The Fed’s shift away from its “higher for longer” messaging (and European central banks attempts at maintaining a hawkish stance) pushed relative interest rate expectations against the US dollar, leaving it weaker against nearly all major currencies this …
15th December 2023
Argentina’s fiscal measures: mission impossible? With Argentina’s economy deep in crisis territory, the new Milei administration wasted no time in announcing a stabilisation plan for the economy this week. This included a steep devaluation of the peso and …
Russia’s economic hit: just how large? Analysis by the US Treasury Department published this week gained a lot of attention for highlighting that Russia’s economy is now 5% smaller due to the war and sanctions than it otherwise would have been. The blog …
Ethiopia restructuring like to drag on after default Ethiopia’s sovereign default appears imminent after the government missed a coupon payment on its 2024 $1bn Eurobond. The prominence of Chinese and private bondholders on the continent continue to …
Fed & markets catching up with inflation reality The Fed’s embrace of interest rate cuts next year is understandable when the latest data suggest that core PCE inflation is rapidly closing in on the 2% target. The plunge in expectations in the aftermath …
If the main objective this week of the Bank of England’s Monetary Policy Committee (MPC) was to keep interest rates unchanged at 5.25% and avoid fuelling even more bets on rate cuts, then it looks like a case of mission accomplished. Even so, the Bank’s …
ECB is not for turning… yet In contrast to the Fed, but similar to the Bank of England, this week the ECB pushed back against expectations that it would start to cut interest rates in early 2024. (See our Drop-in here .) In the ECB press conference, …
Vietnam in the “lean US camp” Vietnam this week played host to President Xi Jinping of China and in doing so became the only country in the world this year to have received state visits from the leaders of both the US and China. During Xi’s visit, the …
Market capitalisation closes in on US$4trn The latest leg up in the Sensex triggered by the announcement of the BJP’s thumping victories in three state elections has continued into this week, helped by a broader rally in global equities following the …
“Big Australia” isn’t going anywhere We found out yesterday that population growth in Australia hit a record high of 2.4% y/y in Q2, as the post-pandemic boom in net overseas migration continued apace. (See Chart 1.) Moreover, we estimate that, allowing …
Services sector running red-hot The strong Q4 Tankan released this week adds to the case for the Bank of Japan to abandon ultra-loose monetary policy. Of particular importance is that the Tankan shows mounting signs of overheating in the services …
Weak sentiment isn’t the main headwind China’s leadership gathered earlier this week for the Central Economic Work Conference (CEWC), which is held every December to discuss the economic targets and policy settings for the following year. The …
Egypt: Year one of al-Sisi’s third term will be crucial Figures over the weekend showed that inflation in Egypt slowed but, with President al-Sisi all but confirmed to be re-elected, policy moves over the coming weeks will dictate how inflation develops …
14th December 2023
The greenback has rebounded this week on the back of another batch of robust data out of the US economy, including today’s non-farm payrolls report . That stands in sharp contrast to the continued weakness in the euro-zone, where data on the German …
8th December 2023
Markets call the Fed’s bluff on higher for longer Markets abandon higher for longer The Fed may not be quite ready to abandon its tightening bias at this week’s FOMC meeting, but the markets are no longer buying its “higher for longer” mantra. Markets …
The Bank of Canada this week reiterated that strong immigration is putting upward pressure on inflation because housing supply is failing to keep up. Yet the Bank surely can’t be oblivious to the negative impact of high interest rates on construction. …
Kenya jacks up rates to support the shilling Kenya’s central bank (CBK) delivered a chunky 200bp interest rate hike, to 12.50%, on Tuesday with officials making clear that the move was an effort to support to the shilling. The statement said that “there …
All eyes on Essequibo Tensions between Venezuela and Guyana escalated this week after Venezuelans approved all five questions in last Sunday’s (rubberstamp) referendum, including the establishment of a new state in oil-rich Essequibo, internationally …
What we’ve learned from the State Tribunal drama The debate around whether Polish central bank governor Glapinski could be brought before the State Tribunal and be removed from his post took more twists and turns this week. But at this stage the events …
The further drop in UK market interest rate expectations this week means that investors now think the first interest rate cut will happen in June next year instead of August. And investors are now pricing in an 80% chance of a cut by May. That has led to …
Note: We’ll be discussing the Fed, ECB and Bank of England December decisions and the policy outlook for 2024 in an online briefing on Thursday, 14 th December . Click here to register for the 20-minute session. Last week we brought forward the timing of …
Falling fertility in Korea Recently released figures show the fertility rate (the number of babies expected to be born per woman during her lifetime) in Korea fell to a new all-time low of just 0.7 in the third quarter of the year. This is the lowest …
Faith in the state backstop as strong as ever Earlier this week, Moody’s downgraded the outlook on China’s sovereign credit rating from “stable” to “negative” and made similar changes to its ratings outlook for Chinese banks, local governments and …
Sensex surges as BJP wins big in state elections The financial market reaction to the announcement of the BJP’s victory in three state elections is perhaps an indication that investors are confident that next year’s general election will deliver another …
Services inflation continues to accelerate The economic data released this week seem to vindicate the Bank of Japan’s caution when it comes to abandoning ultra-loose monetary policy. For a start, the timely Tokyo CPI showed that inflation slowed from …
