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This week’s news on the euro-zone economy has continued to be pretty gloomy. Admittedly, there was a small upward revision to Q1 GDP (to 0.3% q/q) which means the economy will not fall into a technical recession in the first half of the year. And …
20th May 2022
50bp is the new 25bp? It was a quiet week on the data front, but we had plenty of comments and speeches from policymakers to pick through – notably from three of the members of the Riksbank’s Executive Board. Deputy Governors Henry Ohlsson and Martin …
Finland, NATO, and Russian gas supplies The fact that Russia is reportedly close to cutting off the supply of natural gas to Finland in retaliation for its intention to join NATO poses a risk for Finnish industrial firms that are most reliant on gas – …
13th May 2022
The ECB’s hawkish conversion appears to be all but complete, with more officials this week joining the ranks of those calling for rates to rise in July – some more explicitly than others. Perhaps most notably, President Lagarde said on Wednesday that she …
Schlegel won’t rock the boat at the SNB The SNB announced this week that Martin Schlegel will succeed Fritz Zurbrügg as Vice-Chair of the Governing Board after Mr Zurbrügg retires at the end of July. Mr Schlegel is part of the furniture at the SNB, having …
6th May 2022
Widening bond spreads a cause for concern We agree with investors that the ECB is likely to raise interest rates by 25bp in July. We first made the call in late March, when even the most hawkish members of the Governing Council were talking about hiking …
GDP to fall as inflation rises Data for Q1 published this week showed that the euro-zone eked out a 0.2% q/q expansion at the start of the year. However with economic conditions having worsened recently we think that GDP will post a small contraction in …
29th April 2022
Stefan Ingves would struggle to keep a secret Much of the analysis following the start of repo rate hikes by the Riksbank yesterday has pushed a narrative that the Bank’s messaging was more hawkish than expected and its decision to raise rates as a …
We first said in late March that we thought the ECB was likely to raise rates as soon as July. This was because inflation had been higher than expected for several months in succession and we thought it would continue to surprise on the upside, while the …
22nd April 2022
Boom time for Salmon prices In an otherwise extremely quiet week for tier-1 macroeconomic data releases, the publication of weekly salmon price data from Statistics Norway stood out. In short, it’s boom time for the fishing industry. The export price of …
ECB President Christine Lagarde suggested at today’s post-meeting press conference that the Bank would be sticking to its plans for policy normalisation, despite inflation surprising to the upside since the last meeting. She highlighted the hit to …
14th April 2022
Price pressures building This week brought March inflation releases from Norway, Denmark and Sweden. Norway’s inflation data were a little weaker than expected, with the headline rate at 4.5% and the core rate unchanged at 2.1%. (See here .) Those …
Flodén dials up the hawkishness While Anna Breman recently vented her hawkish views at a bunch of students (see here ), Martin Flodén treated a roomful of finance types to a rousing monetary call to arms this week. (See here .) (Recall that Mr Flodén and …
8th April 2022
The latest surveys suggest that the euro-zone economy was still growing at a decent pace in March but that firms, consumers and investors expect much worse to come. Table 1 shows some of the timeliest survey indicators immediately before the euro-zone’s …
Another month, another inflation surprise With euro-zone inflation having jumped to 7.5% in March (see here ) it seems increasingly likely that the ECB will accelerate its plans to tighten monetary policy. We now think it will end net asset purchases in …
1st April 2022
Shifting goalposts for Nationalbank and SNB The fact that we now expect the ECB to hike interest rates sooner and faster than we previously anticipated naturally affects our outlooks for policy in Switzerland and the Nordics. Note that we now forecast the …
European policymakers remained divided this week on whether to impose more curbs on Russian oil and gas. As we argued here , an EU embargo on Russian oil would be less disruptive than cutting off natural gas. But the EU is determined to reduce its …
25th March 2022
Breman vents to a bunch of 16-19 year olds Riksbank Deputy Governor Anna Breman appeared to take out her hawkish frustrations on a group of secondary students in a speech on Wednesday. One can only speculate as to what the pupils made of the talk; while …
What’s Swedish for “fundamental change of view”? In a week when the US Fed and the Bank of England both raised interest rates, Riksbank Governor Ingves finally appears to have woken up to the need for tighter policy in Sweden. Mr Ingves reportedly said …
18th March 2022
Things can only get better worse? Our economic forecasts are based on a working assumption that there is no diplomatic solution to the war in the next few months, that Russia remains economically isolated and that sanctions are not rolled back. This is …
Franc(ie) goes to Hollywood parity The Swiss franc rose through parity with the euro in the early hours of Monday for the first time on record. However, its foray into uncharted territory was brief, and it has since given up the gains it made in March. It …
11th March 2022
Yesterday’s ECB announcement was more hawkish than expected, but so far the Bank’s Chief Economist Philip Lane hasn’t published a new blog post to correct the message as he has done a number of times in the past. You can read our response to the decision …
Finland most exposed to Russian sanctions We have yet to revise down our GDP growth forecasts for Switzerland and the Nordics in response to the sanctions on Russia, but the negative impact of the conflict will be smaller than for the euro-zone. (Note …
4th March 2022
The war in Ukraine has intensified this week, and we have continued to write extensively across all our services about the financial and economic implications, all of which can be found here . In last week’s Weekly , we argued the war in Ukraine would …
