Given our dovish view of monetary policy in Emerging Markets (EMs) – and our increasingly less bearish view of the US economy – we think that EM local-currency government bond yields will fall across the board in the next couple of years, particularly in …
14th September 2023
We’ve revised up our projections for the S&P 500 and the 10-year Treasury yield, but still expect both to fall a bit by the end of this year. We have also tweaked our forecast for the US dollar. We had been projecting that the S&P 500 would struggle over …
The Riksbank looks all but certain to follow the ECB’s example and raise its key policy rate by 25bp next week, to 4.0%. However, while that could mark the end of its tightening cycle, on balance we think It is more likely to deliver one last hike, in …
On balance, we think the SNB will look through the recent low inflation and hike rates by 25bp one last time to 2.00%, given policymakers’ previous hawkish commentary. But with the economy stagnating in Q2 and wage growth suppressed, we would not be …
We think that the ECB is more likely than the Fed to keep rates “higher for longer”, even as the euro-zone heads for a recession. That is one reason why we expect core euro-zone bond yields to fall by less than Treasury yields over the next year or so, …
Yesterday, we hosted a Drop-in webinar taking a closer look at the state of play in Egypt and whether the country can get its IMF deal back of track. You can view on-demand here . This Update addresses some of the questions we received during the event. …
Today’s 25bp rate hike by the ECB probably brings its tightening cycle to an end. Given our view that underlying inflation will ease only gradually even though the euro-zone is heading for a recession, we think policymakers will leave rates at this record …
We think the recent rally in the iron ore price will soon go into reverse. Steel demand in China has surged in recent months, but we think that will prove temporary. China’s steelmakers should cut back on production once the boost to demand from a pick-up …
Note: Join our online briefing on Tuesday, 19 th September about oil prices and the risks to the global inflation outlook. Register here . While we think Saudi Arabia and Russia’s supply cuts, which have sent oil prices surging in recent weeks, will be …
CPI food inflation has remained elevated in recent months but, with wholesale price growth easing rapidly, we are confident it will soon fall sharply. That will help to offset the impact of higher oil prices on energy inflation and means there is still …
This page has been updated with additional analysis since first publication. Consumer strength fading The 0.6% m/m rise in retail sales values in August was mostly due to price-related strength in gasoline sales, with the muted 0.1% rise in underlying …
A gesture of support from the PBOC The People’s Bank has just announced a cut to bank reserve requirements. With private sector credit demand still weak, this is a gesture rather than a meaningful support measure. Substantial rate cuts or a sea change in …
End of the tightening cycle The ECB’s decision to raise interest rates by a further 25bp today probably brings the current tightening cycle to an end. But given the strength of underlying inflation, we expect rates to remain at this level for at least a …
While economic activity was generally more resilient than feared in the first half of 2023, there are growing signs that many major economies are losing momentum. We expect most advanced economies to experience mild recessions in the quarters ahead as …
South Africa’s unemployment rate has dropped back over the past year or so but it remains far above its pre-pandemic level. The rise in long-term unemployment, which has its roots in both cyclical and structural factors, is particularly worrying and could …
All eyes on the CBE The Central Bank of Egypt (CBE) resumed its tightening cycle in August and, with inflation rising further, we expect interest rates to be hiked again. More than anything, though, investors will be looking for any shift in the exchange …
We have updated this webpage with additional analysis, as well as a Chart and Table of the key data. Inflation slows to weakest pace in a year and will ease further Saudi Arabia’s headline inflation rate slowed from 2.3% y/y in July to 2.0% y/y in August, …
We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST on Thursday 21 st September. (Register here .) Final 25bps hike to 5.50% to be followed by rates staying at their peak until late in 2024 Bank may …
Big fall in Swedish inflation won’t stop Riksbank hiking Although the drop in the Riksbank’s target measure of inflation in August was bigger than the consensus had anticipated, it will not prevent policymakers from raising its key policy rate by another …
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is likely to …
This page has been updated with additional analysis since first publication Firm rebound in employment won't move the needle for the RBA Although job creation rose at a breakneck pace last month, it was matched by an equally forceful expansion of the …
This page has been updated with additional analysis since first publication. Business investment should still rebound in Q3 “Core” machinery orders fell by 1.1% m/m in July, and the data point to a sizeable fall in spending on machinery and transport …
Depressed activity remains consistent with falling house prices The further deterioration of the RICS survey figures in August suggest the peak in mortgage rates seen in July are continuing to dampen demand. And as we don’t think rates will fall …
Fed to keep rates unchanged at 5.25%-5.50% next week New SEP to show officials less convinced of need for further hikes Rapid decline in inflation will see rates cut to 3.25%-3.50% by end-2024 The Fed is set to keep rates unchanged at 5.25%-5.50% at the …
13th September 2023
The recent surge in oil prices is fuelling concerns about an inflationary resurgence that could upset central bank monetary policy plans. But how worried should investors be? In this special briefing, our Commodities team explained how the oil market’s …
