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A weaker economy than we previously thought could mean housing demand is a bit more subdued than we expect. But our forecast for mortgage rates to fall further than is widely anticipated suggests transactions will continue to recover and house prices can …
17th February 2025
Economy struggling ahead of Hamas ceasefire The slowdown in Israeli GDP growth, to 2.5% q/q annualised, in Q4 suggests the drag on activity from rising tensions with Hezbollah last quarter was a bit larger than we expected. The recent ceasefires with …
Why did markets greet the latest White House tariffs announcement so warmly? Deputy Chief Markets Economist Jonas Goltermann is on The Weekly Briefing from Capital Economics to talk about the influence of Donald Trump’s reciprocal tariffs plan on investor …
14th February 2025
Trump rings bell for next phase of trade war… While the EU was not in the firing line in President Trump’s first round of tariffs in January, he did make it clear that the EU was still ”in for tariffs”. So the 25% universal tariff on steel and aluminium …
Enthusiasm abound after Trump and Putin talk The phone call between Presidents Trump and Putin this week and comments by US Secretary of Defence Pete Hegseth caught many by surprise, particularly in Ukraine and Europe. The US and Russia have now agreed to …
The potential tariffs that UK exporters could soon face for sending goods to the US became bigger this week. On Monday, Trump said that US imports of steel and aluminium from all countries would face tariffs of 25% from 12 th March. Then on Thursday he …
Trump-Putin call could ease upside risks for energy President Trump was at the centre of another whirlwind week in commodity markets, with his “lengthy and highly productive” phone call with President Putin giving energy traders in particular plenty to …
NBR leaves rates on hold, scope for cuts looking increasingly limited The National Bank of Romania (NBR) left its policy rate on hold again today, at 6.50%, and we think there is limited scope for interest rate cuts this year. Our forecast for the policy …
CBR leaves rates on hold, loosening still some way off The decision by the Central Bank of Russia (CBR) to leave interest rates on hold at 21.00% today was widely expected, and the hawkish communications suggest that policymakers are not going to bend to …
Productivity problems The euro-zone economy performed a little better than previously thought in Q4, but growth was still extremely weak and the early signs are that it got off to a slow start to 2025. There is also little evidence of a turnaround in the …
Booming demand for housing has led to huge price rises in southern Europe over the past few years and will support rapid construction growth for some time to come. Moreover, there is little risk of a bubble forming because mortgage borrowing has been …
13th February 2025
President Trump’s push for a peace agreement in the Russia-Ukraine war would affect major financial markets mainly through lowering energy prices, especially in Europe. In turn, that would be a boost for equities and currencies in the region. But, unlike …
GDP growth in Russia came in stronger than most expected last year at 4.1%, but this was accompanied by significant overheating and policymakers lost control of inflation. We think the period of rapid growth will give way to a slowdown in 2025, but the …
Property valuations worsened in Q4 as alternative asset yields rose and property yields essentially held steady. With the 10-year gilt yield now falling back, and property yields set to for a period of stability, we expect property valuations will …
President Trump’s push for an early peace agreement in Ukraine raises the prospect of higher defence spending in Europe and increases the chance of a fall in European natural gas prices. But it does not dramatically shift the outlook for the European …
If the Trump administration pursues a reciprocal tariff strategy rather than a 10% universal tariff, then it could result in a smaller rise in the overall effective tariff rate than we have assumed. But while most DMs would come out relatively unscathed, …
December even worse than it looks and the outlook remains bleak The fall in euro-zone industrial production in December means that the sector contracted again in Q4. Surveys suggest that production will remain subdued in the coming months and we think …
This publication has been updated with additional analysis. Swiss inflation to stay very low this year The fall in inflation in January was a little smaller than we had anticipated and perhaps reduces the risk of Switzerland falling into deflation later …
This page has been updated with additional analysis since first publication. Higher taxes and weaker global demand hold the economy back The 0.1% q/q rise in real GDP in Q4 (consensus, CE and BoE forecasts all -0.1%) leaves the economy all-but stagnating …
Higher mortgage rates and weak activity starting to weigh on housing demand January’s RICS survey suggests that the recent rises in mortgage rates and the downbeat economic outlook weighed on housing demand at the start of this year. But bigger falls in …
Any attempt by the EU to impose tariffs on imports of US services would be controversial and difficult to implement. It is more likely that the EU links regulation and domestic taxation of digital services to trade relations with the US – but probably by …
12th February 2025
Five years ago, the retail sector was staring at the abyss, as lockdowns and virus-related restrictions worsened what was already a crisis in demand. The turnaround since has been dramatic. But while the sector has now re-priced and is set to perform …
The latest CPI data out of Central and Eastern Europe (CEE) have been stronger than expected, and leading indicators suggest that inflation across the region may be higher than we previously anticipated this year. We have revised up our interest rate …
Prospects for Greece’s economy are brighter than for the core euro-zone economies over the next year or two, but a shortage of labour will keep growth lower than in fellow “peripheral” economies, notably Spain. It could also cause growth in Greece to slow …
The latest opinion polls suggest that a CDU-SPD coalition is the most likely outcome of the German election. Such a coalition would be less likely to pursue labour market reforms and activist industrial policies than a CDU-Green coalition. But we think it …
