The decision by the Riksbank to leave its repo rate on hold at -0.25% this morning came as no surprise, but the fact that it left its (in our view) optimistic forecast for interest rates unchanged bucks the dovish trend by other central banks, notably the …
3rd July 2019
Yesterday’s announcement that Christine Lagarde will succeed Mario Draghi leaves us even more confident that the ECB will loosen monetary policy in the coming months. We think the Bank is likely to cut its deposit rate in September and re-launch QE before …
The jump in euro-zone core inflation in June seems to have largely reflected temporary factors. More generally, a range of measures of underlying inflation suggest that price pressures remain subdued. This should encourage the ECB to loosen policy sooner …
2nd July 2019
Swiss pension funds and life insurers have been among the losers from negative interest rates, but the SNB is unlikely to follow the Bank of Japan’s example of targeting long-term bond yields to limit the damage on the sector. Given that we now expect …
A rise in inflation has led five of the ten Polish MPC members to suggest that interest rates may soon need to be raised. But we doubt that any of the five more dovish members, including Governor Glapinski (who has the deciding vote in the event of a …
While the RBA lowered the cash rate to 1.0% at today’s meeting, it signalled that it won’t ease policy any further for now. However, we think that the Bank remains too optimistic about the outlook for the labour market and inflation. Accordingly, we’ve …
In theory, last weekend’s trade truce between the US and China is a positive for commodity prices . But the muted market reaction suggests some scepticism. We tend to agree. In fact, we suspect that any boost to demand will only be temporary, and that …
1st July 2019
The continued broad-based decline in the global manufacturing PMI in June appears to confirm that the industrial malaise worsened in the second quarter . The global manufacturing PMI, published today, fell from 49.8 to 49.4, leaving it consistent with a …
The further fall in the EM manufacturing PMI last month suggests that EM growth slowed in Q2 and the forward-looking components of the survey point to a weak start to the third quarter. The EM manufacturing PMI fell to a five-month low of 49.9 in June, …
With the economic slowdown feeding through to weaker job gains, the apparent surge in consumption growth in the second quarter will not be sustained. But the strength of households’ balance sheets and the still-elevated saving rate suggest that, barring a …
As long-term clients will know, we have been publishing different forecasts for the economy based on two different Brexit outcomes, “deal on 31 st October” and “no deal on 31 st October”. We are now adding a third – “repeated delays” in which the Brexit …
The preliminary trade deal between Mercosur (Brazil, Argentina, Uruguay and Paraguay) and the EU, if implemented in full, would boost potential growth in the bloc, perhaps by as much as 0.75-1.0%-pt. But with a lengthy phase-in period for some measures, …
Another month of weak PMI readings confirms a renewed slowdown in China’s economy. While optimism surrounding the US-China trade truce is currently buoying commodity prices, we think slower growth in Chinese demand will be a factor dragging prices lower …
This report is only available as a PDF. Click to download. … Chief Economist's Note: Checking in on our key calls …
India’s current account deficit narrowed in Q1 and, while significant policy loosening could cause imports to pick up over the coming quarters, we think that oil prices will remain low. This should keep the import bill in check. Meanwhile, FDI inflows …
The latest Business Outlook Survey somewhat surprisingly shows that Canadian firms have convinced themselves a recovery is just around the corner, even though the weak global backdrop and evidence of a slowdown south of the border would seem to suggest …
28th June 2019
We had previously assumed that the EU would put Italy into an Excessive Deficit Procedure in July, but recent reports suggest that this might be postponed until later in the year. Either way, Italy’s public finances remain on an unsustainable path, and …
Despite rising trade tensions and soft demand growth, we think that the price of copper will be resilient in the coming months and rally thereafter due to supply constraints . As we had anticipated, the LME copper price has dropped since mid-April due to …
Facebook’s new currency, Libra, could be a significant step forward in reducing the cost of processing international transactions. However, it is very unlikely to become a widely-used global currency. Libra’s unveiling has inevitably invited comparisons …
We have long forecast the yen to strengthen to ¥105/$ by the end of 2019, primarily based on our expectation that a sell-off in global equities would boost the demand for safe havens. While we remain of this view, the policy stance of the Bank of Japan …
The recent slowdown in logistics vehicle traffic is consistent with the softness of industrial take-up in the first quarter. Given the supply of industrial property is expected to increase this year, without a decent improvement in logistics vehicle …
The direct economic impact of an initial round of US sanctions on Turkey related to the purchase of Russian defence equipment would probably be limited, but past experience suggests that the threat of further sanctions would weigh on the lira and cause …
27th June 2019
Portugal recovered well from the euro-zone crisis and its economy is set to record above-trend growth for the rest of this year and next. But its high public and private debt levels suggest that it is vulnerable to an increase in interest rates and/or a …
While the performance of the US stock market in the Fed’s last four easing cycles was varied, our view remains that it will fall in the next one, which we expect to span from late-summer 2019 to spring 2020. The S&P 500 soared by nearly 15% in the …
