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Overview – With the inflation battle all but won, weak GDP growth will force the Bank of Canada into more aggressive action, with a couple of 50bp interest rate cuts to end this year. We expect the Bank to adopt a more measured pace of loosening in 2025, …
25th September 2024
Overview – A tight labour market and elevated public demand will keep the RBA from loosening policy before early-2025. Moreover, we expect the forthcoming easing cycle to be short-lived by past standards. By contrast, the more pressing need to stem the …
This page has been updated with additional analysis since first publication. Disinflation gathers pace The Reserve Bank of Australia will look past the sharp fall in headline inflation in August, given that the plunge was driven in large part government …
Increased supply and weak demand are both contributing to the slowdown in house price growth. The recent sharp drop in mortgage rates should cause the market to retighten, but it will take time for that to show up in house prices, which work with a …
24th September 2024
House prices lose further momentum Another muted 0.2% rise in house prices in July adds to the sense that the housing market is cooling amid weak buyer demand and growing supply. As price growth continues to moderate quickly with no signs of a turnaround …
The RBA didn’t discuss a rate hike at today’s meeting for the first time since March but reiterated its pledge that it won’t cut interest rates “in the near-term”. While the risks are starting to tilt towards an earlier rate cut, we’re sticking to our …
The government tried to prevent the Bank of Japan from hiking interest rates in 2000 but that attempt was unsuccessful and the government has respected the Bank’s independence ever since. Renewed efforts to bring the BoJ to heel look unlikely now given …
RBA will only cut in first half of next year The RBA sounded marginally less hawkish today but we still expect the Bank to only lower interest rates in Q2 2025. As widely anticipated, the Bank kept its policy rate unchanged at 4.35%. The key elements of …
Flash PMI suggests continued rebound in activity The composite PMI remained at healthy level in September which suggests that the strong rebound in activity that started last quarter will continue across the second half of the year. Today’s flash estimate …
Overview – With inflation normalising due to improving supply, the Fed is in the fortuitous position of being able to lower interest rates even though economic growth remains solid and the unemployment rate is still relatively low. Despite the downshift …
23rd September 2024
The latest flash PMIs suggest that GDP growth slowed in advanced economies at the end of Q3, particularly in the euro-zone. Meanwhile, weaker activity seems to be weighing on services price pressures, which should give central banks confidence to continue …
This page has been updated with additional analysis since first publication. Growth slowing, not collapsing The fall in September’s composite flash PMI is probably not a sign that the economy is on the cusp of another downturn, but instead is further …
After the long-awaited start to the Federal Reserve’s easing cycle, Group Chief Economist Neil Shearing discusses next steps. He answers client questions about the risks of inflation bouncing back and explains why we expect rates to settle at levels much …
20th September 2024
Offices are still in for a tough few years, with markets like San Francisco, LA and Seattle likely to come out of the downturn with values down 55% or more from their 2019 peaks. However, there are markets, predominantly in the South, where rising office …
Fed opts for a 50 despite strong GDP growth Fed goes big The Fed’s decision to start its rate cutting cycle with a bang was not a big surprise after the seemingly coordinated media articles late last week warning that the 25bp vs 50bp debate was closer …
Stronger third quarter consumption The rebound in retail sales volumes in July will be welcome news to the Bank of Canada, which has been concerned about the downside risks to the economy. With the outlook for sales positive, there is a better chance …
The contrast between the Bank of England keeping interest rates on hold at 5.00% this week, along with the accompanying message that it will cut interest rates only gradually, and the US Fed kick-starting its easing cycle with a big 50 basis point (bps) …
Takaichi leading in the polls According to a recent poll, Economic Security minister Sanae Takaichi is seen as the most suitable successor for departing Prime Minister Fumio Kushida. However, the LDP’s leadership elections next Friday will probably …
The Bank of Japan today signalled that it’s in no rush to tighten monetary policy any further and we’re pushing back our forecast for a final rate hike to 0.5% from October to December. As widely anticipated, the Bank kept its policy rate unchanged at …
Retail sector on track to support consumer spending in Q3 The unexpected large rise in retail sales volumes in August came on the back of a 0.7% m/m increase in July (revised up from 0.5% m/m) and lends some support to our view that the recent stagnation …
This page has been updated with additional analysis since first publication. Borrowing disappoints but backdrop not as dire as Chancellor suggests August’s public finances figures continued the recent run of bad news on the fiscal position, with public …
