The Monetary Policy Committee (MPC) struck a more dovish tone today while raising interest rates from 0.75% to a 13-year high of 1.00% and saying that it won’t make a decision until after August on whether to shrink its balance sheet quicker by selling …
5th May 2022
Poland’s government has shown no signs of meeting President Putin’s demand to get gas flows restored, but we think the economy is relatively well placed to deal with a loss of Russian supplies. As things stand, we do not expect any energy rationing and we …
We think that the surprising stability of the Turkish lira so far this year will not last much longer and we forecast it to weaken against the dollar over the coming months, from ~14.8/$ now to 18/$ by end-2022. This would be a fall of around 20% and, …
As was widely expected, the Norges Bank left interest rates on hold at +0.75% today and all but confirmed that “the policy rate will […] be raised in June”. After June, we forecast two more rate hikes in 2022 and one per quarter next year, which would …
We expect Indonesia’s latest ban on palm oil exports to be short-lived, but constrained supply and the high prices of other edible oils, coupled with elevated oil prices, will support the price of palm oil. We’ve revised up our palm oil price forecast to …
The communications following the Brazilian central bank meeting yesterday, at which the Selic rate was hiked by 100bp (to 12.75%), confirm that the tightening cycle is nearing an end. But even so, with inflation set to remain firmly in double digits over …
With the Fed "highly attentive to inflation risks" it raised its policy rate by a bigger 50bp today, to between 0.75% and 1.00%, and launched its quantitative tightening; with the caps on the value of maturing principal allowed to run off each month set …
4th May 2022
Consensus forecasts hiked again, but pricing correction approaching Consensus forecasts for rents and total returns in 2022 and 2023 have been upgraded in all four sectors since the last survey. But those changes come with property pricing looking more …
The EU proposal to end imports of Russian crude oil and petroleum products by the end of the year has long been in the works. If approved, we expect Russia’s oil exports to fall by around 20% this year, which in turn would keep oil prices over $100 per …
The steep declines in home sales across Canada’s major cities reinforces our view that a downturn in residential investment will prevent the Bank of Canada from raising interest rates by as much as markets are now pricing in, particularly if – as looks …
Having surged over the past two years, there are signs that EM exports may now have passed their peak. That will weigh on economic growth, particularly in parts of Asia. Manufacturers in the emerging world have been among the main beneficiaries from the …
The prospect of tighter monetary policy in the euro-zone has raised the threat of a bigger sell-off in the region’s bond markets. If this happens, we think the ECB would ultimately intervene to prevent any lasting damage. But we doubt that it will agree …
The Reserve Bank today turned even more hawkish with an unscheduled, unconventional 40bp hike that takes the repo rate to 4.40%. We had been among the early hawks on Indian monetary policy and were already expecting more rate hikes than the consensus this …
The pass-through of higher import costs resulting from the weaker yen and soaring energy prices will lift underlying inflation close to the BoJ’s 2% target by the end of the year. However, with wage growth unlikely to pick up in response, inflation will …
While the low level of prime industrial yields compared to history leaves the sector vulnerable to rising interest rates, a fair value analysis that incorporates our expectations for rental growth suggests that office yields could come under more upward …
While the job openings and quits rates both edged up again in March, the bigger picture remains that labour market conditions have been stable over the past nine months or so, with few signs that shortages have begun to ease markedly, with the notable …
3rd May 2022
Uncharacteristically, euro-zone GDP rose while US GDP fell in Q1. But the weak outturn in the US partly reflected temporary factors and domestic spending remained much stronger than in the euro-zone. We expect normal service to be resumed in the rest of …
The global manufacturing PMI fell back in April. Admittedly, it was a sharp drop in China’s PMI that weighed on the global aggregate, but there are warning signs in the PMIs of most of the major advanced and emerging economies . While supply constraints …
The timeliest surveys show that supply problems faced by euro-zone companies have eased a little this year, but remain intense. This will continue to weigh on production and keep inflation high. Since the start of the year there have been signs that the …
The RBA started hiking the cash rate today and sounded hawkish for the first since the start of the pandemic. Our forecast that interest rates will reach 2% by year-end is far above the analyst consensus of 1%, but the risks are tilted to the upside . The …
The latest manufacturing PMIs suggest that activity got off to a weaker start in Q2, as lockdowns in China led to a sharp fall in activity there. Forward-looking components of the surveys – including new orders and new export orders – suggest that …
2nd May 2022
Russia’s central bank (CBR) cut its policy rate by another 300bp to 14.0% today and the communications suggest that the CBR is now more focused on boosting credit growth than it has been in the past. This shift in the CBR’s policy framework is likely to …
29th April 2022
Our new, higher, UK interest rate forecast means we now expect commercial property yields will start to rise by the end of this year, earlier than in our previous profile. Intensifying inflationary pressures led us to revise our forecasts in our latest UK …
While Q1 investment data showed further strength, the impact of the war in Ukraine on investor sentiment, economic growth and interest rates support our view that pan-European (excl. UK) investment activity will slow further ahead. There was little impact …
The cap on the wholesale natural gas price for the Iberian market will result in a bigger fall in energy inflation in Spain than we had previously expected. It might also dampen underlying price pressures, but the big picture is that core inflation will …
28th April 2022
