think euro-zone GDP growth will be lower than most anticipate this year, at around 3.5%, while inflation will come down towards 2% by year-end allowing the ECB to leave interest rates unchanged and continue net asset purchases. The big risk is that …
5th January 2022
While office performance surprised on the upside and we could have been much bolder in our forecast for industrial yield falls, our other forecasts for 2021 proved to be broadly correct. With the arrival of a new year, it is always worth looking back to …