Given the recent economic slowdown, new Finance Minister Nirmala Sitharaman is likely to announce more accommodative tax and spending measures when she unveils the union budget for this fiscal year on 5 th July. Ms Sitharaman may choose to paper over the …
It seems likely that Presidents Trump and Xi will agree to another tariff ceasefire on the sidelines of this weekend’s G20 summit in Osaka, Japan. But given the differences between the two sides, we suspect that any truce will prove temporary. The …
26th June 2019
The Czech National Bank’s post-meeting communications offered the strongest hint yet that the monetary tightening cycle is over. With underlying inflationary pressures likely to ease and the global economy set to slow further, we think that easing will …
Following this morning’s decision by the Central Bank of Iceland (CBI) to cut its key interest rate by 25bps, we now think that further cuts are in the pipeline. However, to the extent that a rumoured fiscal stimulus and a weaker króna help to steady the …
The Bank of Thailand (BoT) left interest rates unchanged today and gave little hint that it was preparing to follow other central banks in the region by loosening monetary policy. We expect interest rates to be left unchanged at 1.75% throughout 2019. …
While the escalating spat between Switzerland and the EU has drawn obvious parallels with Brexit, the implications for Switzerland are likely to be quite modest. And while Brexit has taken a toll on sterling, the latest dispute is unlikely to detract from …
The RBNZ’s dovish tone supports our view that the Bank will cut rates again before the year is out. In fact, we now think the Bank will cut at its next meeting in August, and once more at its November meeting. The Bank’s decision to hold rates unchanged …
Our GDP Tracker suggests that Saudi Arabia’s economy slowed further at the start of Q2 as the drag from the oil sector intensified and the recent pick-up in the non-oil sector started to peter out. We expect growth to slip further over the rest of this …
25th June 2019
The turning point for Indian gold imports is looming Gold imports in India and China diverged in May, as temporary factors propped up consumer buying in the former, while demand in the latter remained sluggish. But we expect import demand for gold in both …
We still think that further monetary tightening lies in store in Hungary over the next eighteen months. But dovish communications accompanying today’s monetary policy meeting, and the reluctance to hike interest rates in the face of rising inflation, …
Prague prime high street yields ticked up in Q1 on the back of stretched pricing. Yet, given that bond yields have fallen and the next move for interest rates is expected to be downwards, we think that this will be the full extent of the correction, and …
Concerns about a shortfall in global oil supply have resurfaced as a result of the escalation in geopolitical tensions surrounding Iran. But we think there are four key reasons why the risk to supply is less now than back in 2011, when hostility between …
The People’s Bank has pushed down overnight interbank rates to multi-year lows. This is partly a response to market jitters following the Baoshang Bank takeover and may partially reverse in the coming days. But we think that the broader shift toward …
PMI surveys for June imply that the slowdown in advanced economies worsened in the second quarter, as growth in the US dropped back towards the weak pace already experienced in the euro-zone and Japan. With price pressures easing too, the surveys support …
The surprise resignation of RBI deputy governor Viral Acharya – one of the most hawkish members of the MPC – boosts the chances of further rate cuts in the near term. But it should once again raise questions over the RBI’s credibility and its …
The opposition candidate secured victory in the rerun of Istanbul’s mayoral election, but this is unlikely to result in a favourable shift in the direction of economic policymaking in Turkey as a whole. And major risks still lie ahead for the economy, …
24th June 2019
The immediate economic impact of the protests in Hong Kong will be very small. But continued erosion of Hong Kong’s autonomy, which is threatened by the proposed extradition law, would undermine a key foundation of its economic success. … What do the …
12th June 2019
We think the small scale of China’s planned tariff hikes reflects three factors – a desire not to escalate tensions, the limited scope for further tariffs and China’s ability to use other tools to punish US firms. … Three reasons for China’s modest …
14th May 2019
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
29th March 2019
The key takeaway from today’s policy announcements at the opening of the National People’s Congress is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate policy …
5th March 2019
China looks likely to introduce only about half as much fiscal and monetary stimulus in response to the current downturn as it did in 2015/16. Any rebound in growth will be much more tepid as a result. The boost for countries that export to China will be …
6th February 2019
The finance ministry made a clear bid in the interim budget today to shore up popular support ahead of the general election with proposals to boost rural incomes and cut income tax. But it is also hoping to demonstrate its commitment to fiscal prudence by …
1st February 2019
In advanced economies, monetary and credit conditions remain supportive. But bond issuance has been declining sharply in recent months, and credit growth in China is still slowing. … Monetary Indicators Monitor …
The decision by the US to impose sanctions on Venezuela’s state-owned oil company, PDVSA, will lead to a large loss of export earnings in the next few months. If Maduro can cling on to power during this time (perhaps by securing loans from China and …
29th January 2019
The finance ministry will be keen to include some election sweeteners in the interim budget that is due on 1st February. But it will also want to demonstrate fiscal rectitude. The most likely outcome is that the deficit target for FY18/19 is revised up …
24th January 2019
