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Policymakers to acknowledge weak economy and decline in inflation. But not ready to consider rate cuts. We expect first cut to come in Q2. The ECB is certain to keep interest rates unchanged next week, leaving the deposit rate at 4%, and we expect …
18th January 2024
Market was picking up even before latest slide in mortgage rates The December RICS Housing Market survey showed sales volumes rising and buyer demand recovering even before the further sizeable drop in mortgage rates in January. That’s encouraging for our …
Early prime office yield data for Q4 suggest that the property correction deepened at the end of 2023. The sharp rises in yields occurred despite a more favourable market interest rate environment. This suggests that property pricing still has further to …
17th January 2024
The downward trend in the EU carbon price since early 2023 has been driven by lower demand for pollution permits on the back of industrial weakness and growth in cleaner energy sources. With energy-intensive activity in the bloc set to stay weak, and …
This page has been updated with additional analysis since first publication. Downward trend stalls, but drop to below 2% still coming in April The unexpected rise in CPI inflation from 3.9% in November to 4.0% in December (consensus and CE forecast 3.8%) …
The resilience of euro-zone rental growth last year surprised us. But our analysis indicates that better-than-expected economic activity explained much of that strength and as recession looms in 2024, all-property rents are likely to slow more decisively. …
16th January 2024
This page has been updated with additional analysis since first publication. Wage growth fading fairly fast Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fairly fast. But the ongoing …
We don’t expect the Federal Reserve, European Central Bank or Bank of England to cut rates in their first meetings of 2024, but they may drop hints about when monetary easing could start. A team of our senior economists held this online briefing after the …
15th January 2024
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
There was a wide disparity in house price growth across regions in 2023 and little reason to think that this year will be any different. Following the recent decline in mortgage rates, we suspect the largest rises in prices will be in the regions that …
German troubles not over yet Preliminary data published today show that German GDP contracted in Q4 and we expect it to continue to struggle this year. Today’s data release shows that Germany’s economy contracted by 0.3% in calendar year 2023, and a …
Fall in inflation won’t be sustained The small fall in Russian inflation to 7.4% y/y in December is likely to be temporary, and we still think that the central bank’s tightening cycle has further to run. We expect a 100bp rate hike (to 17.00%) next month. …
12th January 2024
Inflation data surprise to the downside The softer-than-expected December inflation data released across Central and Eastern Europe (CEE) this week suggest that further interest rate cuts will be delivered across the region over the coming months and, in …
The rebounds in CPI inflation in both the US and the euro-zone in December (from 3.1% to 3.4% and from 2.4% to 2.9% respectively) raise the question of whether the downward trend in the UK will also stall. After all, inflation in the UK has been following …
NBR won’t cut rates as far as most expect in 2024 The National Bank of Romania (NBR) left its policy rate unchanged at 7.00% today and, although a monetary easing cycle seems to be drawing nearer, we think that interest rates are unlikely to be cut as far …
At the ECB’s last meeting in December, President Christine Lagarde insisted that it was too early to discuss rate cuts. But the first comments of 2024 from policymakers, including Ms Lagarde herself, suggest that policy loosening may not be too far away. …
This page has been updated with additional analysis since first publication. Stagnation in Q4, but recovery in sight The 0.3% m/m rebound in real GDP in November (consensus and CE forecast 0.2%) increases the chances that the economy escaped a recession …
Much has been talked about a ‘flight to quality’ in the office sector given the structural shift to hybrid working. However, while there is evidence of this in relative rental performance, a look at the yield data suggests that the opposite has been true …
11th January 2024
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
The lagged effects of the weak economy and high interest rates may mean that loan default rates rise in the coming months. But the prospect of interest rate cuts later this year will mean they won’t rise much. Higher interest rates and the weak economy …
The surge in Italian prime retail rents over the past year is likely to give way in 2024, as inflation falls back and consumer spending stagnates. But the strong fundamentals that have supported this outperformance are still in place and will help rent …
Some ECB Governing Council Members have called for an increase in reserves requirements, primarily in order to reduce the Eurosystem’s interest expenditure. If implemented – which we think is likely – this would have the effect of tightening monetary …
ECB policymakers still insist that monetary policy will remain tight throughout the first half of the year, if not longer. But we think that weakness in economic activity and lower inflation will prompt them to start cutting in April. And in contrast to …
This page has been updated with additional analysis since first publication. Fall in core inflation confirms Norges Bank is finished with rate hikes The fact that core inflation fell and the headline rate was unchanged in December confirms that Norges …
NBP has limited scope for rate cuts in 2024 The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and we continue to think that the scope for monetary loosening ahead is relatively limited. While the consensus view in recent …
