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Several euro-zone governments have tightened coronavirus rules lately and more measures are on the cards, including in Germany. On the whole, these are set to be less severe than they were earlier this year and have less economic impact. But “lockdowns” …
18th November 2021
The fresh falls in the Turkish lira following the CBRT’s interest rate cut today have left Turkey firmly in crisis territory and echoes of previous “sudden stops” during major EM currency crises in the past are growing louder. Without an aggressive policy …
The latest crisis engulfing Turkey is likely to make it harder for the country to roll over its external debts, with the banking sector particularly vulnerable. If Turkey’s crisis worsens, it may cause wobbles in a few EM currencies, but there are reasons …
The sharp falls in the lira over the past few days clearly weren’t enough for Turkey’s central bank to stand up to President Erdogan as it pushed ahead with a 100bp cut (to 15.00%) to its one-week repo rate. While the CBRT did signal that the easing cycle …
We now think that, rather than remaining broadly stable, the spreads of euro-zone “peripheral” bonds will widen somewhat over the next two years as the ECB gradually normalises monetary policy. That said, we still expect spreads to remain low by …
17th November 2021
There has been no let up for the Turkish lira today and all eyes are turning to the central bank’s interest rate decision tomorrow. Policymakers’ increased tolerance to falls in the lira as well as pressure from President Erdogan mean that an interest …
Net capital outflows from EMs have persisted in recent weeks and, looking ahead, a further rise in US Treasury yields could lead to larger outflows over the coming months. The good news is that – Turkey aside – vulnerabilities to outflows in most major …
16th November 2021
Investors were initially disappointed following the decision by Hungary’s central bank (MNB) to raise its base rate by only 30bp (to 2.10%) today, but the hawkish post-meeting communications and a pledge to step up the pace of tightening by using other …
The Turkish lira has remained under significant pressure at the start of this week and there is a growing risk that the central bank’s continued obedience to pressure from President Erdogan for interest rate cuts results in sharp and disorderly falls in …
The current bout of high inflation will put much less direct upward pressure on negotiated wages in the euro-zone than in previous such episodes. This is because far fewer agreements now contain inflation-linked clauses and those which do are typically …
The IPF Consensus forecasts for euro-zone prime office rental growth in 2021 have been revised up, consistent with the more positive recent data. However, expectations were revised down slightly for the next couple of years. Even so, we still have a more …
15th November 2021
We think expectations for corporate earnings in the US and most of Europe are unlikely to improve much further. One exception is the UK, where earnings expectations look a bit less upbeat . Back in July, we showed that expectations for corporate earnings …
12th November 2021
We think that MSCI’s Emerging Markets (EM) Latin America Index will continue to underperform its EM EMEA Index over the next couple of years, albeit not to the same extent as it has in 2021 so far. In recent decades, MSCI’s equity indices for Latin …
Anticipation of higher interest rates has pushed up fixed mortgage rates. And with scope for banks to absorb higher costs in their margins now exhausted, future changes in interest rate expectations will be fully passed through to mortgage rates. But as …
The jump in headline inflation in Spain in October was almost entirely down to the electricity component. We do not expect this bout of higher inflation to last, but in the meantime, consumers are facing a squeeze on real incomes that risks leaving …
The phasing out of crisis support and strength of tax revenues have boosted Israel’s public finances and the conservative stance of last week’s budget will help to narrow the deficit towards 3% of GDP in 2022, although we don’t think this will derail the …
11th November 2021
With speculation rising that the UK will trigger Article 16 of the Northern Ireland Protocol, the big risk is that relations between the UK and the EU sour to such an extent that parts of the whole UK/EU Brexit deal unravel. Even if things do not …
A healthy occupier backdrop and a shortage of supply should allow prime industrial rents in the Netherlands to continue to grow at a steady pace over the coming years. As a result, after years of underperformance, our forecasts leave Dutch rental growth …
The latest real estate data came in stronger than expected. But while there have been encouraging developments, particularly in the retail sector, we think this signals a short-term boost to prospects rather than a permanent improvement. The further …
The divergence between the quarterly and the monthly measures of GDP have left it unclear whether the economy is still languishing at about 2.0% below its pre-pandemic level or if it is nearing that milestone. But regardless of how close the economy is to …
9th November 2021
The sharp tightening of monetary policy in the region will strengthen the preference for savings, dampen lending growth and raise debt servicing costs next year. It is plausible to think that higher interest rates could trim 0.5-0.8%-pts off GDP growth …
There is growing evidence that global goods shortages are weighing on euro-zone activity. We expect this to contribute to a marked slowdown in growth in Q4, and the outlook for early 2022 is no better. What’s more, it looks likely that the shortage-driven …
5th November 2021
The COVID-19 situation in many EMs has improved markedly over the past month or so as new infections have fallen sharply and vaccine rollouts have gathered pace. That said, the recent surge in virus cases in Emerging Europe serves as reminder that the …
Auto producers in Central and Eastern Europe (CEE) have experienced intermittent factory closures in the second half of this year and things may get worse before they get better. Motor vehicles production will remain stop-start until shortages of …
