Filtered by Subscriptions: Europe Economics Use setting Europe Economics
We held an online Drop-In session today to discuss the Biden administration’s new tariffs on goods from China. (See a recording here .) This Update answers several of the questions that we received about the direct effects of the tariffs and what they say …
15th May 2024
An increase in support for populist parties in European parliamentary elections in June will have little bearing on economic policy in the near term because the more centrist parties should still win a majority of seats. Nonetheless, rising populist …
13th May 2024
The Riksbank is likely to follow today’s 25bp rate cut with three more cuts this year, which is one more than the central bank itself forecasts and more than investors are pricing in. The case for rate cuts in Sweden is stronger than for the euro-zone …
8th May 2024
Europe will raise barriers to trade and investment with China in the coming months and years. But policymakers will try to balance conflicting objectives so the result may well be a gradual rather than sudden increase in protectionism with measures …
7th May 2024
Inflation in Norway has been falling faster than Norges Bank expected for some time, but with the core rate still a long way above target, today’s communications show that policymakers are not counting their chickens. While they now seem to envisage …
3rd May 2024
Many central banks are concerned about the fact that services inflation has remained too high. But we think the risks in Switzerland are skewed to the downside and, in our view, outweigh the upside risks from goods prices. This leaves us comfortable with …
2nd May 2024
The Riksbank is likely to kick off its easing cycle next week by cutting its policy rate from 4.0% to 3.75%. Beyond that, our forecast is for 100bp of rate cuts this year which is substantially more than investors are anticipating, as inflation looks on …
Euro-zone construction output picked up at the beginning of this year but we don’t think this was the beginning of a sustained rebound. Surveys suggest that output will decline in the next few months, and while rate cuts should support a recovery later in …
On Tuesday we held a Drop-in on the outlook for the German economy. This Update summarises the key points that we discussed and answers some of the questions that we received during the event. 1. Do the Q1 GDP data mean Germany is out of recession? The …
The anti-dumping duties that the EU is likely to impose on Chinese imports in the coming months will have little macroeconomic impact. But more goods will be targeted in the next couple of years with significant implications for some sectors and …
30th April 2024
The continued decline in core inflation will make it difficult for Norges Bank to stick to its current guidance that it will leave interest rates unchanged until Q4. We suspect that the Bank will change its forward guidance next week to acknowledge the …
26th April 2024
Spanish house prices have risen 5% over the last two years despite rising interest rates. The relative affordability of houses in Spain is the main reason that the market remains strong, but the resilience of foreign demand for houses and a rising …
25th April 2024
Movements in the exchange rate tend to have only a small impact on euro-zone inflation. So while the euro might weaken if monetary policy in the euro-zone and US were to diverge, we think it would take a big move in the exchange rate to have a significant …
19th April 2024
We think it is most likely that future governments bring down Belgium’s budget deficit sufficiently to put its debt on a sustainable trajectory. However, the risks are that the deficit is higher than we forecast because of Belgium’s divided political …
17th April 2024
The detailed breakdown of March’s euro-zone HICP data, released this morning, show that the early timing of Easter boosted services inflation by 0.1ppts. This effect was smaller than in previous years. Nevertheless, excluding the tourism-related sectors …
As things stand, higher oil prices will boost inflation in advanced economies by only a few tenths of a percentage point in the months ahead and we still expect this boost to fade as the year goes on. There are upside risks relating to tensions in the …
16th April 2024
The resilience of Swiss GDP over the past two years has been largely due to the merchanting sector, which buys and sells goods without them ever entering Switzerland. Excluding that sector, the economy was smaller at the end of 2023 than it was two years …
The ECB’s decision to update its guidance suggests that an interest rate cut at the next meeting in June is very likely. Christine Lagarde would understandably not commit to a path of rate cuts, but we expect the Bank to reduce the deposit rate from 4% …
11th April 2024
After a period of relative calm, Italy’s fragile public finances are likely to come under the spotlight again before long. Budget deficits will be much higher than the latest government projections imply and Italy will probably face official EU procedures …
10th April 2024
The Q1 ECB Bank Lending Survey suggests that the drag on lending growth from tight monetary policy continued to ease. But the data remain consistent with broadly stagnant consumption and declines in investment. For the first time since late 2021, banks …
9th April 2024
ECB officials have stressed that evidence of easing wage growth will be key in determining the timing of the first rate cut. Accordingly, this Update assesses which of the euro-zone’s numerous wage measures investors should keep their eyes on. The main …
3rd April 2024
The universal tariff which Donald Trump has proposed, along with other likely spillovers from his trade policies, may result in a hit to the euro-zone economy of up to half a percent of GDP. The damage would be bigger if this triggered a transatlantic or …
2nd April 2024
