With the coronavirus outbreak spreading across Europe and its disruption to economic activity likely to mount, we think that the Polish central bank will ease policy this year. But the tone of the MPC’s post-meeting press conference today suggests that …
4th March 2020
Given the rapid spread of the coronavirus and the Fed’s emergency rate cut, we are revising down our end-2020 forecast for the US 10-year Treasury yield from 2% to 1.25%. The continued increase in new virus cases across the world suggests that the …
The growing risk of COVID-19 to the outlook suggests that the Bank of Canada will follow today’s 50 bp cut in interest rates with an additional 25 bp cut in April. Given the Governing Council’s lingering concerns that looser policy will boost an already …
Given the uncertainty about how the coronavirus will evolve, and how governments will respond, it is easy to envisage ways in which the hit to global GDP will be larger than the 1%-pt we have now built into our forecasts. However, in these more …
Joe Biden’s comeback to win most of the Super Tuesday states means he is now the front-runner for the Democratic nomination, and his campaign could gather further momentum in the coming days if Mike Bloomberg pulls out. That makes a market-friendly …
The continued spread of the coronavirus and the Fed’s emergency rate cut will result in more aggressive loosening in EMs than we previously envisaged. We expect central banks in much of Emerging Asia to continue cutting interest rates, and have now …
The rapid global spread of the coronavirus has prompted us to lower our 2020 GDP growth forecast for India to 5.3%, from 5.7% previously. And there is now a high chance that the RBI follows the lead of other central banks by cutting interest rates in …
The spread of coronavirus outside China and its possible economic effects has prompted us to revise down our GDP growth forecasts across the region by 0.2-0.5%-pts. The scope for monetary easing is limited, but we think that central banks in Poland and …
In a change to our previous forecast, we now think that the economic effects of the coronavirus will result in GDP growth slowing to just 0.7% this year and will soon prompt the Bank of England to cut interest rates from 0.75% to 0.50%. That said, we …
3rd March 2020
The spread of the coronavirus has prompted us to lower our 2020 GDP growth forecasts for the MENA region by 0.5-2.0% and the risks remain skewed to the downside. The UAE is the most vulnerable economy and the fallout threatens to ignite concerns over …
In a dramatic turnaround from last week, when even the most dovish of Fed officials didn’t appear to support any additional policy loosening, the Fed announced an emergency inter-meeting 50bp rate cut this morning – lowering the fed fuds target range to …
A sharp reduction in mortgage interest rates over 2019 increased the benefit of refinancing for recent borrowers, and as a result the median age of refinanced mortgages dropped to just two years in the third quarter, a 16-year low. That cut available …
Today’s G7 statement about likely measures to tackle the effects of the coronavirus fell short of hopes of a major coordinated policy response. This raises the risk that central banks will disappoint markets’ expectations in the months ahead. The …
The spread of the coronavirus has prompted us to revise down our forecasts for the global economy . This Update sets out the revisions to our views for Latin America in more detail. Policymakers generally have limited scope to respond, but we have …
It is now likely that the central banks of major developed markets (DMs) will follow Australia in loosening monetary policy to help their economies weather the impact of the coronavirus. But there is a limit to what this can achieve; more effective will …
Two developments over the past couple of days have caused us to change our thinking on the outlook for monetary policy in Japan. We now assume that the coronavirus will spread widely across most of the world’s economies including Japan and that this will …
The sharp fall in South Africa’s GDP in Q4 not only marked a technical recession, but also set up a very weak starting point for 2020. And downside risks are growing with the spread of the coronavirus. Figures released earlier today showed that South …
The stronger-than-expected increase in Swiss GDP growth in Q4 provides a higher base for annual growth rates at the start of this year than we had previously assumed. Nonetheless, following the surge in coronavirus cases, we now expect the economy to …
It has become clear over the past couple of days that the global spread of the coronavirus cannot be contained . The spike in reported cases within the US suggests that we are in the early stages of a domestic epidemic that will have a more marked impact …
Bank Negara Malaysia (BNM) today cut its policy rate from 2.75% to 2.50%, and with headwinds to growth worsening, we think the central bank will ease policy again at its next policy meeting in May. 15 of the 24 analysts polled by Bloomberg, including …
With the impact of the coronavirus on economic activity set to intensify, we expect the RBA to follow up today’s 25bp rate cut with another 25bp cut in April. It looks increasingly likely that the disease will weigh on the labour market, which raises the …
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Following the surge in Covid-19 cases over the past week, we are cutting our forecast for euro-zone economic growth to 0.5% for the year, from 0.7% previously, due to a sharp drop in household spending in Q2. For now, we are assuming that the economy …
The collapse in the EM manufacturing PMI to an 11-year low in February all but confirms that EM growth has fallen to its weakest rate since the global financial crisis. But the survey is yet to fully capture the disruption from coronavirus on EMs outside …
February’s slump in the global manufacturing PMI to its lowest level since May 2009 confirms that the nascent industrial recovery has been thrown into reverse. The hit to activity has been largely confined to China so far, but there are already signs of …