While the valuation of the S&P 500 appears high in absolute terms – even after the falls in the index in 2022 so far – it seems far less stretched once the still historically low real yields of US Treasuries are considered. And it would probably take a …
As we had expected, the Riksbank finally bowed to economic logic in its April meeting by raising the repo rate, to +0.25%, and announcing that it will begin to shrink its balance sheet this year. While the Bank has spoken in the past of the need to tread …
The Bank of Japan resisted the temptation to widen its tolerance band for 10-year JGB yields today, but it did outline that it will from now on conduct unlimited fixed rate auctions every business day until yields drop back comfortably below its ceiling …
A weaker economic outlook and larger increases in interest rates this year and next mean that we now think euro-zone all-property yields will reach their trough by the end of this year and will come under more upward pressure than previously expected. In …
Russia’s decision to suspend gas deliveries to Poland and Bulgaria from today because of a payments dispute will only strengthen the EU’s resolve to end its dependency on Russian gas, keeping gas prices historically high for months to come. The move also …
27th April 2022
Our new forecast that interest rates will be raised from 0.75% now to a peak of 3.00% next year is more hawkish than the peak priced into the financial markets (2.50%) and the peak expected by the consensus of economists (2.00%). That’s because we think …
Although the fortunes of major assets have varied after high inflation in the US has peaked, we still think the historical evidence may offer clues to their relative performance in the coming years. Last summer, we examined the performances of a selection …
Our new, higher, interest rate forecasts mean that we now expect house prices to fall marginally in 2023 and 2024. While there are risks on both sides, our base case is that prices drop by 5% overall, reversing a fifth of the surge in house prices since …
With US Treasury yields set to keep rising over the coming year, it will become even more difficult for the Bank of Japan to defend its target for 10-year JGB yields. While we don’t expect the Bank to abandon Yield Curve Control altogether, we think it …
26th April 2022
Spillovers from the war in Ukraine are likely to cause Turkey’s current account deficit to widen to more than 4% of GDP this year. In the recent past, deficits of this scale have tended to precede sharp falls in Turkey’s currency. Turkey’s current account …
25th April 2022
In our latest European Economic Outlook , we set out three non-consensus forecasts for the euro-zone. First, we think inflation will overshoot expectations this year. Second, the hit that this will deliver to spending power means that the economy is …
The re-election of French President Emmanuel Macron gives him five more years to improve France’s economic potential and its public finances, with pension reform and the green transition central to his plans. But Le Pen’s greater vote share suggests he …
We think that a period of sustained outperformance from emerging market (EM) equities relative to those in developed markets (DMs) – like that which accompanied the last big bull run in commodities in the 2000s – is unlikely. That partly reflects our view …
22nd April 2022
The Flash PMIs for April suggest that activity in advanced economies generally held up better than expected at the start of Q2, despite worries of a large hit to industry from lockdowns in China and the war in Ukraine. And there were even some signs that …
The squeeze on consumer incomes points to a tough couple of years ahead for regional and super-regional malls, which tend to be more reliant on discretionary spending than other retail property types. But we expect the divergence in mall performance …
The minutes of the MPC’s early April meeting – in which the committee kept the repo rate on hold but introduced a new rate that set a higher floor for the interest rate corridor – confirm that taming inflation has taken precedence over supporting the …
This Update presents our revised forecasts for the yields of developed market (DM) long-term government bonds, in light of recent market moves and changes to our expectations for monetary policy. We argued last month that the increase in DM government …
We think the yen will drop even further as policy divergence widens. We now forecast USD/JPY to reach 140 by the end of this year, before dropping back as the Fed takes its foot off the gas in 2023. While it has stabilised over the past couple of days, …
Past delays in development projects mean that office completions will exceed demand in Budapest this year and next. As such, having held broadly steady in 2021, office vacancy is set to rise again and put downward pressure on rents over the next couple of …
Households and corporates in advanced economies amassed savings during the pandemic which could feasibly be used to support consumption and investment in the current environment of rising costs. But since saving rates are now back to around pre-virus …
21st April 2022
We think the recent upturn in office market performance is largely down to the one-off release of pent-up demand and remain downbeat about future prospects. With occupancy still languishing and remote working firmly established, we think that the risks to …
Rising mortgage interest rates and tight credit conditions pushed the cash buyer share of existing home sales to a six-year high in March. But while the cash buyer share and house price growth are loosely correlated, we don’t think such buyers will be …
Iron ore prices have rocketed by close to 30% since the start of 2022 on supply fears. Yet, we expect cooler economic activity in China to weigh on iron ore demand, causing prices to fall by end-year. Russia and Ukraine are exporters of iron ore , and …
With the yen falling to a 20-year low against the dollar, talk of foreign exchange market intervention is growing. While we think the bar for any intervention is high , this Update answers some key questions. 1. Who decides whether to intervene? Bank of …
A cooling US housing market will weigh on lumber prices, despite disruption to imports from Canada. We expect the lumber price to continue its downward trend, but to remain well above its 10-year average . US lumber prices have been particularly volatile …
