Most central banks that have introduced quantitative easing in recent years have done so by pledging to buy a certain amount of government bonds. Our base case is that the RBA will do the same when it launches QE over the coming months, but a yield target …
9th March 2020
Korea’s position as a key supplier of high-tech intermediate goods means it plays an important role in regional supply chains. Extended factory closures due to the spread of the coronavirus would cause significant disruption to the global electronics …
The recent market meltdown reflects concerns about the economic impact of the COVID-19 virus. This will inevitably hit commercial property, but in our view, the downside is likely to be relatively modest. The spread of the coronavirus from Asia into …
6th March 2020
Lebanon’s government is set to decide tomorrow on whether to repay a $1.2bn Eurobond maturing on Monday. Whatever the decision, a debt restructuring inevitably lies in store and the government will probably try to concentrate losses on holders of …
If, as we expect, worst fears about the coronavirus outbreak don’t materialise, global stock markets will probably generally recover. However, we doubt that this will be the case for equities in Emerging Asia, which feeds into our view that MCSI’s EM …
Coronavirus fears will cut short the housing market recovery, and we have reduced our forecasts for house price growth in response. What’s more, the risks to the market – particularly housing transactions – are now firmly on the downside. Recent months …
The response by policymakers, households and firms to the spread of the coronavirus looks set to take a heavy toll on Italy’s economy. We suspect that GDP will contract in both Q1 and Q2, and that over the year as a whole it will shrink by about 0.5%. It …
5th March 2020
Our current working assumption is still that the number of coronavirus cases in the US is restricted to the low tens of thousands which, in a country of more than 325 million, would represent an infection rate of less than 0.1%. Furthermore, we suspect …
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
The Brazilian real has fallen to a record low and, while our central view is that it will recover some lost ground in the second half of the year, it will remain much weaker than most currently anticipate. The real has now weakened by 12% against the …
We expect the Treasury to announce only a small fiscal package of around $2bn in response to the coronavirus outbreak. With economic activity slowing sharply and revenues undershooting expectations, that should be enough to thwart the government’s aim of …
The Central Bank of Sri Lanka (CBSL) left interest rates unchanged today, and while it kept the door open to loosening, high inflation and the CBSL’s concern over the rupee limits the scope for further cuts. Having cut rates three times since last May, …
Headline consumer price inflation is likely to have dropped sharply in February, in large part due to a moderation in food inflation. This should further embolden the RBI to follow its global peers and cut interest rates over the coming weeks in response …
The prospect of stronger demand stemming from stimulus in China, alongside recent supply disruptions, means that we now expect the deficit in the iron ore market to deepen this year, rather than shrink. As a result, we have revised up our year-end …
4th March 2020
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 …
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 …
