Filtered by Topic: Monetary Policy Use setting Monetary Policy
GDP target RIP It turns out that GDP growth targets aren’t such a big deal after all. The Politburo yesterday said that only “provinces that are in a position to do so” need hit their targets this year. And it signalled that no major new stimulus measures …
29th July 2022
Gazprom’s announcement this week that it is reducing the supply of gas through Nord Stream 1 to only a fifth of its normal capacity has pushed European natural gas prices up from €125/MWh to €190/MWh over the past week, and will further increase inflation …
A tournament to forgot for Nordic football fans Of course, Sweden measures up well against the UK in many ways, including on the economic and political fronts. After all, the estimated 1.4% q/q rise in Swedish GDP in Q2 (data released on Thursday) is in a …
New president backs “Build, Build, Build” In his first State of the Nation address, the president of the Philippines, Ferdinand “Bongbong” Marcos Jr., this week pledged to resume the “Build, Build, Build” infrastructure programme of his predecessor, …
Re-opening boost to fade, fast The chunky increase in euro-zone GDP in Q2 was due to the re-opening of the services sector which has masked a deterioration in most other parts of the economy. We expect a triple whammy of high inflation, tighter monetary …
Consumers borrowing more to cope with higher inflation The chunky increase in unsecured borrowing in June suggests that households are having to rely more on credit due to the cost of living crisis. But households won’t be able to fully offset the hit to …
Rising core inflation adds to pressure on ECB With headline and core inflation rising more than expected yet again, the case for the ECB to pursue further aggressive tightening of interest rates is unassailable. A 50bp hike in September now looks nailed …
GDP in Taiwan contracted last quarter as a surge in COVID-19 cases weighed heavily on consumer-facing sectors and exports slowed. Although consumption should bounce back now that virus cases are falling and mobility is rebounding, the worsening prospects …
Falling yields ease pressure on yield target Long-term government bond yields have retreated from their recent highs in both the US and Japan, with the yield on 10-year Japanese government bonds (JGB) now the lowest it has been since mid-March. (See Chart …
Global economic and market analysis from Capital Economics We expect euro-zone GDP probably rose a little bit last quarter … … and intense price pressures kept regional inflation high in July (10.00 BST) We think that Colombia’s central bank will hike its …
28th July 2022
Governor Tiff Macklem has voiced concern about the inflationary impact of the loonie, but we doubt that a modest fall would prevent the Bank of Canada from pausing its tightening before the Federal Reserve. At US$0.78, the loonie is far lower than the …
We held an online Drop-In event yesterday to discuss our Q3 Global Economic Outlook and the forecasts within it (see an on-demand recording here ). This Update addresses several of the client questions that we did not have time to answer during the event. …
Gulf would benefit from possible OPEC+ policy shift Next week’s OPEC+ meeting may provide the first hints of the group’s production policy beyond September and if, as we expect, they opt to remove quotas, the Gulf stands to benefit most. On its current …
The economic outlook has deteriorated across the region. Inflation is soaring and monetary conditions are tightening, which is weighing on households’ real incomes and spending power. The latest surveys show consumer confidence tanking and economic …
Downbeat surveys raise the spectre of recession The bigger-than-expected decline in the EC Economic Sentiment Indicator in July adds to a growing list of indicators pointing to activity slowing markedly in July. With the region’s gas supply now reduced …
MPC to raise rates by a bigger 50bps and to leave the door open to more 50bps hikes Our forecast that rates will peak at 3.00% remains higher than the consensus forecast of 2.00% Bank takes another step closer to gilt sales We expect the Monetary Policy …
Drop in inflation unlikely to stave off another 50bp hike next week Another 50bps possible in September, but tightening to slow after inflation peaks in Q3 Repo rate to rise by more than most expect by early 2023 We expect the MPC to continue frontloading …
Overview – Activity has bounced back from lockdowns but China’s economic recovery will become more challenging from here on as exports turn from tailwind to headwind and the property downturn deepens. Policy restraint means that stimulus will not fully …
The Fed’s decision to raise interest rates by a further 75bp to 2.25%-2.50% takes them close to their “neutral” level. With inflation set to fall and mounting signs of economic weakness, we suspect officials will be more cautious raising rates from here, …
27th July 2022
The mortgage boycotts are a double threat to developers and to the housing market. They have drawn attention to the problem of cash-strapped developers being unable to complete properties that they have already sold, which is putting off new homebuyers. …
For a major net oil exporter, Nigeria’s worsening economic struggles in the current high oil price environment are striking. Low oil production, which was 30% below the country’s OPEC+ quota in June, has curbed oil export revenues. Coming alongside …
Global economic and market analysis from Capital Economics We expect the Fed to hike the fed funds rate by 75bp, to 2.25-2.50%(19.00 BST) We think the US economy expanded by just above 1% q/q annualised last quarter (13.30 BST) Register for our Drop-In on …
Risks rising, but recession still far from inevitable While the deterioration in the survey data and renewed inversion of the Treasury yield curve imply that the risks are rising, our composite models suggest that the economy is still more likely than not …
Latin American economies held up well in early part of this year, helped by the surge in commodity prices brought about by the war in Ukraine. But there are signs that activity is now weakening. Timely monthly activity indices fell in m/m terms in five of …
Bank lending growth accelerated further in June, but lenders expect the demand for loans to slow sharply in the coming months, adding to the reasons to expect the economy to fall into recession. Meanwhile, banks in the periphery are tightening the Ts and …