Back in safe-haven mode Just weeks after hawkish messaging from the ECB helped to weaken the Swiss franc against the euro (see here ), the Russia-Ukraine conflict has put the currency back into full-on safe-haven mode. Perhaps unsurprisingly, the exchange …
25th February 2022
By far the biggest news this week has of course been the Ukraine crisis, and we have written extensively about the implications for the global economy, all of which you can find here . In this Weekly , we will bring out a few key points about what it …
This week saw tensions between Russia and Ukraine get close to boiling point. We have written extensively about the economic implications of a further escalation on both our Emerging Europe and Commodities services and all of our research on the topic can …
18th February 2022
Yet another blow to Riksbank’s dovish stance Statistics Sweden made a bid for the most eyebrow-raising data release of the week with the news this morning that core inflation jumped from 1.7% in December to 2.5% in January. (See here .) We, the consensus …
Governor Ingves is not for turning We were surely not the only ones to have thought, “What is the Riksbank playing at?”, following the damp squib of its policy announcement on Thursday morning. Recall that the Bank barely changed its dovish messaging, and …
11th February 2022
Anybody expecting the ECB to completely undo the hawkish policy shift that Christine Lagarde delivered at last week’s meeting will have been disappointed by this week’s numerous policy statements. Admittedly, Ms Lagarde herself adopted a more balanced …
“Mr Establishment” gets the job Today’s appointment of Jens Stoltenberg as Governor of the Norges Bank shows that worries of potential political nepotism ultimately fell on deaf ears, and completes the trifecta for top jobs for the ex-PM and Finance …
4th February 2022
We said in our Drop-in on Tuesday that there would be a high bar to clear for the ECB to change its plans and raise interest rates this year. Three days later, after some strong inflation data, that bar now seems to have been cleared! January’s inflation …
The raft of country-level Q4 GDP data published this morning point to the euro-zone eking out some marginal growth at the end of last year, with Germany contracting by 0.7% q/q. (See here and here .) Nor does the euro-zone appear to have made a strong …
28th January 2022
Stage set for Riksbank mea culpa in February The 0.3% m/m increase in Sweden’s GDP Indicator in December, released this morning, left it a whopping 4.7% higher than its February 2020 level. (See Chart 1.) We will have to wait until the 28 th February for …
The key event of this week (for us at least) was the release of our European Economic Outlook setting out our forecasts for 2022 and 2023. We think the euro-zone will come through the Omicron wave of coronavirus relatively well but think growth will be …
21st January 2022
Denmark achieves a geranium “greenium” Denmark joined the growing list of countries to offer a green sovereign bond, on Wednesday. The country is far from a trailblazer in the area, with the Netherlands, Germany, and the UK all amongst those to have …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
14th January 2022
Economy close to standstill in Q4 The latest activity data for the final quarter of last year are a mixed bag. The industrial production data for November published this week suggest that manufacturing output may have declined in the fourth quarter. (See …
Next stop, rate cut in Denmark? We learnt this week that Denmark’s Nationalbank intervened heavily in the FX market in December to counter upward pressure on the krone. The sale of DKK 47 billion in the month was the biggest intervention in absolute terms …
7th January 2022
Looking at the euro-zone, one would be forgiven for feeling a slight sense of déjà vu as we start the new year. Once again, a surge in Covid infections – this time driven by the Omicron variant – has prompted tighter restrictions on domestic activity. …
The majority of this week’s multiple central bank decisions turned out to be a little more hawkish than most had anticipated, and the ECB was no exception. We commented on its decision here , but a couple of points are worth underlining. First, the ECB …
17th December 2021
Shifting sands at ECB change landscape for the SNB As expected, Thursday morning’s SNB announcement did not throw up any surprises, and the ability of Swiss policymakers to play a straight bat puts England’s openers to shame. However, the mildly hawkish …
Interview coaching for SNB candidates This week’s announcement that Fritz Zurbrügg – one of the three members of the SNB’s Governing Board – will retire at the end of July 2022 sounded the starting gun to appoint his successor. We are not privy to the …
10th December 2021
This week brought yet more bad news for the euro-zone economy. Although German industrial output grew by 2.8% on the month in October, driven by a rebound in the struggling auto sector, this followed months of declines and left production 6.5% below its …
“You shall not pass!” [the CHF 1.04 per euro mark] We were ahead of the curve in arguing that the SNB would wave goodbye to the implicit ceiling of CHF 1.05 per euro that it defended in earnest during the early stages of the pandemic. (See here .) …
3rd December 2021
In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. Indeed, Vice President Luis de Guindos said this week that “the high rate of inflation we’re experiencing …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
26th November 2021
SNB starting to show its hand Having risen through the CHF 1.05 per euro mark last week for the first time since mid-2015, the Swiss franc rose by a further 0.5% this morning on the back of the worries about the B.1.1.529 variant . This was mirrored in a …
After weeks of worrying about surging inflation and what the ECB will do next, developments this week were a stark reminder that the pandemic is far from over. The rapid deterioration in the Covid situation in Austria over the past week has driven the …
19th November 2021
Well, that happened quickly! We argued only last week that the SNB would be comfortable with letting the Swiss franc push higher against the euro. (See here .) As it happens, we didn’t have to wait long to be vindicated. The sharp rise in the franc this …