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We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception. The …
7th December 2023
While government bond yields continue to plunge and the main euro-zone equity index has risen to a new high, the rally in US equities has stalled over recent days and the dollar recovered some ground. This suggests to us that the resurgent optimism in …
6th December 2023
Easing cycle paused The National Bank of Poland (NBP) left interest rates on hold as expected today, and we think the easing cycle will remain on pause until the end of Q1. With the economy recovering and the disinflation process likely to stall over the …
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. ECB will slash its 2024 inflation forecast …
This page has been updated with additional analysis since first publication. Construction PMIs once again below 50 in November The headline CIPS construction PMI barely changed in November, settling at 45.5 from 45.6 in October, and was still below the 50 …
Hotel demand has suffered recently from the impact of high inflation and interest rates weighing on discretionary spending. But thanks to the soaring cost of foreign holidays and a revival in international tourism, we think that hotel rental growth will …
5th December 2023
Overview – With higher interest rates taking longer to percolate through the economy, we now think the recession will be shallower and GDP growth will stay weak throughout all of 2024. It’s a softer landing for the economy, but the runway is longer. And …
PMIs show recession and fading price pressures Final PMIs published today were revised up from the flash estimates but still suggest that the economy is probably in recession and that price pressures are fading. The final Composite PMI for the euro-zone …
Although the spread between the 10-year German and Swiss government bond yields has widened significantly over the past couple of years, we think it will stay close to this level for a long while yet. The soft Swiss CPI data released today has added to …
4th December 2023
Our view about relative economic and interest rate prospects in Sweden and the euro-zone suggests that the Swedish krona’s recent rebound may prove durable. In fact, given how far below “fair value” it appears to us, we think that the krona will rise …
While there have been growing concerns about public finances in some euro-zone countries recently, prospects for Greece’s debt are quite bright. Steady economic growth, large primary surpluses and low interest expenditure should keep the debt ratio on a …
The COP28 jamboree in Dubai will produce a long list of climate promises from governments and corporate leaders, but these will be of little practical help to market participants attempting to track progress on the green transition in a systematic way. …
This publication has been updated with additonal analysis and charts. Falling inflation means rate cuts are near The unexpected fall in Swiss inflation to 1.4% in November ensures that the SNB will not be at all tempted to raise interest rates in …
This publication has been updated due to an error in the previous version. Further evidence of easing price pressures The small rise in Turkish inflation to 62.0% y/y in November adds to evidence that inflation pressures in the economy continue to cool. …
Group Chief Economist Neil Shearing warns the potential threat to fiscal positions from higher rates is “perhaps the most important question hanging over the outlook for the next couple of years”. In this episode, he speaks to Head of Research Vicky …
3rd December 2023
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
1st December 2023
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
This page has been updated with additional analysis since first publication. CEE turning a corner The manufacturing PMIs in Central and Eastern Europe (CEE) rose in November suggesting that industrial sectors in the region are turning a corner, while …
This page has been updated with additional analysis and charts. Export-driven strength unlikely to last The 0.3% q/q increase in GDP was better than the consensus and our own forecasts (consensus: 0.1%; CE: 0.0%) but there was a downward revision to Q2 …
Rising prices continue to confound forecasters The further small increase in the Nationwide house price index in November was unexpected and came on the heels of an even larger rise in October. It means house prices are on track to fall by just 2% y/y in …
Our AI work has identified data centres as a clear winner from these innovations. That the sector is already in rude health is borne out by the latest real estate data. But it remains to be seen if it can ever reach the scale to displace more traditional …
30th November 2023
The key indicators that have usually convinced the Bank of England to cut interest rates suggest the first cut could come in Q1 2024. That said, rates have risen to a lower peak than most models suggest, which implies they need to stay higher for longer …