9th January 2024
Industrial output in Germany is likely to follow November’s decline with further falls this year. While the recent fall in natural gas prices could help to stem the bleeding in the near term, energy costs are still high. And weak demand will compound …
Although bonds and equities have started the year on the back foot, which may continue in the near term, we think they’ll fare better over the year as a whole. We project especially large gains for equities. Any renewed hopes for a “soft landing” prompted …
8th January 2024
This page has been updated with additional analysis since first publication. Regional sentiment continues to recover The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally continued to rise in December and …
This page has been updated with additional analysis. Rise in Swiss inflation will be reversed in January The unexpected increase in Swiss inflation in December raises some doubt as to whether rates will be cut soon. However, we suspect that the headline …
There are still plenty of downside risks to our below-consensus forecast that the economy will stagnate in 2024 with GDP growth of 0.0%. (See here .) But the news over the past week has highlighted three upsides. First, the slide in 2-year and 5-year …
5th January 2024
Data released this week support our key calls on the euro-zone for the upcoming year. First, the economy looks likely to be weaker than most anticipate. Although the final euro-zone Composite PMI for December, released on Thursday, was revised up from the …
Our forecast of earlier Bank Rate cuts means that mortgage rates will be significantly lower than we had anticipated this year, which will lead to a stronger recovery in demand from mortgaged buyers. With little reason to think that demand from cash …
Falling interest rates will herald the end of the commercial property downturn in 2024. However, owing to price declines in H1 we still think values will end the year lower. Our forecast for marginally positive euro-zone returns – while a considerable …
This page has been updated with additional analysis since first publication. Construction PMIs still subdued in December The rise in the headline CIPS construction PMI from 45.5 in November to 46.8 in December was driven by the increase in the housing …
Lower mortgage rates see house prices jump in December The big 1.1% m/m increase in the Halifax house price index confirms that falls in mortgage rates are translating into renewed increases in house prices. Given further recent falls in mortgage rates, …
The run of softer-than-expected news on CPI inflation and wage growth means we now expect the Bank of England to cut interest rates sooner than before. Our forecast is that rates will be cut from 5.25% in June and will fall to 3.00% in 2025. The markets …
4th January 2024
In another year of upheaval for commercial property in Europe, our forecasts were broadly correct in terms of direction, but underestimated the severity of the downturn. Some, though not all, of this was the result of unexpected macroeconomic factors, …
Rebound in inflation won’t last The jump in Germany’s headline inflation rate in December came as no surprise as it was driven by energy price subsidies introduced more than a year ago. With core inflation continuing to trend down, it should not affect …
This page has been updated with additional analysis since first publication. Lower mortgage rates will ease the squeeze, but still some pain to come November’s money and credit data suggest that the recent falls in mortgage rates will stimulate new …
Strong November lending, but subdued investment volumes Net lending to commercial property increased for the ninth consecutive month in November, but that wasn’t reflected in investment volumes which dropped further. But throughout H1 2024 we expect …
Rise in mortgage approvals set to continue The rise in mortgage approvals in November was little surprise given the sharp drop back in mortgage rates since July. Given recent further falls in swap rates, mortgage rates are likely to continue to fall from …
This page has been updated with additional analysis since first publication. PMIs point to recession The final Composite PMI for the euro-zone in December was revised up significantly from the flash estimate of 47.0 to 47.6, meaning that it was unchanged …
In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November. We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025. That’s …
3rd January 2024
Headline inflation picks up, but core inflation losing momentum The rise in Turkish inflation to 64.8% y/y in December was broadly in line with expectations and the breakdown provided some signs that underlying price pressures continue to soften. We think …
Both bond and equity markets have started the year on the back foot. But, while a pause after the rapid rally in most asset prices over the last two months of 2023 would not be surprising, we think the outlook for both bond and, especially, equity prices …
2nd January 2024
Flat prices in December confirm 2023 resilience Unchanged house prices in December ensured that over the course of 2023 they fell by much less than forecasters had expected. With mortgage rates falling, it is increasingly likely that house prices avoid …
29th December 2023
While we got mortgage rates and lending roughly right in 2023, house prices fell by less than we expected as longer mortgage terms, strong demand from cash buyers, and tight supply came together to support them. There is little reason to think that these …
28th December 2023
Fiscal rules no game changer for CEE public finances EU finance ministers agreed on a new set of fiscal rules this week, but this doesn’t change our view that concerns about public debt dynamics will grow in parts of Central and Eastern Europe (CEE) over …
22nd December 2023