Although today’s August CPI report was broadly in line with expectations, it provided further evidence that underlying inflation in the US is coming down even as the economy there weathers the Fed’s prior increases in interest rates very well. If that …
Overview – India’s economy is showing signs of coming off the boil, and core inflation is moderating. However, a surge in food prices has pushed headline CPI inflation well beyond the upper limit of the RBI’s 2-6% tolerance range. The onset of a …
EM governments’ budget deficits have narrowed and their debt-to-GDP ratios have fallen since the height of the pandemic. But some of the tailwinds that have supported an improvement in fiscal health are set to unwind. Among the major EMs, debt dynamics …
This page has been updated with additional analysis since first publication. Downward trend in core inflation still firmly intact The Fed will look through the 0.6% m/m jump in headline CPI in August as it was driven by the recent rally in energy prices. …
Although wage growth is clearly falling in the US, the same cannot be said for the UK and euro-zone despite some evidence of labour markets cooling there too. A further fall in inflation expectations and an easing in worker mismatches is probably needed …
This page has been updated with additional analysis since first publication. Sizeable fall in July marks beginning of downward trend Euro-zone industrial production fell in July and we think it will continue to do so over the remainder of the year in the …
For consumers, it’s the camera lenses on the outside that may draw them to Huawei's Mate 60 Pro. For those tracking shifts in the global macro narrative, it’s the chip inside the sanctioned Chinese firm’s newest flagship phone that’s most interesting. In …
10th September 2023
Over the last year or so, spreads over sovereign yields have narrowed to their lowest since the euro-zone debt crisis. But while these are expected to widen again over the next year, mostly thanks to falling bond rates, they look set to stay well below …
This page has been updated with additional analysis since first publication. Recession may have begun The 0.5% m/m fall in real GDP in July (consensus and CE forecasts both -0.2% m/m) could possibly mean that the mild recession we have been expecting has …
Data on cell phone usage suggest that cities with a high share of professional, scientific and technical occupations and long commute times are typically associated with poorer downtown recoveries. That is in line with our existing views, but also implies …
12th September 2023
Our view on UK inflation vis-à-vis the US suggest s that bond yields are set to fall back by more in the former , adding downward pressure on sterling. Today’s mixed UK Labour market data prompted only modest falls in Gilt yields and sterling, as it …
When the ECB Governing Council announces the results of its operational review later this year, it is likely to say it will continue to use the deposit rate as its key policy tool . We also expect the ECB to establish a new framework for lending reserves …
There’s little evidence in the investment and trade data so far to back up the commonly-cited narrative that Mexico is experiencing a “nearshoring” boom. The one sector where there are some signs of this is industrial real estate, which suggests that it’s …
New home sales have brushed off a collapse in overall housing demand, rising 23% in the first half of 2023. More competitive pricing will be providing some support to sales, but the primary factor is the chronic shortage of existing homes for sale, …
After a strong 2022, annual office rental growth has slowed in Italy in H1 2023. And given the contraction in employment we are forecasting, together with increased supply, we think prime rents will largely stagnate both in Milan and Rome until 2025. …
This page has been updated with additional analysis since first publication. Headline CPI rate drops, but food inflation threat is not over yet The drop in headline consumer price inflation in August should provide some welcome relief for the RBI. But …
This page has been updated with additional analysis since first publication Another 50bp cut on the cards despite rise in inflation The rise in Brazilian inflation to 4.6% y/y in August won’t prevent the central bank from delivering another 50bp cut, to …
The Q2 Mortgage Lenders and Administrators statistics showed that higher rates are limiting lending and making it more difficult than ever for single-income households to get onto the housing ladder. Meanwhile, arrears took a step up as another cohort of …
Often-breathless debate around AI can leave investors bewildered as to what this emerging technology will actually mean for the global economy and markets. It’s a debate which has lacked a consistent and comprehensive framework for thinking through AI’s …
Little sign of the economy slowing Industrial production softened a touch in Turkey in July but retail sales continued its recent run of strength and adds further support to the view that the economy is not yet slowing in response to the recent policy …
This page has been updated with additional analysis since first publication. Strong wage growth suggests the Bank will raise rates further The tightness of the labour market continued to ease in July. But the further rise in wage growth will only add to …
Another step up in the Chinese and Japanese authorities’ efforts to prop up their faltering currencies has given the renminbi and the yen a bit of a boost today. Alone, these measures are unlikely to prove the start of a lasting turnaround: we continue to …
11th September 2023
The G20 summit which concluded yesterday in New Delhi supported our view that the global economy is fracturing into US and China-led blocs, and that India still leans to the former. While the statement was light on explicit policies, calls to increase …
The recent weakness of Gross Domestic Income (GDI) is only partly because it includes the losses now being incurred by the Federal Reserve. Even after excluding those, GDI paints a much weaker picture of recent economic performance than GDP. As GDI has …
