BoK hikes, but tightening cycle likely to be gradual The Bank of Korea today raised interest rates by 25bps for the second consecutive meeting, taking the policy rate to 3.00%. The decision was a close call, with 18 of 35 economists polled by Reuters …
27th August 2026
Although there are many reasons to expect recent upward pressure on the 10-year Treasury term premium to persist, they could collectively be more than outweighed for a while by a bursting of the bubble in AI, which is something we envisage occurring next …
26th August 2026
While local-currency bonds in parts of LatAm and EM Europe may outperform those in Asia if oil prices fall, equities in those regions are likely to continue to lag their Asian peers as the AI rally enters its final stages. But if the AI bubble bursts, …
Growth in Latin America last quarter was a mixed bag, with Colombia the region’s star performer while Argentina underperformed. But we think that growth will come in below consensus expectations in most countries over the next couple of years. Headline …
Our Commodities team hosted a 20-minute online briefing on the latest developments across commodity markets on Thursday 3rd September . The team highlighted key risks to prices as the US-Iran confrontation drags into its seventh month, as fiscal fears …
The increased footprint of hedge funds in sovereign bond markets is one reason why these markets will remain susceptible to frequent bouts of volatility. This Focus examines, more broadly, the risks and benefits to sovereign bond markets of hedge funds’ …
Middle-of-the-road data batch changes little for the Fed The slightly above-target-consistent rise in the core PCE deflator in July won’t be enough to convince the Fed that they’ll need to hike rates as soon as September. But with the annual rate still at …
Our China Activity Proxy suggests that typhoons dealt a significant blow to activity in July, with both construction and industrial growth slowing sharply. The good news is that these disruptions should be short-lived. Growth should recover in the months …
Signs of economic resilience. But more fiscal deterioration. And still-potent inflationary pressures. The UK economy has held up better than expected through the summer, despite higher energy prices, but the outlook remains challenging as we head into the …
25th August 2026
The continued closure of the Strait of Hormuz and Houthi threats against Saudi Arabia will hold back a recovery in the Gulf economies. The downside risks to our forecast for a ~3% contraction in GDP in the region this year appear to be growing. Outside …
On hold for this year Thailand’s central bank (BoT) left its key policy rate unchanged today at 1.00%, and the tone of the statement supports our view that interest rates will remain unchanged for the remainder of the year. Today’s decision came as no …
Strong inflation keeps chances of RBA rate alive With underlying inflation showing no signs of slowing, there’s still a risk that the RBA will deliver another rate hike over the coming months. The 3.5% annual rise in consumer prices in July followed a …
With inflation still far too high for the RBNZ’s comfort and the economy showing signs of life again, we now expect the Bank to hike rates at each of its next two meetings in September and October. That said, given uncertainty around the economic recovery …
The recent sell-off in long-end Treasuries does not amount to a tightening in financial conditions that will slow the economy. Accordingly, we still expect the Fed to raise interest rates by year-end. While higher yields can reflect positive trends, such …
Despite gross issuance of long-dated US corporate bonds and other private-sector bonds surging over recent months, we doubt this is the main culprit behind the rise of Treasury yields over this period. But if this rate of issuance persists it could become …
Canada (sort of) goes “dollar for dollar” The retaliatory tariffs announced today largely match the Section 338 tariffs imposed on Canada last week, reflecting a response which is politically popular but economically insignificant – and, importantly, does …
Asia Chart Pack (August 2026) …
The recent rise in EU natural gas prices to their highest level in over three years has been driven by a combination of constrained LNG supply and hot temperatures lifting demand. Against the backdrop of low storage levels in Europe ahead of peak demand …
Growth in Argentina’s economy remains unbalanced and we think that large parts of it (outside mining and agriculture) will continue to struggle over the rest of Milei’s term due to fiscal tightening and an overvalued exchange rate. These policies are part …
House prices resilient, but likely to lose some momentum Even though the 0.2% m/m rise in house prices in June was stronger than we expected, we remain reasonably confident that prices will lose momentum heading into the third quarter as the …
Easing cycle on course to continue into Q4 The further fall in Hungarian inflation meant the 25bp interest rate cut (to 5.50%) today was never in doubt and it’s now looking likely that the base rate will be cut well into Q4. We have pencilled in an …
Strong tech-related demand is set to support faster growth in prime rents in Munich and Berlin than the other main German markets while the AI boom persists. However, we expect rent growth to ease more notably in Berlin thereafter given it has a larger …
