A surge in demand for refinancing has stretched lenders’ capacity, lengthening the time it takes to close a mortgage. That has disrupted the usual relationship between pending and existing home sales. While that disruption should not last long, it means …
26th September 2019
The Central Bank of Egypt shrugged off the market volatility following recent protests across the country and lowered interest rates by another 100bp, to 13.25%, at today’s meeting. So long as the protests don’t escalate, weak inflation pressures mean …
Ethiopia’s investment-focused economic model has attracted widespread praise, but has also created dangerous external vulnerabilities. Were domestic instability or EM-wide risk aversion to cause funding to dry up, the country would quickly face a painful …
Rising tensions in the Middle East present a significant upside risk to our oil price and inflation forecasts, and could force a handful of EM central banks to abandon easing cycles or even hike interest rates. But a majority of central banks would …
The Bank of Canada’s latest research implies that home equity extraction has had only modest effects on consumer spending and GDP. Once we consider the total wealth effects, however, the significance of previous gains in house prices is much larger. The …
Today’s cut to the policy rate by the central bank in the Philippines (BSP) from 4.25% to 4.00% is unlikely to be the last in the easing cycle. With growth likely to disappoint and price pressures set to remain subdued, we expect more cuts in the coming …
Most of the recent outperformance of Switzerland’s manufacturing sector relative to Germany’s reflects strong growth in pharmaceuticals. But this has masked struggles in more Germany-facing sectors. The Swiss manufacturing sector has outperformed its …
Given that the SNB’s policy rate is already at -0.75%, fears of hitting the so-called ‘reversal rate’ are likely to make it unwilling to cut rates much further. With the ECB once again in easing mode, we put the odds of the SNB having to reinstate a …
25th September 2019
Following a bold start to the year, office take-up in Barcelona looks set to record its strongest year since 2005 which, coupled with falling vacancy rates, should boost rental growth. Indeed, Barcelona is set to outperform its peers for the next few …
EM capital outflows persisted last month and, with the US-China trade war unlikely to abate, we think that they will continue in the coming quarters. However, the scale of outflows should remain modest, which in turn should limit the macroeconomic …
The Bank of Thailand (BoT) left interest rates unchanged at 1.50% today, but with economic growth set to remain weak and concerns about the strength of the baht mounting, we think the central bank will loosen policy again before the end of the year. …
Nigeria’s latest budget plan has strengthened our view that the fiscal position is unsustainable and that the country will face some kind of debt crisis within five years. Nigeria’s new fiscal framework makes for sobering reading . The document not only …
The combination of a broad-based easing cycle in emerging markets and strong demand for risky assets has pushed local currency emerging market (EM) sovereign yields down sharply in 2019. However, we expect that rally to go into reverse by the end of the …
The Reserve Bank of New Zealand sounded more comfortable with its position when it left rates on hold today but we still think the Bank will cut rates to 0.75% by early next year. The decision to leave rates unchanged at 1.0% following the dramatic 50 …
Flash PMIs for September suggest that advanced economies ended Q3 on a weak footing. The surveys also point to weaker exports, jobs growth and core inflation. The fall in the euro-zone composite PMI, to a 75-month low, indicates that the economy almost …
24th September 2019
We are cutting our forecast for euro-zone GDP growth in 2020 and expect inflation to stay close to 1%. Moreover, we think the ECB will revise its inflation target in the coming months, then cut its deposit rate to -0.8% and further step up QE next year, …
The ruling by the Supreme Court in the UK that the Prime Minister’s decision to prorogue Parliament was “unlawful, void and of no effect” and that the suspension should be “quashed” as soon as possible increases the chances of a delay to Brexit and …
The Bank of Japan’s announcement that it will “re-examine economic and price developments” at its meeting at the end of October has been widely interpreted as opening the door to a shift on policy. In this Update , we highlight the indicators that will …
This Update was originally sent to clients as a Rapid Response immediately after the ruling by the Supreme Court on the legality of the Prime Minister’s decision to suspend Parliament until 14 th October. The ruling by the Supreme Court that the Prime …
With attention focused on the impact of tariffs on goods trade, the recent decline in services exports has gone largely unnoticed. But that has already knocked a few tenths off GDP growth and, with the weakness concentrated in sectors in which the US has …
23rd September 2019
President Nicolas Maduro’s attempts to control inflation have had some effect, but without more severe measures we think that price pressures will probably remain extremely high over the coming months. After peaking at 350,000% y/y in January, Venezuelan …
We think that this year’s joint surge in the prices of US equities and government bonds is on its last legs, given the outlook for monetary policy and corporate earnings. Share prices get a boost when there is a reduction in the rate at which investors …
Lower production in Saudi Arabia and the lower-than-expected US output growth have led us to revise down our global oil supply growth estimates. We now expect the market surplus to be smaller than we had previously expected in 2020, which will support …
Protests in Egypt over the past few days have ignited concerns that the country is on the cusp of another period of political upheaval. Past experience suggests that this would be disruptive for the economy and government efforts to quell unrest, such as …
The UK has significant financial ties to Hong Kong, and the recession and correction in house prices we are forecasting there will put the territory’s financial sector under pressure. However, only a couple of UK banks are vulnerable. And as they appear …