O labour market slack, where art thou? In the wake of the Fed’s hawkish 50bp cut and another set of strong Australian labour market data , the financial markets now see a lower 60% chance of an RBA rate cut by the end of the year, down from 85% when we …
The Bank of Japan kept policy unchanged today as widely anticipated and we’re sticking to our forecast that it will deliver another 25bp rate hike at its October meeting. As correctly anticipated by all analysts polled by Reuters, including ourselves, the …
Underlying inflation will hover around 2% until early-2025 Underlying inflation rebounded in August and will remain close to the BoJ’s 2% target until early-2025, triggering another rate hike by the Bank at its October meeting. The 2.8% annual rise in …
In the months ahead, there are five themes to watch for in the world of trade and shipping, the most immediate of which is the risk of strikes at US East and Gulf coast ports in October. The upshot is that, after a nascent recovery in the first half of …
19th September 2024
Sales slump, but signs of life emerging The slump in existing home sales in August shows that the sharp fall in mortgage rates since late-July is yet to stimulate the market, although the signs of life in last week’s purchase mortgage applications data …
We’ll be discussing the differences in the policy outlook for the Bank, the ECB and the Fed in a 20-minute online briefing at 3pm BST today. (Register here .) By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the …
For our more detailed analysis of the Bank's September policy announcement, see here . BoE underlines that interest rates will be reduced gradually By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the Fed and is …
Unemployment rate will approach 5% next year The labour market and population data released today are consistent with our view that the Reserve Bank of Australia will only lower interest rates in Q2 2025. For a start, the 47,500 rise in employment in …
This page has been updated with additional analysis since first publication. RBNZ still on course to loosen policy aggressively Economic activity in New Zealand last quarter wasn’t quite as weak as most had anticipated. However, we still think there’s a …
The Fed did cut its policy rate by a bigger 50bp today, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections point to smaller 25bp cuts at the remaining two FOMC meetings this year. Accordingly, today’s announcement is …
18th September 2024
A hawkish 50 The Fed did cut its policy rate by a bigger 50bp, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections only shows an additional 50bp of cuts between now and the end of this year. Accordingly, today’s …
Rebound in housing starts The large rise in housing starts in August was due to a rebound in starts in the south, confirming that the July slump was a temporary disruption caused by Hurricane Beryl. The increase in permits, particularly in the …
This page has been updated with additional analysis since first publication. Rise in services inflation makes September rate cut even less likely CPI inflation stayed at 2.2% in August (consensus & CE 2.2%, BoE 2.4%), but the rise in services inflation …
Even though state and federal budgets point to a sharp slowdown in public demand in 2024/25, our analysis suggests that the public sector will keep providing a sizeable boost to GDP growth. And if we’re right that private demand will pick up as real …
Drag from net trade will moderate Q3 GDP growth Even though the trade balance held up much better than most had anticipated in August, net trade will still provide a large drag on Q3 GDP growth. The 5.6% y/y rise in export values was much weaker than the …
We doubt the gap between expected interest rates in the US and its trading partners will keep shrinking, given what’s priced into the money markets. That could potentially buoy the dollar in time, assuming the Fed shies away from slashing its policy rate …
17th September 2024
Rent growth slowing rapidly Increased supply and weaker demand are pushing down rents in several cities. That raises the risk of another leg down for apartment prices, despite the recent drop in mortgage rates. The housing market is struggling for …
Despite the US being a net oil exporter, the recent plunge in the oil price will be a tailwind for the economy, as lower gasoline prices support consumer confidence and real consumption. The Fed will largely look through the impact on headline inflation, …
We doubt the small fall in Nationwide house prices in August was the start of a renewed downturn. Surveys suggest the recent declines in mortgage rates have led to an increase in housing demand, while a significant near-term pick-up in supply appears …
Manufacturing output rebounds, but challenges remain Manufacturing output rebounded strongly in August as the temporary disruptions to production from the previous month were reversed. Together with last month’s solid gain in control group retail sales, …
Consumers remain resilient The stronger-than-expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown. With control group sales …
Mission almost accomplished The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects and is likely to be short-lived, with inflation rebounding to as high as 2.5% by the turn of the year. Nonetheless, the …
Limited data flow since August meeting broadly in line with RBA’s expectations Bank will therefore reiterate pledge to keep rates unchanged this year First rate cut will happen in Q2 next year The Reserve Bank of Australia will probably stick to its …
