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Donald Trump’s second presidency is likely to result in lower US GDP growth, faster US inflation and a slightly higher path for the fed funds rate. The implications for the rest of the world are highly uncertain, not least because it is unclear how many …
6th November 2024
NBP leaves rates on hold, risks to our rate forecast shift up slightly The decision by the National Bank of Poland (NBP) to leave its policy rate on hold again today, at 5.75%, was never in doubt, and we think that interest rate cuts are unlikely to …
Contraction in housing activity drags headline construction PMI down After a strong September the headline CIPS construction PMI dropped back to 54.3 in October, although that still points to an expansion of construction activity. A rebound in long-term …
Data released last week showed that the euro-zone’s unemployment rate was unchanged at a record low in September. But a broader assessment of the labour market suggests that it is cooling, and the latest surveys suggest that it will continue to do so. …
5th November 2024
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
Inflation figures out of Turkey – including those published for October yesterday – have surprised on the upside and forward-looking indicators suggest that the disinflation process will be slow in the coming months too. Consensus expectations for the …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
4th November 2024
Another upside surprise likely to reenforce CBRT’s hawkish stance The smaller-than-expected fall in Turkish inflation in October, to 48.6% y/y, is likely to dash any remaining hopes that a monetary easing cycle will start this year. The risks now seem …
CEE struggling, Hungary in a league of its own The Q3 GDP data out of Central Europe this week continued a bleak run of activity data for the region. The Czech economy grew by just 0.3% q/q – in line with our forecast, but some way below the central …
1st November 2024
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
The main economic news in the euro-zone this week were the stronger-than-expected GDP figures for Q3 and inflation figures for October, as well as a concerted effort by ECB policymakers to play down the need to accelerate the pace of rate cuts. So it is …
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
Inflation to drop sharply next year Another larger-than-expected fall in both headline and core inflation in Switzerland will increase concerns that the country could temporarily enter deflation next year. This will pile on pressure on the SNB to act …
This page has been updated with additional analysis since first publication. Mortgage rates will still fall next year and support house prices October’s 0.1% m/m rise in Nationwide house prices was a bit weaker than expected (consensus forecast +0.3% m/m, …
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
31st October 2024
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are …
An interest rate cut from 5.00% to 4.75% seems nailed on for November It’s less clear whether BoE will quicken the pace and cut rates in December too We think cuts will remain gradual until mid-2025, with rates eventually falling to 3.00% The Bank of …
We doubt the sell-off in gilts following the Budget will gather momentum and cause another step down in commercial property values. However, given the current narrow spread between risk-free interest rates and property yields, the latter are likely to …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
Norway’s economy is struggling and inflation keeps falling faster than Norges Bank expects, yet the Bank has not started loosening policy. Next week we think it will open the door to a December rate cut. At its last meeting in September, Norges Bank said …
The latest activity data out of Emerging Europe have been surprisingly weak, and GDP growth in many parts of the region looks as though it will come in below our previous expectations this year. That said, above-target inflation remains a concern, and we …
The Q3 RICS commercial survey painted a somewhat mixed picture of the market. There was a slight improvement in investment and capital value expectations, but rental expectations were revised down. That highlights that the road to recovery for commercial …
This page has been updated with additional analysis since first publication. Inflation rises but is still below ECB forecasts Euro-zone inflation came in a touch higher than expected in October but was still below the ECB’s projections for Q4. While …
The sell-off in the Gilt market after today’s budget announcement in the UK probably reflects concerns that the Chancellor’s fiscal plans will result in an increased a supply of bonds and less monetary easing. We will be reviewing our forecast for Bank …
30th October 2024
Growth slowing further in Q3, but consumer spending remains strong The latest Russian industrial production and retail sales figures for September were a bit stronger than expected, although GDP growth still probably slowed over Q3 as a whole towards 3.0% …
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks ease further, regional divergence among fiscal risks Financial vulnerabilities have declined further …
