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We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
28th September 2023
As we anticipated , housing starts in England spiked to their highest level on record in Q2 as builders began work early to avoid having to conform with the Future Homes Standard. More timely monthly data show that starts slumped in July and August in …
Click here to read the full report. Overview – Russia and Turkey have outperformed the rest of the region this year amid support from loose policy, but both economies look set for a slowdown in 2024 while recoveries take shape across Central and Eastern …
This page has been updated with additional analysis since first publication. Sentiment ticks down, but still consistent with recovery The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in …
This page has been updated with additional analysis since first publication . Euro-zone sentiment weakens further The weak outturn for the euro-zone’s EC Economic Sentiment Indicator (ESI) in September supports our view that the economy will contract in …
German state figures point to big drop in euro-zone inflation The big drop in CPI inflation across German states in September all but confirms that German and euro-zone HICP inflation also fell sharply this month. While this mainly reflects base effects …
Fairly solid growth, meaningful slowdown unlikely until 2024 Russia’s industrial production and retail sales data for August suggest that activity remained fairly solid and we think the economy is on track for GDP growth of 2.5% this year. Monetary policy …
27th September 2023
This page has been updated with additional analysis since first publication. Easing cycle just around the corner The Czech National bank (CNB) left interest rates on hold again at 7.00% at today’s meeting, but we still think that an easing cycle will …
Overview – We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Lower energy prices and improved global supply chain conditions should keep headline inflation on a …
The latest euro-zone money and credit data show that tighter ECB policy is continuing to weigh on households’ and firms’ borrowing, as well as influencing what they do with their savings. The weakness in money and lending growth supports our view that the …
The Hungarian central bank (MNB) delivered another 100bp interest rate cut (to 13.00%) and simplified its monetary policy toolkit at today’s meeting, paving the way for the second phase of the easing cycle in the coming months. The hawkish tone of the …
26th September 2023
Entering the second phase of the easing cycle The Hungarian central bank’s (MNB’s) decision to cut the top of its interest rate corridor, by 250bp, today is a first step in what is likely to be a shift in the monetary policy framework that will be …
The weakness in German construction activity has raised questions about whether a slowdown in new office supply could offset the weakness in demand and prevent a rise in vacancy. But we think that on balance it won’t be enough and that rental growth will …
The sharp slowdown in broad money growth since late last year suggests that higher interest rates are working by reducing households’ and firms’ demand for borrowing, which should lead to softer activity and lower inflation. This supports our view that a …
Another set of downbeat business surveys out of the euro-zone and an increasingly cautious tone from ECB officials have put the EUR/USD rate under renewed pressure. But more broadly market participants do not appear particularly downbeat on the prospects …
25th September 2023
Ifo points to renewed contraction in German GDP in Q3 The Ifo Business Climate Index (BCI) confirmed that the German economy remained in the doldrums in September. We continue to expect contractions in GDP in both Q3 and Q4 of this year. The small fall in …
The following is a presentation that our Chief Property Economist Andrew Burrell gave to the District Conference in Barcelona on 21st September, 2023. … Where next for euro-zone …
22nd September 2023
This week’s news that interest rates are probably at their peak (see here ) and the news that public borrowing in the current fiscal year is £11bn below the Office for Budget Responsibility’s forecast has raised the pressure on the Chancellor to deliver …
We do not expect the recent rise in oil prices to cause the ECB to hike rates, as the impact on headline inflation will be limited. Since the end of June, the Brent crude oil price has risen by almost 30% to around $94pb, predominantly due to cuts in …
Poland-Ukraine relations show some cracks The dispute that escalated this week between Poland and Ukraine shows how Poland’s ruling PiS party is hoping to capitalise on nationalism, and public fatigue over the war, ahead of elections next month. Poland, …
With most European G10 central banks now at, or very close to, the ends of their tightening cycles, this note examines where the European G10 currencies stand and how we see the outlook for the main euro cross-rates. In short, we think the Swiss franc …
This page has been updated with additional analysis since first publication. Signs that recession has started all-but confirms interest rates have peaked The fall in the activity PMI further below the boom-bust level of 50.0 in September suggests the …
