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Riksbank likely to hike more than it expects The 25bp rate hike announced by the Riksbank today, which brings the key policy rate to 3.75%, had been strongly signalled at the Riksbank’s last meeting. But the accompanying statement and decisions to …
29th June 2023
Inflation back under 2% The further fall in Spanish HICP inflation will provide some respite for households who have suffered a sharp hit to real household income over the last year. But it will have little sway over ECB decision-making as …
This page has been updated with additional analysis since first publication . Economic momentum continued in Q2 The industrial production and retail sales data for Russia for May continue a run of strong data showing that activity has recovered this year. …
28th June 2023
Investors generally revised down their interest rate expectations across Central and Eastern Europe (CEE) over the past month, partly reflecting weaker-than-expected inflation prints and more dovish communications from central bankers. Investors are now …
Higher mortgage rates have not only priced many buyers out of the market altogether, but also reduced the size of mortgage those still able to buy can take out. (See Chart 1.) The latest surge in mortgage rates to almost 6% means that, for the same …
Improvement in core inflation not enough to appease ECB The drop in Italy’s headline and core inflation in June is encouraging. But the euro-zone core rate is unlikely to have declined significantly due to base effects related to the anniversary of the …
The effects of tighter monetary policy are very clear in the money and credit data, reinforcing our view that the euro-zone economy will underperform the ECB and consensus forecasts. Data released this morning show that savers continue to tie up their …
The Bundesbank may make large losses in the coming years but these will be paper losses only, will have no impact on the government’s fiscal position, and are likely to fall over time. While the losses may fuel opposition to the ECB in some quarters, this …
26th June 2023
We continue to expect risky assets to struggle over the second half of this year, as major developed market (DM) economies slip into recessions. Meanwhile, we think DM sovereign bonds will rally; that’s partly due to safe-haven demand, and partly because …
Limited fallout from tensions in Russia, for now The Wagner mutiny in Russia this weekend seems to have ended as quickly as it escalated, having had far less impact on global financial and commodity markets than Russia’s invasion of Ukraine last year. …
The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this …
After several disruptive quarters, we are making few changes to our near-term euro-zone real estate forecasts. Nonetheless, a higher profile for 10-year rates has led us to push back yield reductions until after 2025 and we have also downgraded our office …
This page has been updated with additional analysis since first publication. More bad news on the German economy The slump in the German Ifo, together with the drop in the PMIs, released on Friday, suggests that German GDP probably contracted for the …
Lower-than-expected euro-zone PMIs in June support our view that economic activity will disappoint, which we think will push the euro and government bond yields down by the end of 2023. Underwhelming PMIs in the euro-zone have put some pressure on the …
23rd June 2023
It’s been an extremely tough week for the Bank of England and its Governor, Andrew Bailey. Wednesday’s CPI release revealed the second shocking surge in core inflation in a row and appeared to confirm our view that the inflation problem is bigger in the …
A cut, a hold .... and an underwhelming hike The three central bank meetings that took place across the region this week all produced different outcomes, and policymakers’ communications suggest interest rates in these countries will continue to move in …
This week, we published our latest Europe Economic Outlook . Three key points are worth highlighting. First, the euro-zone economy is likely to remain in recession for the rest of 2023. Admittedly, this year’s fall in gas prices will support demand and …
Swiss offices have already seen the second sharpest price correction across the major European markets. And with stretched valuations set to face renewed pressure from rising bond yields, we think office yields will edge higher and that sluggish rent …
This page has been updated with additional analysis since first publication. Services price inflation still sticky June’s flash activity PMIs won’t do much to ease the Bank of England’s inflation fears, which suggests that yesterday’s interest rate rise …
The fall in the euro-zone flash Composite PMI from 52.8 in May to 50.3 in June left it even lower than our below-consensus forecast. On the face of it, the index still points to a small expansion in Q2, but it hasn’t been a good leading indicator …
This page has been updated with additional analysis since first publication. Sales boosted by hot weather, but drag from soaring mortgage rates yet to bite The further rebound in retail sales volumes in May suggests the recent resilience in economic …
A disparate range of global central banks have delivered their latest policy rate verdicts over the past 24 hours. We think there are four key points for investors to note. First, European central banks are clearly still in hawkish moods. But while that …
22nd June 2023