The use of retail CVAs may have peaked. However, given that CVAs lower the overall market rent and that those retailers who have been subject to a CVA are still at risk of insolvency, we think that retail rental values have further to fall. Since early …
The deterioration in the external environment and willingness of the Hungarian MPC to look through above-target inflation means that monetary conditions are unlikely to change over the next twelve months. That said, we think that the central bank will …
20th September 2019
Given our view that the US economy will avoid a recession, we doubt that the Fed will deliver as many rate cuts as investors anticipate. As such, we think that Treasury yields will rise substantially next year. To re-cap, the Fed voted this week to cut …
We estimate that 190,000 tonnes of refined nickel have flowed into unreported stocks since 2017. In other words, nickel stocks are much higher than official numbers indicate. This supports our view that nickel prices will decline next year even if …
Fiscal loosening measures announced by Finance Minister Nirmala Sitharaman today are likely to provide a small boost to economic growth over the coming quarters, but significantly increase the chances of the ministry missing its budget deficit target this …
Increased competition among lenders has caused mortgage interest rates to fall in recent months. But funding costs are set to remain pretty stable. That, combined with already tight interest margins and increased regulation, leaves limited scope for rates …
The changes to the SNB’s tiering system, announced yesterday, are even more generous to domestic banks than they initially appear, and will help to ‘sugar the pill’ ahead of a probable rate cut. The main point of interest at yesterday’s SNB meeting was a …
The decision to reform the RPI measure of inflation at some point between 2025 and 2030 could reduce RPI inflation by a little under 1ppt a year. That could give the Government a windfall of about £3.2bn per annum at the expense of bondholders and …
The newly-revamped Loan Prime Rate (LPR), the reference point against which banks now price loans, came in slightly lower for September. We think that more decisive cuts will materialize before long. The one-year LPR was set at 4.20%, down from the …
US production of light crude oil will continue to grow in the coming years, and we expect that this will lead to the US becoming a net exporter of crude oil by 2021 . US oil production has grown sharply from 5.5m bpd in 2010 to 12.4m bpd currently, owing …
19th September 2019
Although the oil price has fallen back since the weekend’s attacks on production facilities in Saudi Arabia, it could surge again if there are further strikes or if tensions in the Middle East escalate into a full-blown conflict. In that event, we think …
Given policymakers’ decision to keep their key rate on hold at 6.50% today, we now think that South African interest rates will remain unchanged over the coming quarters. Policymakers do not seem inclined to take the opportunity to boost the economy, and …
Given the drop in GDP in Q2, the fall in core inflation to an almost 3-year low in August and the ongoing Brexit drama, there was never much chance that the MPC would raise interest rates from 0.75% today. And even though the tone of the minutes was …
The surprisingly low uptake of the ECB’s TLTROs today was probably a one-off, and uptake in December is likely to be stronger. But even if it is, we doubt that this will provide much of a boost to the economy. At just €3.4bn, uptake in the first TLTRO-III …
Taiwan’s central bank (CBC) left its key policy rate unchanged today at 1.375%, and with growth picking up we doubt it will be in any rush to join the region’s rate cutting cycle. We expect interest rates to be left on hold until at least the end of next …
This morning’s decision by the Norges Bank to raise its key policy rate by 25bps, to 1.50%, was is in stark contrast to the rate cuts delivered by the Fed and the ECB over the past week. Nonetheless, given the dovish shift in the Bank’s tone, we agree …
Sri Lanka’s economy held up better than we had expected last quarter given the drag from the recent terrorist attacks on the country. But we suspect that the published figures overstate the real strength of the economy. With the tourist sector likely to …
The ability of monetary easing to stimulate credit growth in China has diminished and we think this will lead the People’s Bank to pull down interbank rates further than most anticipate. But even this probably wouldn’t avert a further economic slowdown …
The Bank of Japan’s pledge today “to reexamine economic and price developments” at its next policy meeting has further fuelled speculation of a rate cut in October. Governor Kuroda added in his press conference that the Board “has become more eager to …
Today’s rate cut by Bank Indonesia (BI) clearly signals that its main priority at the moment is supporting the struggling economy. While we think further easing is likely, the central bank is likely to tread cautiously over the coming months. The rate …
Given that the Swiss National Bank last changed its policy stance in January 2015, this morning’s decision to leave its policy rate on hold at -0.75% came as no surprise to us. But its tweak to make its tiering system more generous to banks lends further …
Stamp duty changes previously hinted at by the Prime Minister could affect over half of all home buyers, with more expensive homes seeing substantial savings. While the effect on house prices would be minimal, it could provide a modest boost to …
While far from certain, there is a growing chance that the German government announces a fiscal stimulus in the coming weeks or months. However, even if it does, we think any boost to demand would be too small to make much difference to short-term growth …
The Brazilian central bank’s decision to cut the Selic rate by 50bp last night was accompanied by a statement clearly signalling that policymakers intend to ease monetary policy further. As a result, we now expect another 25bp cut in October. The 50bp cut …
The Fed voted to cut its key policy interest rate by an additional 25bp today, to between 1.75% and 2.00%, but the FOMC is more split than ever over what to do next. Close to one-third of the FOMC is projecting another rate cut before year-end, while …
18th September 2019
