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NBP keeps rates on hold, probably for the whole year The National Bank of Poland (NBP) left its policy rate on hold again today, at 5.75%, and the inflation backdrop is likely to prevent the restart of the easing cycle for some time. We don’t expect …
16th January 2025
December’s weaker-than-expected inflation outturn won’t sway Norges Bank: we still expect it to wait until March to start cutting interest rates. We suspect that it will then lower rates gradually, once per quarter, until the key policy rate reaches 3% in …
Economy still at risk of contracting in Q4 While the smaller-than-expected 0.1% m/m rebound in GDP in November (consensus and CE forecast +0.2% m/m) offset the 0.1% m/m decline in activity in October, it’s clear that the economy has a bit less momentum …
Higher mortgage rates appear to be weighing on housing demand December’s RICS survey suggests that the relief rally after the Budget may have started to fade at the end of last year and the recent rise in mortgage rates have finally began to weigh on …
The ceasefire reportedly agreed between Israel and Hamas is likely to have significant consequences for some countries in the region, notably Israel itself as well as Jordan and Egypt. But the possible disinflationary impact for the rest of the world via …
15th January 2025
Inflation continues to accelerate The rise in Russian inflation to 9.5% y/y in December is likely to be followed by an increase to more than 10% early this year. The central bank has set a high bar for further tightening but we think the balance remains …
Easing cycle to stay on pause amid inflation and fiscal risks The National Bank of Romania (NBR) left its policy rate on hold again today, at 6.50%, amid continued concerns about the inflation outlook and the direction of fiscal policy post-election. We …
Slowing economic growth and rising availability will hold back French industrial rental growth this year, with affordability concerns likely to be an additional drag in Paris. This will leave the region underperforming other euro-zone markets, with …
This page has been updated with additional analysis since first publication. Outlook weak despite rise in production The small uptick in euro-zone industrial production in November will be of little relief to the beleaguered sector. Surveys suggest that …
A flurry of elections are due across Central and Eastern Europe (CEE) over the next year or so, which will provide a gauge of support for Ukraine and, in some cases, will shape countries’ future relationship with the EU. Fiscal risks will also be in the …
Germany still in the doldrums Preliminary GDP data for Germany suggest there is still no sign of the country exiting stagnation, with GDP down slightly in both Q4 and in 2024 as a whole. We forecast a very small cyclical recovery in 2025, but even that …
This page has been updated with additional analysis since first publication. Soft surprise boosts February rate cut odds While a lot of the surprisingly large fall in services inflation from 5.0% in November to 4.4% in December (CE forecast 4.8%, BoE …
EM sovereign FX debt issuance surged over the past year and at the start of 2025, albeit with many sovereigns returning to global markets and issuing at high interest rates. Borrowing does not look excessive and there’s unlikely to be a further sharp rise …
14th January 2025
Poland’s public debt dynamics are more favourable than many of its peers. But the sharp widening of the budget deficit, coupled with the decision to leave austerity measures until next year and beyond, suggests that it will be challenging to get the debt …
At first glance the 24% y/y drop in sponsored study visas in Q3 2024 spells bad news for PBSA rents. But the cause of that drop - new rules banning international students from bringing dependents - means the decline will have been concentrated in students …
Madrid has seen some of the region’s strongest prime office rental growth in the recent past. While the factors supporting this surge may weaken slightly over time, we think that rent and returns performance will remain close to the top of the euro-zone …
Our base case is that a stabilisation and eventual fall back in gilt yields will allow the government to muddle through and wait until the next fiscal event on 26 th March before making any decisions on taxes and spending. However, a significant worsening …
The recent ramp-up in US sanctions on Russia’s oil supply chain has tightened the global oil market and may keep prices higher in the near term. But we still expect greater OPEC+ supply and weak demand growth to drive prices lower towards $70pb by the end …
UK commercial property finally turned a corner in 2024 after a few painful years. But 2025 has started with a bruising sell-off in gilt markets that has seen yields surging to multi-year highs. Will this imperil the market’s recovery? Where will the …
13th January 2025
While the economy lost all momentum at the end of last year, we still expect GDP growth to accelerate from 0.8% in 2024 to an above-consensus 1.3% in 2025. Admittedly, activity could be restrained if the increase in the government’s borrowing costs due to …
On the face of it, the fact that the world is installing more renewable electricity generating capacity than seemed likely just a few years ago is encouraging for the green transition. That said, one must not lose sight of the fact that non-renewable …
2025 has taken little time to get going, with more evidence of the US’ relative economic strength, weakness in Chinese equity markets, and a dramatic sell-off in DM bond markets – not least gilts. And that’s all before Donald Trump is sworn in. In this …
The CDU’s economic policy agenda, released today, clearly recognises the scale of Germany’s economic challenges and proposes some sensible policies to address them. But some of the measures are not ambitious enough and many will not be implemented in full …
10th January 2025
This week’s leap in gilt yields creates more problems for the Chancellor and is an extra headwind for the economy. But it is not a crisis. Admittedly, it is always worrying when UK bond yields rise by more than yields elsewhere and the pound weakens. …