The rapid depreciation of the Swedish krona has pushed the currency down to its lowest ever level against the euro. Worse still, we do not think the krona is significantly below “fair value”, nor do we expect the headwinds facing it to abide anytime soon. …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday, 19 th July . Register here to join that 20-minute online briefing. The 50 basis point (bps) interest rate rise by the Bank of England today, …
The 650bp interest rate hike by Turkey’s central bank today (to 15.0%) will underwhelm investors that wanted a faster and more aggressive monetary tightening. The currency has come under a bit of pressure since the announcement. But the communications …
50bps and at least another 25bps hike to come The Bank of England’s decision to raise rates by 50bps, from 4.50% to a near 15-year high of 5.00%, is unlikely to be the last hike given the UK’s higher and longer lasting inflation problem. We think the …
Some observers have suggested that the strength of Swedish inflation in May reflected buoyant demand driven by Beyoncé’s Stockholm concerts but the Riksbank is more likely to view it as evidence that underlying price pressures are too high. We expect a …
The 25bp rate hike announced by the SNB this morning was smaller than the 50bp hike we had predicted. But the accompanying statement and upward revision to inflation forecasts for 2024 and 2025 strongly suggest that there will be at least one more hike in …
Today’s 50bp rate hike by the Norges Bank, taking its policy rate to 3.75%, was accompanied by new hawkish guidance and projections. As a result, we have revised up our already above-consensus forecast for the peak in the policy rate to 4.25%. It could …
This page has been updated with additional analysis since first publication . Economy continues to struggle May’s industrial production and retail sales data out of Poland were weaker than expected and are consistent with our forecast that GDP growth …
Norges Bank steps up the pace of rate hikes, more to come Today’s 50bp rate hike by the Norges Bank, taking its policy rate to 3.75%, won’t be the end of its tightening cycle. We already expected the policy rate to hit 4%, above the consensus forecast, …
SNB hikes by 25bp and signals more to come The 25bp rate hike announced by the SNB this morning was in line with market expectations but less than the 50bp we had predicted. However, the accompanying statement and upward revision to inflation forecasts …
Click here to read the full report. Overview – Downturns in activity are bottoming out in Emerging Europe, current account deficits are narrowing and disinflation has taken hold across the region. But the road ahead still looks challenging. We expect GDP …
21st June 2023
Overview – We expect the mild recession in the euro-zone to drag on for the rest of the year. The drop-back in energy prices will provide some relief for households and companies but will be partly offset by governments withdrawing policy support. …
This page has been updated with additional analysis since the post-meeting statement and press conference. Hawkish CNB will turn dovish by year-end The Czech National Bank (CNB) left its main policy rate on hold again today, at 7.00%, and the hawkish …
Ugly inflation print tips balance to 50bp hike tomorrow In response to May’s inflation data , released earlier today, we now expect the MPC to raise interest rates by 50bps to 5.00% at tomorrow’s meeting. A lot of attention has focussed on the fact that …
This page has been updated with additional analysis since first publication. Public finances limits the Chancellor’s room for manoeuvre Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST. …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . A return to mortgage rates of around 6% for the first time …
20th June 2023
Since bottoming out late last year, European and US equities have fared comparably in local-currency terms, and European stocks have even outperformed in dollar terms. Looking ahead, however, we think that the lack of AI (or indeed tech) “champions” in …
This page has been updated with additional analysis since first publication. MNB leading the EM cutting cycle Hungary’s central bank (MNB) announced a cut to its one-day quick deposit rate (the key policy rate at the moment) by 100bp, to 16.00%, today. We …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . Overview – As the UK’s recent problem of higher inflation …
19th June 2023
The latest MSCI data indicate that values in western European office markets have held up better since the start of the pandemic when compared with the US and UK. But given these cities face similar long-term problems, we remain downbeat about the …
16th June 2023
PiS adding further fuel to the inflation fire The Polish government set out plans this week to increase the national minimum wage by around 20% again next year. With the labour market still very tight and further pre-election fiscal stimulus likely to be …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . The title of last week’s UK Economics Weekly was “Why …
More ground to cover The message from the ECB yesterday was decidedly hawkish. The Bank raised rates and more or less promised another hike in July, while the substantial upward revision to its inflation forecasts implied that further tightening could …
How low Fed and ECB policy rates will go, when they are eventually normalised, is at least as important for financial markets as the precise timings of the ends of tightening cycles, in our view. We think both central banks will cut deeper than investors …
Policymakers are likely to raise the policy rate by 50bp to 2% next Thursday, despite inflation falling sharply this year. And SNB Chairman Thomas Jordan’s view that Switzerland’s neutral interest rate might be around 2% suggests that there will be …
15th June 2023