This page has been updated with additional analysis since first publication. Euro-zone HICP (September) Faster disinflation brings earlier rate cuts into view The larger-than-expected fall in inflation in November means it is becoming increasingly …
Disinflation process entering a slower phase The small fall in Polish inflation to 6.5% y/y in November is likely to mark the start of a slower phase for the disinflation process over the coming months. Against this backdrop, we think the central bank …
GDP growth slowing, more to come The sharp slowdown in Turkish GDP growth to 0.3% q/q in Q3, together with more timely figures for Q4, suggest that the economy is rebalancing in response to the policy tightening this year. With the central bank set to …
Consensus more pessimistic in 2024, but view further out improves The latest IPF Consensus Survey shows that forecasters have downwardly revised their expectations for 2024, as a downgrade in capital value growth outweighed some improvement in rents. That …
29th November 2023
While we think both yields will fall next year, we expect a smaller drop in the yield of 10-year Bunds than in that of 10-year Treasuries. The 10-year Bund yield fell ~7bp so far today, after inflation data from Germany and Spain released today suggested …
With the post-pandemic global monetary tightening cycle now drawing to a close, this Update takes stock of where interest rate expectations in the G10 economies stand and what that implies for the currency outlook over the coming quarter as more and more …
Economy showing further signs of overheating Russia’s economy looks to have started Q4 on fairly solid footing and we think GDP growth of 3.0-3.3% this year is now highly likely. Support from loose fiscal policy and a strong labour market should keep GDP …
This page has been updated with additional analysis since first publication. CEE recovery continuing in Q4 The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally rose in November, and suggest that activity …
This page has been updated with additional analysis since first publication. Euro-zone sentiment remains weak Despite the rise in the EC Economic Sentiment Indicator (ESI) in November, it remained consistent with the economy at best stagnating in Q4. (See …
This page has been updated with additional analysis since first publication. Higher interest rates will continue to percolate through the economy October’s money and credit data suggest that higher interest rates are continuing to percolate through the …
Strong October lending, but anaemic investment volumes While net lending to commercial property increased for the eighth consecutive month in October, this hasn’t translated into higher investment volumes – which fell back again in October. But further …
Trough in mortgage approvals behind us With mortgage rates easing, the rise in mortgage approvals in October confirms that the trough in mortgage approvals is behind us. But with mortgage rates unlikely to fall much below 5% until the second half of 2024, …
Given how far below “fair value” the Swedish krona appears to us, we suspect that its decade-long fall may be coming to an end. The Swedish krona has been the best performing G10 currency so far this month, having risen by nearly 6% against the US dollar. …
28th November 2023
The rebound in the activity data in November has convinced investors that the first interest rate cut will happen later, in August next year instead of June. Our view that core inflation will ease only slowly explains why we think interest rates won’t be …
Our recent r* work reinforces the view that property yields will stay relatively high longer term. That implies global returns in low single digits over the next decade or so, well below pre-pandemic averages. Our recent Global Economics Focus summarises …
27th November 2023
We think that yield curves across Europe and the US will “disinvert” next year, as central banks shift towards easing monetary policy. Although Gilt yields have risen across the curve since the UK budget announcement , the shape of the sovereign bond …
24th November 2023
Overview – Property yields rose further in Q3, but with risk-free rates now falling back, we think they will peak by the end of 2023. That will help stabilize capital values, but, given historically narrow yield spreads, we doubt we will see much yield …
CBRT bringing tightening cycle to a close Turkey’s central bank (CBRT) delivered another chunky 500bp rate hike to 40% this week but it also signalled that its tightening cycle was very close to an end. The local elections in March may be playing a part …
We continue to think the euro-zone economy will fall into recession in the second half of this year and roughly flatline in the first half of next year. This is mostly due to the impact of squeezed household incomes and the tightening of monetary policy, …
It’s true that the Chancellor’s pre-election splurge unveiled in this week’s Autumn Statement was the largest discretionary fiscal loosening (outside of the Covid period) since 2010. And at £20.3bn (0.6% of GDP) in 2028/29, it was the biggest tax-cutting …
