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This page has been updated with additional analysis since first publication. UK inflation to fall below 2% in April and the rates in the US and euro-zone We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute online …
20th March 2024
The recent weakness of Germany’s economy is partly due to temporary factors which should ease this year. However, demographic and structural headwinds, partly driven by global fragmentation, mean the economy is likely to grow by little more than half a …
19th March 2024
Vladimir Putin secured a record victory in Russia’s presidential election over the weekend. The focus now will be on whether this emboldens Putin to devote more resources to the war effort, whether policymakers push through unpopular non-war fiscal …
18th March 2024
Pressure building in Turkey ahead of the election Pressures on Turkish policymakers are building ahead of the local elections on 31 st March as capital inflows have slowed and FX reserves are falling again. We doubt the central bank will hike interest …
15th March 2024
Overview – The euro-zone will remain close to recession until the second half of this year and the subsequent recovery is likely to be weak. Household real incomes will pick up only slowly and consumers will be cautious amid a softening labour market. …
January’s GDP figures received the most attention this week, mainly as they suggested the economy may have exited recession. (See here .) But while there was better news on demand, the same cannot be said for the supply-side of the economy. The rise in …
Overview – A slight rise in mortgage rates since the start of the year is likely to mean house prices stall in the near term. But our forecast that Bank Rate will be cut faster than most expect, to 3.00% by the end of 2025, suggests that further …
ECB postpones some big decisions After 15 months of waiting, this week the ECB finally published the outcome of its operational framework review. We set out the key points here . In the near term, the status quo will largely be maintained, with the …
Inflation in Switzerland has surprised most other forecasters, including the SNB, this year by falling to just 1.2% in February, which was the ninth month in a row that it has been below 2%. We think this will encourage the SNB to reduce the policy rate …
14th March 2024
Interest rates unchanged at 5.25% and BoE to keep hawkish guidance But data not the guidance counts We think rates will fall to 3.00% in 2025 rather than to 4.00% as investors expect At the policy meeting on Thursday 21 st March, the Bank of England will …
Inflation in Norway has fallen more quickly than Norges Bank expected, so at next week’s meeting it is likely to signal that it will cut interest rates sooner than it previously expected, perhaps in Q3. And we think there’s a good chance that it will make …
The revival of prime retail rental growth in 2023 ended a three-year rental decline for the sector. This likely marks the end of retail’s rental woes and we have nudged up our prime rent forecast for this year, but we doubt there will be a return to the …
Sweden CPI (February) Rapid disinflation sets up May rate February's inflation data will strengthen policymakers' conviction that they can begin to cut interest rates in May. The fall the Riksbank’s target CPIF measure of inflation, which excludes the …
The ECB’s new operational framework for implementing monetary policy, announced this afternoon, was largely in line with our expectations and has no immediate implications for monetary policy. But it does mean that the Bank will maintain a portfolio of …
13th March 2024
This page has been updated with additional analysis since first publication. Inflation picks further, rates to stay high for some time The rise in Russian inflation to 7.7% y/y in February highlights that price pressures in the economy remain strong and …
This page has been updated with additional analysis since first publication. Output to continue falling Euro-zone industrial production fell in January and is likely to continue contracting in the coming months due to weak demand. The 3.2% m/m decrease in …
Improved valuations suggest that the price correction in prime property is almost done. However, with little scope for bond yields in continental Europe to fall from here and property-to-bond yield spreads still narrow compared to the recent past, we …
This page has been updated with additional analysis since first publication. UK economy has probably already exited recession Note: We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm …
The timeliest data support our long-held view that the euro-zone economy will remain close to recession in the first half of the year. Beyond that, we think growth will be much lower than the consensus or the ECB are forecasting. However, the labour …
12th March 2024
Turkey’s balance of payments figures for January showed that the current account deficit continued to narrow, but the drop in capital inflows in recent months is a concern and it appears that this forced the central bank to sell FX reserves. This adds to …
Productivity in the euro-zone has been falling for well over a year. We think this is largely because it was unsustainably high in mid-2022 as many companies struggled to fill vacancies. Since then, it has fallen to more manageable levels. The decline in …
We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) We doubt the big rise in the minimum wage in April will prevent wage growth from …
11th March 2024
Further easing in core inflation sets up Q2 rate cut February’s inflation data from Norway strengthen our conviction that Norges Bank will cut interest rates much sooner than its forecasts suggest. The decline in headline inflation from 5.3% in January to …
June rate cut coming The main event this week was the ECB meeting on Thursday where the key message was that officials are getting closer to easing policy but want to see more evidence that wage growth and underlying inflation are moderating before …
8th March 2024