This page has been updated with additional analysis since first publication. Composite PMI edges up but still points to recession The small increase in the euro-zone Composite PMI in September left it still in contractionary territory. We think a further …
This page has been updated with additional analysis since first publication. Not as good as it looks, sales likely to fall in Q3 The 0.4% m/m rebound in retail sales volumes in August isn’t as good as it looks as it partly reflected a pickup in sales …
Despite ending the interest rate hiking cycle today, the Monetary Policy Committee (MPC) succeeded in convincing financial markets that interest rates will remain high for some time. As market interest rate expectations determine fixed mortgage rates, the …
21st September 2023
Despite the hawkish rhetoric from central bankers on both sides of the Atlantic, we still expect most long-dated government bond yields in developed markets (DM) to fall over the next couple of years. After a surprisingly hawkish message from the FOMC …
Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST today. Register here to join. The surprise decision by the Bank of England to leave interest rates unchanged at 5.25% today probably means that …
CBRT sticks to the course with 500bp hike Turkey’s central bank delivered a 500bp interest rate hike at today’s meeting, to 30.00%, providing further encouragement about policymakers’ commitment to tackling the inflation problem. A lot more tightening …
The Bank’s job is done The surprise decision by the Bank of England to leave interest rates unchanged at 5.25% today probably means that rates are already at their peak. We think rates will stay at this peak of 5.25% for longer than the Fed, the ECB and …
The SNB’s decision to keep rates unchanged at 1.75% was a surprise. Although the Bank left the door open for further hikes, we think rates are now at their peak. And with inflation set to fall further, we expect the SNB to start cutting rates next year. …
Following today’s rate hikes, the Riksbank and Norges Bank are now at, or close to, the end of their tightening cycles. Both central banks’ new projections suggest that they are more likely than not to raise rates one more time. But whether or not they …
Early signs of a recovery Poland’s retail sales and industrial production figures for August suggest that the economy may be at the early stages of a recovery, but we still expect overall GDP growth to be relatively tepid in the near term. We think that …
Norges Bank and Riksbank nearly done with rate hikes Following today’s rate hikes, the Riksbank and Norges Bank are now at, or close to, the end of their tightening cycles. Both central banks’ new projections suggest that they are more likely than not to …
SNB goes for a hawkish pause, but we think rates have peaked. The SNB’s decision to keep rates unchanged at 1.75% was a big surprise, although it left the door open for further hikes. We do not expect any further increases in the policy rate as we expect …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST today. Register here to join. A bit more wiggle room for pre-election …
Our Emerging Europe Chart Pack has been updated with the latest data and our analysis of recent developments. Russia and Turkey had a strong first half to the year, but large policy tightening is likely to result in a sharp slowdown in 2024. Inflation …
20th September 2023
This page has been updated with additional analysis since first publication. Easing in services inflation may mean BoE halts rate hikes…after tomorrow Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In on …
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% until mid-2024. While transactions volumes have only seen a modest decline so far, we …
19th September 2023
The problems of WeWork, which have intensified in recent months, do not look reflective of significant distress in the wider flexible office market. However, flex has yet to see much of a boost from greater hybrid working and may not be immune from …
Overview – A slower fall in core inflation than in the US or the euro-zone will mean that the Bank of England keeps interest rates on hold at the probable peak of 5.50% for longer than the US Fed or the ECB. But our non-consensus forecast that higher …
18th September 2023
There’s a lot of uncertainty about how much impact monetary tightening has had in the global economy so far, but in Central and Eastern Europe (CEE) the hit to households has already been significant and we estimate that almost all of the impact from …
We were not surprised that European Commission (EC) President Ursula von der Leyen announced in her State of the Union address this week that the EC will launch an anti-subsidy investigation into electric vehicle (EV) imports from China. Indeed, we had …
15th September 2023
Russia seeking closer friendship with North Korea The strengthening relationship between President Putin and North Korean leader Kim Jong Un was on show this week but we doubt the discussions will yield any meaningful benefits for Russia’s economy or …
Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST on Thursday 21st September. (Register here .) We’ve been surprised by the resilience of the labour market over the past year. More recently, …
CBR delivers another large hike, more tightening still in the pipeline Russia’s central bank (CBR) raised its policy rate by 100bp, to 13.00%, at today’s meeting and with the ruble likely to remain under pressure and inflation pressures to keep building, …