Our more detailed and update analysis can be seen here . Despite large rise in taxes, Budget still boosts economy As the Budget loosens fiscal policy relative to previous plans, it is consistent with GDP growth perhaps being a bit stronger and interest …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will residential continue to deliver? Which economies and markets offer the best opportunities? And what could go wrong with …
Central Europe continues to struggle The weaker-than-expected Q3 GDP data out of Central Europe, which showed that the Hungarian economy slipped back into recession last quarter, suggests that stagnating demand from the euro-zone is continuing to act as a …
Third quarter GDP data reported so far suggest that the aggregate euro-zone growth rate will be a little higher than we had forecast in Q3, but the big picture is that, the Olympics and Spain aside, growth in the euro-zone is weak and probably slowing. …
Softer rental prospects, less scope for yields to fall and lower income returns look set to weigh on French residential property returns compared to Germany, the UK and the US in the coming years. This Update uses a similar methodology to our recent Focus …
29th October 2024
Net lending to property sees another decent rise Net lending to property totalled £1.33bn in September, essentially unchanged from the previous month. Lending to standing assets was responsible for all of that total, with net lending to development seeing …
Budget has yet to affect households’ financial decisions Although consumer confidence has fallen ahead of the Budget, there is little evidence in September’s money and lending figures that Budget worries are having a big influence on households’ financial …
Economy contracts, but outlook is strong Preliminary data show that Sweden’s economy contracted by 0.1% q/q in the third quarter, far below the consensus expectation and the Riksbank’s forecasts (0.5% and 0.2% respectively). At face value this may suggest …
In light of the worsening outlook for economic growth and inflation in the euro-zone, we are making major downward revisions to our ECB interest rate forecast. We now think the Bank will implement back-to-back 50bp rate cuts in December and January, and …
28th October 2024
Maybe it’s the approach of Halloween that spooks the bond market so much. Two years ago, the UK government’s “mini Budget” triggered a meltdown in the gilt market and ultimately ended Liz Truss’s short but chaotic time as Prime Minister. Government bond …
The possibility of looser fiscal policy than previous planned in the upcoming UK Budget on 30 th October suggests the risks to our forecast that the 10-year gilt yield will fall to 3.50% by end-2025 are skewed to the upside, even if a repeat of the …
Has Poland’s consumer recovery gone into reverse? The downside surprise in Polish retail sales data this week was the biggest at any point in the past decade. (See Chart 1.) In contrast to expectations for a slight slowdown in growth to +2.0% y/y in …
25th October 2024
This week’s news has persuaded us that the ECB is likely to cut interest rates further and faster than we previously thought. We now see a greater-than-even chance of a 50bp rate cut in December, and think the “terminal” rate in this cycle will be below …
Why does the new rule allow more borrowing? The Chancellor, Rachel Reeves, has confirmed that in next week’s Budget she will shift from targeting the Public Sector Net Debt excluding the Bank of England (PSND Ex BoE) measure of government debt to another …
Surprise 200bp hike takes policy rate to a new high The decision by the Russian central bank (CBR) to hike its policy rate by a larger-than-expected 200bp today, to 21.00%, is evidence that – despite President Putin’s efforts at this week’s BRICS summit …
New bank lending has risen recently as the interest rates on loans have begun to edge down, but it is still weak. While it will probably continue to increase gradually in the coming months, the ECB might need to cut its policy rates substantially to give …
This page has been updated with additional analysis since first publication. Germany stuck in recession The rise in the Ifo Business Climate Index in October still left it deep in recessionary territory. With growth in the rest of the euro-zone also weak, …
We think a pick-up in global growth and the further inflation of a US equity bubble mean prospects for euro-zone equities are generally promising, despite sluggish economic growth in the region. European equities have risen, on net, so far today, more so …
24th October 2024
Capital values are now recovering and, notwithstanding a recent rise in interest rates, will continue to do so. However, with not much prospect for yield compression the recovery will be weak by past standards. Thanks to stronger rental growth the …
A victory for Donald Trump in the US election would probably result in higher US Treasury yields and a stronger dollar. That’s an environment in which central banks in EMs with strained balance sheets (notably Turkey) could hike rates and others that are …
This page has been updated with additional analysis since first publication. Budget concerns trigger slowdown in activity The fall in October’s composite flash PMI to an 11-month low suggests that real GDP growth, after what is shaping up to be a 0.2% q/q …
This page has been updated with additional analysis since first publication. Flash PMIs support case for 50bp rate cut The low activity and price components of the flash PMIs for the euro-zone in October will strengthen the conviction of policymakers who …