The indication from the Bank of England that Bank Rate of 1.25% would be too high for the economy suggests that the forthcoming rise in interest rates won’t be anywhere near large enough to topple the housing market. Rather, we expect house prices to rise …
The Czech National Bank (CNB) shocked everyone with a 125bp interest rate hike at today’s meeting and while this was clearly intended to front-load tightening, the hawkish communications suggest that the tightening cycle still has some way to go. We …
4th November 2021
By leaving interest rates at 0.10% and continuing its QE asset purchases, the Monetary Policy Committee (MPC) didn’t set off any early fireworks today. But it did throw on the bonfire the markets’ expectations that interest rates will rise to 1.0% by the …
While the latest virus outbreak has clouded the near-term outlook, a tight supply picture and steady employment growth mean that prime Moscow office rents should return to growth in 2022. Preliminary data revealed that, following a collapse in occupier …
Spain is a long way behind its euro-zone neighbours in recovering from the pandemic. That is partly because its important tourism sector has been hamstrung by travel restrictions but it also reflects domestic weakness. Some of the shortfall will be …
Following yesterday’s taper announcement by the Fed, and ahead of the knife-edge decision by the Bank of England later today (we forecast a 15bp rate hike), this morning’s announcement from the Norges Bank was less eventful. Norwegian policymakers …
The National Bank of Poland’s (NBP) decision to raise its policy rate by a larger-than-expected 75bp to 1.25% alongside the upwards revision to its inflation forecast suggests to us that the NBP is taking the fight against inflation much more seriously …
3rd November 2021
The Chancellor’s new fiscal rules could help to convince voters and investors of the Conservative Party’s fiscal discipline. But with eleven rules having come and gone in the past seven years and with no less than nine new fiscal indicators unveiled in …
The recent surge in energy prices and worsening supply chain disruption will keep Germany’s inflation rate higher next year than we had anticipated. However, we still think inflation will fall from a peak of around 5% to 2% or so by end-2022 and beyond …
The economic and political backdrop in Turkey is eerily similar to that which preceded the currency crisis in 2018, although one key difference now is that the lira doesn’t appear to be fundamentally misaligned. The upshot is that, even if the lira were …
October’s PMIs suggest that manufacturing sectors in Southeast Asia are recovering from recent Covid waves, but supply constraints are taking their toll on industry in China, Brazil and parts of Emerging Europe. With supply shortages set to persist for …
2nd November 2021
Data published this week provide more evidence that the supply of labour has held up fairly well in the euro-zone and that those who have left the labour market have probably not done so permanently. This should help to keep a lid on wage growth at a time …
28th October 2021
The surge in COVID-19 cases and deaths in Eastern Europe has prompted the re-imposition of restrictions and it looks like measures will be stepped up, weighing on recoveries in Q4. Tight restrictions may not remain in place for long across Central Europe, …
The ECB stuck to its script today, arguing that although the increase in inflation now underway will be larger and last longer than previously anticipated, it is still temporary. Meanwhile, confirmation that the PEPP will end in March tells us nothing …
The Q3 investment data indicate that activity could be slightly stronger this year than we had expected. However, with the economic recovery topping out and structural headwinds limiting investment in the office and retail sectors, we think commercial …
Oil, gas and coal prices have reached multi-year highs in recent weeks and this Update takes a look at some of the implications for the region. In short, an improvement in Russia’s terms of trade has boosted its external position, the public finances and …
This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Budget speech at 12.30pm on Wednesday 27 th October and to provide some instant context. We will send a Rapid Response and a Focus …
27th October 2021
Money growth has slowed this year and is likely to decline further next year. Meanwhile, although the pandemic has resulted in a huge increase in the money supply, we do not think this will cause inflation to rise because the relationship between the …
Since the start of the pandemic, Italy has experienced a bigger drop in its workforce than other euro-zone countries. But that largely reflects temporary factors, which suggests that the labour force will eventually recover to around its pre-crisis level, …
26th October 2021
25th October 2021
We expect steady French industrial rental growth over the next few years on the back of a solid economic backdrop and more online shopping. That said, if construction costs and land constraints become more acute, there is a risk that rents climb higher …
We don’t have much timely official data on the detailed breakdown of consumption. But the available evidence shows a sharp (albeit uneven) increase in spending on services since the end of Q2. While spending in restaurants has risen above pre-pandemic …
22nd October 2021
Russia’s central bank (CBR) stepped up the pace of its tightening cycle again at today’s meeting with a larger-than-expected 75bp interest rate hike, to 7.50%, and the hawkish tone of the accompanying communications suggest that further tightening will be …
We expect the Turkish lira to remain among the worst-performing currencies over the next two years, as political pressures, high inflation, and a vulnerable external position continue to weigh on the currency. The lira has been the worst-performing …
By any standard, retail property has had a torrid time during the pandemic. The latest data on online sales look like further bad news, with the share of spending much higher than expected after lockdowns. But the recovery in consumer demand has also been …
21st October 2021
Any remaining confidence in the credibility of Turkey’s central bank (CBRT) was shattered after today’s larger-than-expected 200bp interest rate cut, to 16.00%. The lira hit a fresh record low against the dollar and we think that it will continue to …