Trump softening his expectations on the war? Expectations for an imminent end to Russia’s war in Ukraine once Trump takes office as US President on 20 th January took a knock this week, following an FT report and recent comments from officials suggesting …
We expect the euro-zone economy to grow at only a sluggish pace this year, with southern economies outperforming the core. Germany’s election will lead to only a modest loosening of its restrictive “debt brake”. France’s budget deficit will remain very …
Oil market rally on shaky foundations The recent rise in oil prices has dominated proceedings so far this year; at the time of writing, Brent crude is currently at $79.8pb – up more than 3.5% on the day and more than 11% higher than its December low. For …
ECB to keep cutting rates gradually With data this week revealing that services inflation remained stuck at 4% in December, ECB policymakers will feel in no hurry to slash interest rates. (See here .) We have taken out the 50bp rate reduction that we had …
With long-dated gilt yields hitting multi-decade highs, we held an online Drop-In session on Wednesday to discuss the outlook for the gilt market and the implications for government policy and the UK macro and housing market outlook. (See a recording here …
9th January 2025
While upside risks to energy prices have garnered plenty of attention in recent months, there are several downside risks that are worth noting. Although we would characterise the downside risks – Saudi Arabia performing a major pivot in oil policy and …
UK Gilts have not only been embroiled in a global government bond sell-off, but they have fared worse than others. However, we think that bonds will recover before long, with yields in the UK falling particularly sharply by the end of this year. The …
We originally published an Update ahead of the general election on 4 th July on what taxes the next government could raise. In light of the recent rise in gilt yields putting the Chancellor on course to break her fiscal rule, we have refreshed this …
2024 likely marked the bottom in all-property values in Europe, but we expect further falls in the US in 2025. That said, US performance should improve further ahead, outpacing the euro-zone over the 2025-29 period. By sector, stronger rental growth will …
The troubling start to 2025 is casting doubt over our key non-consensus forecasts for 2025. But we still think other forecasters are underestimating how fast the economy will grow, how far inflation will fall and how many times the Bank of England will …
Weak retail sales at the end of last year The 0.1% m/m increase in euro-zone retail sales in November was a little worse than expected (CE +0.7%, consensus +0.4%) and follows a fall in sales of 0.3% in October (previously estimated at -0.5%). This …
The outperformance of the peripheral economies since early 2022 is likely to continue over the next year, supported by high immigration, tourism growth and Next Generation EU funding. That said, growth in the periphery will not be particularly strong by …
November pick-up but outlook still poor German industrial production picked up in November. But the level of output was still very low by past standards and with industry facing several structural headwinds we expect the sector to continue to struggle …
Against a backdrop of lower interest rates and weak economic growth in much of Europe, we think the recovery in property values will continue at a gradual pace in 2025. Our forecast for euro-zone total returns of almost 9% is a notable improvement on the …
8th January 2025
Compared to our end-2023 forecasts, property yields look set to end 2024 a bit higher than we anticipated and rental growth stronger. Overall, that means our call for all-property total returns of just over 6% in 2024 will prove correct. Our non-consensus …
This page has been updated with additional analysis since first publication. EC survey points to economy stagnating and price pressures remaining sticky The EC survey is broadly consistent with euro-zone GDP stagnating in Q4. It also suggests that …
Rachel Reeves’ room for manoeuvre is rapidly shrinking as long-end gilt yields rise. Amid a worldwide bond sell-off, should the government brace for its borrowing costs to keep increasing – and what are the implications for fiscal policy if they do? Our …
Inflation lower than expected, Riksbank to cut in January The fall in inflation in December will ease policymakers’ concerns about upside risks to inflation. We had previously been expecting them to wait until March before cutting the policy rate for a …
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
7th January 2025
The latest inflation figures out of Turkey have given us more encouragement that the disinflation process is underway and that the central bank could lower interest rates towards 30% by year-end. Even so, real interest rates will need to be kept …
There is a significant chance that the Office for Budget Responsibility (OBR) will judge that the Chancellor, Rachel Reeves, is on course to miss her main fiscal rule when it revises its forecasts on 26 th March. To maintain fiscal credibility, this may …
Brazil’s public finances have been in the headlines for all the wrong reasons over the past month. But while an extreme case, the combination of a large budget deficit and limited political will to rein it in isn’t unique to Brazil. Indeed, Mexico, …
The end of the downturn in the European property market came in 2024 as forecast, though the euro-zone performed better than we had expected. That primarily reflected the strength of the prime office market, where rents grew faster than both we and the …
Construction activity continues to expand despite drag from housing The headline CIPS construction PMI eased to a six-month low of 53.3 in December, from 55.2 in November, although that indicates construction activity is still expanding. The decline in …
This page has been updated with additional analysis since first publication. Sticky services inflation suggests ECB will continue cutting slowly The continued stickiness of euro-zone services inflation means that the ECB is likely to keep cutting interest …