11th February 2025
This analysis has been edited to reflect the influence of the Q4 2024 GDP data released two days after the initial analysis was published. Higher taxes for businesses, a lingering drag from the previous interest rate hikes and softer overseas demand …
After a strong Q4, a shaky start to 2025 has highlighted the fragility of the recovery in euro-zone commercial real estate investment. We still expect transaction volumes to rise over the remainder of the year, but tight lending conditions, refinancing …
We expect equities in Germany to underperform those in other major developed markets in the coming year or so because German firms are more exposed to the increase in protectionism which appears to be gathering pace. This will probably be more important …
While it is possible that a fall in mortgage rates will trigger a modest increase in the number of rental properties over the next two years, we doubt this will offset the weakness in rental supply over the past decade. Our forecast is for tight supply to …
Trump’s curveballs have limited sway in oil markets With oil prices back to where they were at the start of the year, the oil market has offered a collective shrug to the geopolitical curveballs thrown its way. Although Canada and Mexico have been granted …
10th February 2025
We expect the euro-zone economy to grow at only a sluggish pace this year, with southern economies outperforming the core. Germany’s election will lead to only a modest loosening of its restrictive “debt brake”. France’s budget deficit will remain very …
The Central London office pipeline looks set to go from feast to famine over the next few years, with a sharp drop in planned completions from 2027. But we doubt new office supply will run dry. Constraints on development are easing and demand for new, …
The overall message from the Bank of England this week was decidedly dovish, raising the risk that interest rates will be cut further and faster than our forecast of a fall from 4.50% to 3.50% by early 2026. But as we unpacked in our reaction to the …
7th February 2025
Hawks fly in CEE, but further rate divergence likely The communications from policymakers following central bank meetings in Poland and Czechia this week struck a hawkish tone. After leaving rates on hold , Poland’s central bank Governor Glapinski focused …
Note: Join us as we discuss how Donald Trump's moves to build out his policy agenda will affect energy, soft commodities, and metals markets in a Drop-in on Thursday 13th February 15:00 GMT/10:00 EST . Register here for the 20-minute online briefing. …
Tariffs on energy suppliers. Tariffs on metals suppliers. A push to end the Ukraine war. A National Energy Emergency. Less than one month in. Donald Trump has roiled commodities markets with a slew of orders in the opening phase of his administration. …
While there is currently a lot of focus on r* at the ECB (which we wrote about earlier today ), the outlook for wage growth may prove to be more important in guiding monetary policy. And the ECB’s wage tracker, released on Wednesday, suggests that wage …
Comparing the ECB’s deposit rate to estimates of its equilibrium level suggests that monetary policy will soon be only slightly restrictive. But there is a huge amount of uncertainty around these estimates. With the economy struggling and underlying price …
Will the federal election outcome bring any clarity to Germany’s existential economic and political questions? Could a new government usher in an era of more aggressive fiscal spending – including on defence – and structural reform? Will Germany's new …
Donald Trump has sent shockwaves through European corridors of power with his moves to re-engage with Vladimir Putin, his efforts to end the war in Ukraine, and his threats to withdraw the US as the backstop of the continent’s security. But how much of …
20th February 2025
The ECB’s April meeting comes amid falling inflation – but also rising global risks, not least the potential growth shock from Trump’s aggressive tariffs. How will heightened macro uncertainty shape the Governing Council’s decision and communications? …
7th April 2025
This page has been updated with additional analysis since first publication. Housing market continues to shrug off sluggish economy The 0.7% m/m rise in the Halifax house price index in January is at odds with the muted 0.1% m/m increase in the Nationwide …
We expect the Bank of England to cut faster and further than investors expect, pushing Gilt yields down and in turn weighing on the pound. The Bank of England (BoE) cut its Bank Rate by 25bp to 4.5% today, as widely expected. Even so, the tone of the …
6th February 2025
The UK stock market appears to be riding high – the FTSE 100 has hit a record high. But local-currency returns from UK equities have been flattered by a weaker pound. In common-currency terms, UK stocks have performed much less impressively, and we expect …
A slowdown in the adoption of EVs – along with an increasing preference for hybrids – is likely to increase demand for platinum by a bit more than for palladium over the coming years. Accordingly, with the supply backdrop likely to remain constrained for …
A stabilisation in capital values and decline in interest rates have sparked optimism that we may be past the worst of the real estate debt refinancing challenge. That indeed looks to be the case in the UK. However, euro-zone banks are still pulling back …
While cutting interest rates from 4.75% to 4.50% today, which was the third 25 basis point (bps) cut in seven months, the Bank of England showed some signs that it may cut rates faster and further than our forecast of a decline to 3.50% by early 2026. …
Easing cycle resumes, rates on their way to neutral The Czech National Bank (CNB) cut its policy rate by 25bp today, to 3.75%, and we think that further easing lies in store this year. Our forecast for the policy rate to fall to 3.00% by end-2025 would …
For updated and more detail analysis see here . Dovish development adds downside risk to our forecast for Bank Rate to fall to 3.50% While cutting interest rates from 4.75% to 4.50% today, which was the third 25bps cut in seven months, the Bank of …
Retail sales lose momentum in Q4 December’s fall in euro-zone retail sales means that growth over Q4 as a whole slowed substantially. We suspect that spending growth will remain subdued in the coming quarters. The 0.2% m/m decline in euro-zone retail …
