Filtered by Region: Europe Use setting Europe
The end of Portuguese Prime Minister António Costa’s time in office does not signify the end of Portugal’s impressive period of debt reduction. We think any future government is likely to exercise similar fiscal discipline while benefitting from …
20th December 2023
This page has been updated with additional analysis since first publication. Collapsing domestic inflationary pressures may mean BoE cuts rates earlier For the second month in a row, the falls in CPI inflation from 4.6% in October to 3.9% in November …
Investors’ growing expectations that the US Fed will cut interest rates in March next year, as well as the recent soft UK wage and inflation data, have convinced investors that the Bank of England will start cutting interest rates sooner, in May 2024 …
19th December 2023
The goal of keeping government debt ratios stable or falling means that many euro-zone countries will need to tighten fiscal policy substantially and some will need to run primary budget surpluses for a long time to come. Italy has the most challenging …
This publication has been updated with additional analysis from the post-meeting press statement and press conference. 75bp cuts to continue for the time being The Hungarian central bank (MNB) cut its base rate by 75bp again today (to 10.75%), and we …
Inflation and interest rates will fall across Central and Eastern Europe in 2024 and an economic recovery is likely to take hold across the region. But the task of bringing inflation back to central banks’ targets will take time and we think that monetary …
Large downward shifts in interest rate expectations mean that mortgage rates will continue to fall for the next month or two. That will support some recovery in activity and means that price declines are behind us for now at least. As we expect the Bank …
18th December 2023
Property yields rose further in Q3, but with risk-free rates now falling back, we think they will flat-line in Q4. That will help stabilise capital values, but given historically narrow yield spreads, we doubt we will see much yield compression ahead. As …
It’s that time of year when economists set out their views of what to expect over the coming twelve months. You can find our contribution on this dedicated ‘ World in 2024 ’ page, and listen to our podcast , in which I discuss the macro outlook for next …
Russia’s economic hit: just how large? Analysis by the US Treasury Department published this week gained a lot of attention for highlighting that Russia’s economy is now 5% smaller due to the war and sanctions than it otherwise would have been. The blog …
15th December 2023
If the main objective this week of the Bank of England’s Monetary Policy Committee (MPC) was to keep interest rates unchanged at 5.25% and avoid fuelling even more bets on rate cuts, then it looks like a case of mission accomplished. Even so, the Bank’s …
ECB is not for turning… yet In contrast to the Fed, but similar to the Bank of England, this week the ECB pushed back against expectations that it would start to cut interest rates in early 2024. (See our Drop-in here .) In the ECB press conference, …
CBR slows down tightening, cycle not yet over Russia’s central bank (CBR) delivered a 100bp interest rate hike at today’s meeting, to 16.00%, and we still think that strong inflation pressures will force another rate hike in Q1. Today’s hike was in line …
This page has been updated with additional analysis since first publication. Resilient activity to encourage BoE to double down on high for longer The rise in the flash composite activity PMI, from 50.7 in November to 51.7 in December, increased the …
Turkey’s gross international reserves have hit a record high recently which, on the face of it, suggests that the policy U-turn since May has helped to diminish the country’s balance of payments vulnerabilities. But the central bank’s large on- and …
14th December 2023
This week, we held a series of property roundtable discussions with clients in our London office as part of our World in 2024 series. In this Update, we outline our thoughts on the most interesting questions raised, covering electoral uncertainty and …
The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent soft wage and inflation data mean the Bank may not wait as long as …
ECB holding the line for now The ECB’s decision to leave its deposit rate unchanged at 4.0% today and make only limited changes to the policy statement suggests that policymakers are pushing back against market expectations for rate cuts to begin in March …
Few signs Bank of England is starting to contemplate rate cuts The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent …
Today’s decision by Norges Bank to hike its policy rate by 25bp to 4.50% marks the end of its tightening cycle. Looking ahead, we have pencilled in a faster pace of rate cuts next year than policymakers currently anticipate as we expect a weak economy and …
Today’s SNB decision and statement were largely in line with expectations as the policy rate was held at 1.75% and policymakers removed any mention of FX sales. We think the latter decision signals that loosening is imminent and will probably first …
Tightening cycle comes to an end Today’s decision by Norges Bank to hike its policy rate by 25bp to 4.50% marks the end of its tightening cycle. Looking ahead, we have pencilled in a faster pace of rate cuts next year than policymakers currently …
SNB leaves rates unchanged, but policy loosening is imminent The SNB kept rates on hold at 1.75% at today’s policy meeting, but the monetary policy statement was dovish as policymakers placed less emphasis on selling FX assets and reduced their inflation …
Heading in the right direction The larger-than-expected fall in all the main measures of Swedish inflation in November will not prompt the Riksbank to cut interest rates at its next meeting but it does make us more confident in our call that rate cuts …