Not higher, not longer Earlier today, the Treasury and the RBA published an updated Statement on the Conduct of Monetary Policy. The revised statement clarified that the RBA’s objective is to return inflation to the mid-point of its 2-3% target. That led …
Egypt: aftermath of election to prove pivotal Next week Egyptians will head to the polls to vote in the presidential election and, while it is widely expected President al-Sisi will be re-elected, the vote could act as a trigger for policy moves that are …
7th December 2023
The greenback’s grind lower has continued this week amid falling US Treasury yields and strong appetite for risk. While comments from numerous Fed speakers (including Chair Powell today) continued to point to an extended pause, PCE data and November’s …
1st December 2023
Despite strong growth, core inflation normalising Q3 growth up, Q4 down This week’s modest upward revision to third-quarter GDP growth, which is now estimated to have been as strong as 5.2% annualised, rather than 4.9%, was certainly eye-catching. It …
The revisions to the national accounts leave the post-pandemic recovery looking stronger than we thought. But that is partly due to intense inventory building, which leaves the economy vulnerable to a period of destocking now that demand is weakening. …
Argentina: signs of more orthodox shock therapy There have been two key developments in Argentina this week that give a sense of what President-elect Javier Milei’s policy agenda will look like. First, the confirmation that Luis Caputo will become economy …
Investors increased their expectations for interest rate cuts by the ECB after November’s soft euro-zone inflation print this week, but in parts of Central and Eastern Europe (CEE) the latest developments suggest inflation will take a lot longer to fall …
In light of the inflation and activity data released this week we are bringing forward our forecast for the start of the ECB’s rate cuts from September to June next year. And we now think the deposit rate will come down from 4.0% currently to 3.0% by the …
The prospect of earlier interest rate cuts in the US and the euro-zone has led to a sharp fall in US and euro-zone government bond yields this week. 10-year US Treasury and German Bund yields have fallen by 15 and 22 basis points (bps), to 4.32% and 2.43% …
SA's public debt risks a problem for banks? The key takeaway from the South African Reserve Bank’s latest Financial Stability Review released this week is growing concern about local financial institutions’ holdings of government bonds – what the report …
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
Korea makes a weak start to Q4 This week’s data dump from Korea suggests the economy weakened at the start of Q4, supporting our view that the tightening cycle is over and that interest rate cuts could come onto the agenda soon. Figures published …
Revising up our GDP forecasts The activity data this week confirm that India’s economy is rude health. The GDP data for Q3 (Q2 of FY23/24) showed a slowdown in both y/y and q/q, but this was very mild and the bigger picture is that the pace of growth …
Consumption falling but labour market tightening The October activity data were a mixed bag. While industrial production rose by 1% m/m, firms’ forecasts for the next couple of months were weak and point to a stagnation in output across Q4 following …
House prices falling again in Sydney and Melbourne Data released by CoreLogic today showed that house prices rose by 0.6% m/m in seasonally-adjusted terms in November, the smallest rise since April. And CoreLogic’s daily data show that house price …
COP attendance t = COP attendance t-1 ^ 2 Whatever does or does not get agreed at COP28 in Dubai over the coming weeks, one way in which the event will set records is the staggering number of people in attendance. As shown in Chart 1, the 70,000 delegates …
30th November 2023
All eyes on Vienna and Dubai The UN’s annual climate conference, COP28, gets underway in Dubai today with thousands of delegates set to attend. But events in Vienna could take the spotlight. OPEC+’s delayed meeting is taking place as we speak and could …
Zambia and Angola hikes, Nigeria resists High inflation is pushing some African economies to return to monetary tightening but Nigeria has resisted so far. We doubt this will last. Inflation rose again in Nigeria, Angola and Zambia last month as currency …
24th November 2023
Currencies were no exception to the calm across markets, and the US dollar seems set the end the week a bit lower against most currencies. While “more of the same” downbeat data out of the euro-zone weighed on the euro, most other G10 currencies …
Markets welcome Milei’s win From a political angle, it’s hard to see Javier Milei’s victory in Argentina’s presidential election last Sunday as anything other than a rejection of the political establishment, in a similar vein to the surge in support seen …
It would be a stretch to say the government showed fiscal restraint in the Fall Economic Statement , but the announcement of only a few billion dollars in extra spending measures means that Finance Minister Chrystia Freeland did not pour much more fuel on …
CBRT bringing tightening cycle to a close Turkey’s central bank (CBRT) delivered another chunky 500bp rate hike to 40% this week but it also signalled that its tightening cycle was very close to an end. The local elections in March may be playing a part …
We continue to think the euro-zone economy will fall into recession in the second half of this year and roughly flatline in the first half of next year. This is mostly due to the impact of squeezed household incomes and the tightening of monetary policy, …
It’s true that the Chancellor’s pre-election splurge unveiled in this week’s Autumn Statement was the largest discretionary fiscal loosening (outside of the Covid period) since 2010. And at £20.3bn (0.6% of GDP) in 2028/29, it was the biggest tax-cutting …
Revising up our GDP forecasts India’s economy recorded solid growth in the first half of this year and continues to do so in the second half. Household consumption appears to have been robust in recent months. The RBI’s latest consumer confidence survey …