Labour market surprising to the upside, but inflation in line with expectations Bank to keep hiking by 50bp until October Rates to peak at 3.6%, but housing downturn will prompt rate cuts next year While the labour market has surprised to the upside, …
Table of Key Forecasts Overview – EM GDP growth will be weaker than most expect in 2022 and 2023 as China’s economy rebounds only moderately and activity slows elsewhere. Inflation is set to remain elevated for some time yet, and policy rates will be kept …
26th July 2022
The news today that Gazprom will further reduce its natural gas supply to Europe increases the likelihood of recessions in the euro-zone, UK and parts of Emerging Europe. It also supports our view that inflation pressures will be relatively persistent in …
Overview – Sub-Saharan African economies are suffering heavily from the spillovers from Fed tightening and the war in Ukraine. Policy in the region is likely to tighten further as a result, weighing on growth. Indeed, our growth forecasts for this year …
GDP figures for Korea released earlier today showed economic growth accelerated in the second quarter thanks to a strong rebound in private consumption as the economy enjoyed a reopening bounce. This follows the scrapping of most of the remaining COVID-19 …
Inflation has peaked, but will remain high The drop in inflation in Brazil to 11.4% y/y in the first half of July provides the first clear sign that inflation has passed its peak and is now on a downwards path. But even so, with the headline rate far …
Italy’s next government is unlikely to bring the country’s future in the euro-zone into doubt, in a repeat of the turmoil that we saw after the 2018 election. But it will probably run looser fiscal policy and find it more difficult to pass reforms. If it …
Global economic and market analysis from Capital Economics Inflation probably edged down in Brazil in the first half of July (13.00 BST) We expect Hungary’s central bank to hike rates by 100bp (13.00 BST) Clients can register here for a Drop-In on our …
25th July 2022
Heading for recession The further decline in the German Ifo Business Climate Index (BCI) in July adds to the evidence that the German economy is on the brink of a recession as high energy prices and worries about energy security take their toll on firms’ …
Our view that GDP growth will slow below potential next year assumes one of the sharpest falls in dwellings investment in Australia’s modern history. However, this Update explains why dwellings investment could hold up better than we’re anticipating. In …
Slump in confidence points to sales weakness ahead Retail sales rose by a bit more than we anticipated in May, but the preliminary estimate implies that most of the gain in sales volumes was reversed in June and the slump in consumer confidence suggests …
22nd July 2022
Who would have thought that one of the most noteworthy parts of the news on the UK economy this week would be the government’s debt interest payments on its index-linked gilts? But with the battle to become the next Prime Minister reaching its final …
Fed officials may have briefly contemplated an even bigger hike following the news of the further surge in inflation in June but, with inflation expectations dropping back and the incoming news on activity softening, we expect another 75bp hike next week. …
Almost exactly ten years on from Mario Draghi’s “whatever it takes” speech, the ECB this week had another attempt at keeping a lid on peripheral bond spreads as it kicked off its first tightening cycle in more than a decade with a bigger-than-expected …
Tanzania, Kenya secure IMF funds The approval this week of an IMF package for Tanzania and the latest disbursement of a loan for Kenya will ease near-term balance of payments pressures. The Fund has pushed fiscal consolidation in both countries but, in …
Danish policymakers won’t be rushed Given that Denmark’s Nationalbank operates an exchange rate peg with the euro, it was no surprise to see it mirror the 50bp rate hike by the ECB on Thursday afternoon. If anything, the only surprise was that it took …
Remittances to support external position Remittances (money transferred by foreign workers back to their home countries) are an important and often underappreciated source of foreign currency for India. The RBI’s latest monthly bulletin released this week …
Pipeline price pressures have peaked Spending on travel and leisure is supporting activity and has so far prevented the UK composite flash PMI from joining the euro-zone’s PMI in contraction territory. Perhaps even more encouraging was that price …
Further tightening over the coming months We published our latest Emerging Asia Economic Outlook this week, which contains our detailed forecasts. Here are three key calls from the report. Key Call 1: Growth will slow GDP figures due over the coming …
Euro-zone on brink of recession July’s flash PMIs suggest that the euro-zone is teetering on the brink of recession due to slumping demand and rising costs while inflationary pressures remain intense. The ECB will have to follow up on yesterday’s historic …
Mobility softening as virus cases surge New Covid-19 cases are now nearly twice as high as they were at the peak of the Omicron wave in February. The government has so far ruled out declaring another state of emergency, which makes sense as the number of …
Table of Key Forecasts Global Overview – The outlook for the world economy has darkened again and we have reduced our forecasts for all major economies, leaving them further below the consensus of economists. We now anticipate recessions in the euro-zone …
21st July 2022
Headline CPI inflation probably eased in Japan in June (00.30 BST) Rising prices probably weighed on June retail sales volumes in the UK (07.00 BST) We expect July’s flash PMIs to show that activity weakened in the euro-zone & the UK Key Market Themes …
The ECB’s 50bp rate hike today is likely to be the first move in a sustained interest rate hiking cycle which we think will bring the deposit rate to around 2% next year. We also think the Bank will at some point have to use its new asset purchase …
South Africa’s central bank upped the pace of tightening further with a 75bp hike, to 5.50%, as policymakers’ intensifying fears about inflation (and inflation expectations) trumped any concerns about the slow and bumpy economic recovery. The increasingly …