Our Emerging Europe Economics Chart Pack has been updated with the latest data and our analysis of recent developments. Economic growth has generally held up well since the start of the year, albeit with a divergence that is likely to persist in the …
Ifo points to continued economic resilience Germany’s August Ifo survey and detailed Q2 GDP release added to evidence of surprising economic resilience and support the case for near-term policy tightening by the ECB. The Ifo Business Climate Index rose …
Naval blockade trumps financial offensive on Iran’s oil exports The announcement of the “greatest financial offensive ever” by the US ups the ante on Iran and could widen the divide between factions in the country. But with the renewed US naval blockade …
24th August 2026
Africa Chart Pack (Aug. 2026) …
Capital flows into EM bond and equity markets have returned to positive territory in the past few weeks and are nearing their highest level in over two years. Even if flows were to reverse course, our risk indicators suggest that most EMs would be well …
Global government bond markets have come under renewed pressure in recent weeks, with yields on thirty-year bonds touching their highest levels since 2007 in several major economies. This is not yet a bond market crisis. But there are good reasons why …
Trade talks between the US and Canada collapsed on Friday, triggering 50% US tariffs on around $20bn of Canadian goods and a promise from Ottawa to match them "dollar for dollar" from 8th September. But how great are the economic risks from here, and …
We don’t think it’s time to panic about long-dated government bonds, even though the headwinds they face are gathering strength. Still not a bond crisis Last week was a mixed one for government bonds , with 10-year yields, for example, generally a little …
Although the main cause of weakness in long-dated Treasury bonds at the moment seems to be rising term premia, increasing ‘risk-neutral’ yields could prove just as problematic to them in the longer run. It’s widely accepted that the recent rise in …
21st August 2026
With the upward move in yields gathering pace at the start of the week (see here ), the Treasury said that it will raise the size of its long-end liquidity support buybacks from the current maximum of $2bn per operation to at least $4bn. The Treasury has …
We agree with the White House’s assessment that China’s indirect exports to the US have risen sharply since US tariffs first came into force. But it remains unclear how much of this is illegal transhipment versus legal trade diversion, which will make it …
Focus on defence and consumers Plans in Taiwan’s 2027 budget for a sharp rise in defence spending may face some pushback from parliament, but proposals for an even larger increase in social welfare spending and a fresh round of cash handouts should temper …
SA: Food inflation slump raises bar for rate hikes The fall in South African inflation in July was driven by lower energy inflation, but food inflation played a role too. Both may pick up again in the coming months, but these rises shouldn’t be enough to …
Q2 GDP: Colombia outperforms the rest of LatAm This week’s activity data point to a big divergence in growth across the region. At one end of the scale, in Argentina, the monthly activity index suggests that the economy contracted last quarter. Chile’s …
Goods CPI jump exaggerates firms’ pricing power The 0.23% m/m average increase in CPI-trim and CPI-median in July marked the largest monthly rise since last September and seems suggest to that price pressures are broadening. (See here .) Measuring …
Renewed rise in gas prices stunts spending recovery The 1.5% m/m jump in retail sales volumes in June confirms solid momentum in consumer spending heading into the third quarter, though the weak July advance estimate suggests that the renewed rise in …
Will the bond sell-off continue? The recent global bond sell-off is a result of investors demanding greater compensation for fiscal, geopolitical and policy uncertainty. (See here .) Within the euro-zone, investors’ attention is focused on the public …
We suspect long-dated Treasury yields will stabilise over the next few weeks as some calm is restored following the recent bout of volatility in global sovereign bond markets. But we expect term premia to keep edging higher and put upward pressure on …
The first-round “indirect effects” of higher energy prices on inflation have been almost non-existent so far (i.e. firms passing on increases in their energy costs by raising prices). The rise in CPI inflation from 2.6% in June to 2.9% in July was …
The recent jump in oil product spreads in the US means that the so-called ‘3-2-1’ crack spread there is now equivalent to more than the cost of crude oil itself. (See Chart 1.) Crack spreads in Europe and Asia are also well above their long-run averages. …
Budget deficit on course to widen again Ministry of Finance (MoF) officials chaired a press conference today. They didn’t explain why, despite an expansionary annual budget, China’s fiscal impulse turned contractionary in Q2. But they did pledge to …
This special episode of The Weekly Briefing from Capital Economics features an exclusive extract from our client briefing on the global bond sell-off, its causes, consequences and where markets go from here. In this edited extract, Group Chief Economist …
Poland eases fiscal fears … for now Poland’s latest tax proposals have been welcomed by analysts because they appear fiscally neutral and reduce the risk of a further widening in the budget deficit next year. But the government is still avoiding the …