Setting the record straight on recent HUF weakness The dispute between the Hungarian central bank (MNB) and the government heated up further this week, which has fuelled a narrative that threats to central bank independence are responsible for the recent …
Much ink has been spilled on the Spring Budget this week. For our part, we discussed the macroeconomic and financial market implications in our UK Drop-In and in our UK Economics Focus . The main takeaway is that while the Chancellor was desperate to use …
German Industrial Production (January) January increase but activity still weak The rise in Germany industrial production in January reverses only a fraction of the previous falls and does not change our view that the sector will struggle this year. The …
Given our view about monetary policy, we expect government bond yields in some developed markets such as the UK to fall markedly this year. In some other places, like the euro-zone, we doubt central banks will have much impact on yields. And we see scope …
7th March 2024
We doubt that ECB policy will have much impact on German bond yields this year and next – if anything, risks are skewed to the upside. But the outlook may be a bit brighter for Italian bonds, and we expect the Italian-German spread to narrow. The yield of …
Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
We discussed the implications of Russia’s election in a Drop-In on Tuesday, 12 th March. Click here to watch the 20-minute online briefing. The outcome of Russia’s presidential election taking place over 15-17 th March is not in doubt: Putin is all but …
Lagarde likely to dash remaining hopes of April rate cut The ECB decision to leave rates unchanged and the key messages in the press release were in line with expectations. In the forthcoming press conference we suspect that Christine Lagarde will kill …
Today’s UK budget announcement contained no major surprises, leaving our forecast for the 10-year Gilt yield to fall further this year and sterling to struggle against other major currencies intact. Our UK Economics service is the place to look for the …
6th March 2024
NBP keeps rates on hold, limited window for rate cuts this year The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and the scope for monetary easing this year looks relatively limited. We still think there is a …
Boost to the economy now comes ahead of a bigger drag after the election The net fiscal giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may at the margin help lift the economy out of its mild recession before an election later this year. But a …
This page has been updated with additional analysis since first publication. Euro-zone sales rose but still weak January’s retail sales data are consistent with our view that the near-term outlook for consumption is poor. While retail sales edged up by …
Note: Andrew Burrell will be answering questions and highlighting key issues around the size and scale of the recovery in commercial property in a Drop-In on Tuesday, 12th March . Register here for the 20-minute online briefing. Completions in Europe …
5th March 2024
Relatively high interest rates and structural problems within offices will weigh on the commercial real estate recovery over the next three years. Indeed, we forecast the upturn will be weaker than in any previous cycle across global markets. And with …
4th March 2024
Our view that the Bank of England will become less concerned by the most persistent part of services CPI inflation suggests that it will cut interest rates in the summer, perhaps in June. But the risk is that non-energy intensive services inflation stays …
We have traced the government’s target of building 300,000 new homes a year in England back to the 2004 Barker Review. Rerunning the calculations two decades on suggests 385,000 new homes a year would now be necessary to achieve the same aims. In the 2017 …
Swiss CPI (February) Swiss disinflation ending but rate cuts now likely The period of disinflation in Switzerland is close to an end, but with inflation likely to remain close to 1% for the foreseeable future we think policymakers will start lowering …
This page has been updated with additional analysis since first publication. Inflation continues to rise, tightening cycle now at risk of restarting The stronger-than-expected rise in Turkish inflation to 67.1% y/y in February adds to our concerns given …
Neil Shearing has been in the Middle East and Asia, talking to clients about the macro outlook. In meetings from Dubai to Singapore to Hong Kong, some questions kept coming up again and again and, in this week’s episode, he goes through them with David …
1st March 2024
Turkish GDP growth continues to run hot Data released this week showed that Turkish GDP growth unexpectedly re-accelerated in Q4, which challenges the view that recent aggressive monetary tightening is rebalancing the economy. We published our initial …
ECB will leave its deposit rate at 4.0% again next week. Policymakers will cut growth and headline (but not core) inflation forecasts. We now anticipate 100bp of rate cuts this year starting in June. Next week’s ECB meeting looks set to be a fairly …
Could there be a tax-cutting Budget bombshell? The rumours this week suggest that the Chancellor may have a bit less to play with in the Budget on Wednesday 6 th March than the £15bn we estimated. As a result, he seems to be considering more revenue …
The main data releases in the euro-zone this week will have done little to dispel ECB policymakers’ view that they should wait patiently before making a decision on when to cut interest rates. Economic activity appears to have made a slow start to the …
Recent media attention has focused on the downturn in Germany and the travails of its lenders exposed to the crash in property values both domestically and in the US. While the focus on Europe’s largest market is justified, other major euro-zone markets …
This page has been updated with additional analysis since first publication. ECB rate cut in April is not going to happen February’s euro-zone inflation data look like the final nail in the coffin for an April interest rate cut . The decline in headline …