Falling mortgage rates breathe life back into the market Declining mortgage rates have already generated a significant improvement in demand, with the new buyer enquiries and sales expectations balances recording their strongest readings for over a year …
Falls in financial market interest rate expectations mean that mortgage rates will drop to a six-month low in December. That will support a further recovery in housing market activity in the near term. But, if we are right to think the Bank of England …
13th December 2023
The detailed mortgage lending data for Q3 show that the high cost of borrowing has continued to price many out of the market and made new BTL investment unattractive. But while arrears are rising, they are not translating into repossessions so we still …
Economy slowing at the start of Q4 The further softening in Turkish retail sales and industrial production growth in October suggests that the slowdown in the economy continued at the start of Q4. We think it’s possible that GDP contracts outright this …
Contraction in October sets scene for stagnation in 2024 Note: We’ll be discussing the Fed, ECB and Bank of England December decisions and the policy outlook for 2024 in an online briefing on Thursday, 14 th December . Click here to register for the …
Overview – The euro-zone will remain in or close to recession in the first half of 2024 as the effects of higher interest rates continue to weigh on household consumption and investment, and fiscal policy is tightened. Headline inflation has already …
12th December 2023
This page has been updated with additional analysis since first publication. Sharp fall in wage growth will further fuel market rate cut expectations The sharp fall in wage growth in October will probably further fuel investors’ expectations that interest …
We think the rally in developed market (DM) government bonds will continue for a while yet, as some major central banks, including the Fed, ultimately cut by more than investors seem to expect. But we anticipate that yields will generally settle at much …
11th December 2023
Last week we held a series of online briefings on the outlook for 2024. In this week’s note, I answer three of the most commonly asked questions by clients during the sessions. Why have advanced economies been so resilient and will it last? Some …
Sharp fall in inflation, but rates likely to be left on hold next week The fall in Czech inflation to 7.3% y/y in November means that the start of a monetary easing cycle at next week’s policy meeting is still very much a close call. But at this stage we …
This page has been updated with additional analysis since first publication. Sticky inflation to force Norges Bank into one final hike The rise in the headline rate and slight fall in the core rate in November was broadly in line with the central bank’s …
The same questions kept coming up in our client briefings on the 2024 outlook and Group Chief Economist Neil Shearing tackles them in this latest episode of our weekly podcast. He talks about why economic resilience will be increasingly tested and which …
8th December 2023
Price pressures continue to mount The rise in Russian inflation to 7.5% y/y in November is likely to be followed by further increases in the coming months as the economy continues to overheat. We think this CPI release supports the case for a 100bp …
What we’ve learned from the State Tribunal drama The debate around whether Polish central bank governor Glapinski could be brought before the State Tribunal and be removed from his post took more twists and turns this week. But at this stage the events …
The further drop in UK market interest rate expectations this week means that investors now think the first interest rate cut will happen in June next year instead of August. And investors are now pricing in an 80% chance of a cut by May. That has led to …
Note: We’ll be discussing the Fed, ECB and Bank of England December decisions and the policy outlook for 2024 in an online briefing on Thursday, 14 th December . Click here to register for the 20-minute session. Last week we brought forward the timing of …
Overview – A weak economic outlook underpins our view that prime rent growth will continue to slow in Europe next year. At the same time, valuations remain stretched and the pace of recent yield rises suggests it is too early to call the bottom in prices. …
Bank of England to keep interest rates unchanged at 5.25% but retain its hawkish bias It won’t risk fuelling bets on earlier rate cuts by watering down its forward guidance We expect Bank Rate to be cut later, but by more than most expect With the Bank …
7th December 2023
Overview – Inflation and interest rates will fall across Central and Eastern Europe (CEE) in 2024 and an economic recovery is likely to take hold across the region. But the task of bringing inflation back to central banks’ targets will take time and we …
Even though we expect the economy to be weaker than the consensus in 2024, we think that lingering constraints on domestic supply will prevent wage growth and services CPI inflation from falling quite as fast as is widely expected. As a result, we think …
SNB Chairman Thomas Jordan recently reiterated the Bank’s line that “we will not hesitate to tighten monetary policy further if necessary” but the actual question is whether policymakers will hesitate to cut rates. We think the answer is yes and that they …
Despite the recent paring back of interest rate expectations across Europe, we think Norges Bank is likely to go ahead with one final 25bp hike next week – taking the policy rate to a peak of 4.50% – though it will signal that its tightening cycle is …
This page has been updated with additional analysis since first publication. Industrial recession continues The fifth successive monthly fall in industrial output in October suggests that industry will again be a drag on economic activity in Q4 and will …
Halifax confirms that prices are on the rise again The second consecutive monthly rise in the Halifax house price index in November mirrored the increase in the Nationwide index, confirming that house prices have not only stabilised, but are rising. …