We suspect that the BoJ’s response to the coronavirus will mostly consist of liquidity provision to banks and a renewed acceleration of its ETF purchases. We are not forecasting a cut in the Bank’s short-term policy rate. The Bank of Japan today issued a …
China’s PMIs slumped in February, and a particularly worrying drop in the employment component suggests that a swift recovery is not on the cards. The data do, however, bolster our case that economic stimulus will be forthcoming, giving a boost to …
Revisions to India’s GDP data suggest that the recent slowdown started earlier, and problems in the shadow banking sector have had a more acute impact on the economy, than previously thought. But arguably the most worrying aspect of the new data is that …
The recent strength of Milan office take-up has not prevented rental growth slowing and isn’t likely to be sustained in 2020. Indeed, we expect a slowdown in employment growth to weigh on occupier demand. Combined with supply increasing twofold, prime …
The coronavirus itself may not trigger a wholesale reorganisation of supply chains, but it strengthens the argument for companies to reduce associated risks. One response might be to introduce more redundancy into supply chains to lessen reliance on …
The slump in China’s PMIs in February and the continued spread of the coronavirus beyond China has raised the odds that the RBA will cut interest rates at tomorrow’s meeting. On balance though, we still think the Bank will wait until April before cutting …
Last year saw a fall in foreign investment into US commercial property, but South Korean inflows bucked the trend. This year could see a similar level of activity from Korean investors, but given their return targets, we don’t expect a resurgence to …
28th February 2020
Despite the past week’s equity market rout, financial conditions in DMs generally remain accommodative. It’s still early days, but the sell-off would need to go much further before hampering GDP growth. Coronavirus fears have sparked the third-largest …
While medical advances put the world in a better position than in the past to limit the health consequences of a global pandemic, globalisation and a bigger services sector mean that, other things equal, a pandemic is likely to cause greater short-term …
We think that, at least initially, the energy proposals of a Democratic President would support oil prices by curbing supply more than demand . All the major Democratic candidates disagree with the pro-fossil fuel agenda of President Trump, and they all …
We had previously assumed that any coronavirus-related hit to metals demand in Q1 would be made up in subsequent quarters. But that now seems unlikely. As a result, we are lowering our year-end price forecasts for most base metals. However, and perhaps …
27th February 2020
The failure of the Chinese economy to recover promptly from the measures put in place to contain the coronavirus means that world demand growth will be softer than we had anticipated this year, but probably a bit stronger next year. As a result, we have …
In our view, the coronavirus epidemic would have to get much worse for central banks to deliver more rate cuts that investors now anticipate. As such, we think that government bond yields in most developed economies are more likely to rise than fall …
Our GDP Tracker suggests that the downturn in Saudi Arabia’s economy deepened in Q4 of last year and, while the worst has probably now passed, the downside risks to the outlook are mounting. Saudi Arabia’s quarterly GDP data are published with a …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
The Bank of Korea (BoK) unexpectedly left its main policy rate on hold at 1.25% today. But with the economic cost of the coronavirus mounting, policy support will have to be ramped up soon – we are forecasting a cut in April. Today’s decision was the …
Falls in equity prices and bond yields so far this week reflect fears that coronavirus cases outside China will mark the start of a wider outbreak that deals a blow to the world economy. For now, we envisage a moderate hit to global GDP growth of 0.5ppts …
26th February 2020
The growing possibility that the COVID-19 virus will have a widespread and lasting impact on the global economy increases the downside risks to our forecasts for equities and bond yields. Until recently, the most likely scenario appeared to be that the …
The outsized importance of cross-border commuters to the Swiss economy means that it is particularly vulnerable to any disruption to flows of people within Europe as a result of the coronavirus. Partly because of this, the chances of a rate cut by the SNB …
We think that 2020 will be the eleventh consecutive year of double-digit total returns for industrial property. However, we also think it will be the last in this cycle, as slower yield falls from 2021 and a lower rate of rental growth keep returns in …
With normal activity taking longer to recover than seemed likely earlier this month, we now think that China’s economy will contract outright in year-on-year terms this quarter, for the first time since at least the 1990s. The leadership appears to be …
The government is trying to balance weak revenue with increased interest and SOE spending by cutting wages and programme costs, which will prove politically difficult. The weakening fiscal position and rising debt burden have further increased the risk of …
The 2020-2021 budget that the Hong Kong government announced earlier today is large in scale and should help offset the damage that the coronavirus outbreak is having on companies and consumers. But there is little the government can do to address the …
A flight to safety and belief that the Fed will cut rates have driven the 10-year Treasury yield to record lows. But we doubt the 30-year mortgage rate will follow suit. Stretched lender capacity and increased caution will act to widen the spread against …
25th February 2020