February’s money and credit data suggest that the effect of tighter monetary policy has eased slightly. But the data are still very weak and we think that rate cuts later in the year will lead to only a gradual rebound. The narrow (M1) money supply …
28th March 2024
We think investors are underestimating the extent of rates cuts that the Riksbank will make this year. Policymakers are, rightly in our view, increasingly confident that inflation will soon return sustainably to the 2% target. Accordingly, we think they …
27th March 2024
Data released today showed that Spanish inflation picked up from 2.9% in February to 3.2% in March. We think it is likely to increase further over the coming months due to base effects in energy inflation, higher VAT rates on energy and foods, and …
The SNB under Chairman Thomas Jordan has never shied away from making big calls, so it was fitting that it surprised markets with a 25bp rate cut today, to 1.5%, only three weeks after Mr Jordan announced he would leave his post in September. We expect …
21st March 2024
We think the Riksbank will leave its policy rate unchanged at 4.0% next week but cut it by 25bp at the following meeting, in May. Beyond that, our forecast is for rates to come down much faster than the Riksbank’s own forecasts imply but broadly in line …
20th March 2024
Inflation in Switzerland has surprised most other forecasters, including the SNB, this year by falling to just 1.2% in February, which was the ninth month in a row that it has been below 2%. We think this will encourage the SNB to reduce the policy rate …
14th March 2024
Inflation in Norway has fallen more quickly than Norges Bank expected, so at next week’s meeting it is likely to signal that it will cut interest rates sooner than it previously expected, perhaps in Q3. And we think there’s a good chance that it will make …
The ECB’s new operational framework for implementing monetary policy, announced this afternoon, was largely in line with our expectations and has no immediate implications for monetary policy. But it does mean that the Bank will maintain a portfolio of …
13th March 2024
Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
7th March 2024
The disinflation story is largely over in Switzerland, and rising rent inflation may actually cause headline inflation to increase in the summer. However, this will not stop the SNB from cutting its policy rate on the 21 st March by 25bp to 1.5%. …
28th February 2024
Monthly industrial production data have been overstating the decline in German industry. Nonetheless, the more accurate gross value added measure still shows that activity has been falling. German industrial production has been on a clear downward trend …
27th February 2024
January’s money and credit data are consistent with our view that the improvement in the data towards the end of last year was not the beginning of strong recovery. After falling sharply throughout most of last year, the money and credit data improved a …
The stalling in services disinflation in recent months is largely due to technical factors and one-offs. If services prices continue to increase at their recent pace in month-on-month terms, the year-on-year rate will fall a little further in the coming …
22nd February 2024
Carbon price not out of the woods yet …
Euro-zone construction output picked up in December, but remained well below last year’s peak. We expect it to drop again in 2024, in part due to a continued dismal performance by the sector in Germany. Data released today showed that euro-zone …
20th February 2024
Data published today show that negotiated wage growth in the euro-zone remained strong at the end of last year. But these data won’t stop the ECB from cutting interest rates in April – as we are forecasting – as long as other indicators continue to point …
Chairman Thomas Jordan’s recent comments about the franc raise questions over whether the SNB might use FX interventions to loosen monetary conditions. But we think policymakers will use the policy rate as the main tool to achieve price stability, and …
13th February 2024
The Riksbank signalled unequivocally in today’s policy statement that interest rates may be cut sooner than they previously anticipated. While a March rate cut is possible, particularly if the January and February inflation data come in below …
1st February 2024
January’s European Commission business and consumer survey, released this morning, supports our view that the euro-zone economy will stagnate in Q1. But recent increases in services firms’ price expectations could prompt policymakers to wait a little …
30th January 2024
Data released this morning suggest that the collapse in the euro-zone’s money supply might be over. But we expect money and lending growth to remain fairly weak. Since the ECB started raising interest rates, the narrow (M1) money supply has plummeted as …
26th January 2024
The Riksbank is set to leave its key policy rate unchanged next week but we think it will begin to cut rates in the second quarter and reduce them faster than policymakers are forecasting. As a reminder, the Riksbank left its policy rate at 4.0% at its …
25th January 2024
The ECB kept interest rates unchanged and stuck to the argument that a first rate cut is most likely in the summer. An earlier move is still possible if the inflation data are weak in the next few months, but the risks are shifting towards rates staying …
Norges Bank today reiterated that it will leave its policy rate at 4.5% “for some time”. But we think that inflation will fall rapidly this year, so when the Bank does start to cut rates, it will do so more quickly than its forecasts suggest. The decision …
We think Norges Bank will keep its policy rate unchanged at 4.50% next week but, given the weakness in the krone and tight labour market, retain a hawkish bias in its guidance. Further ahead, we think rates will be cut sooner than the Bank expects as …
18th January 2024
The latest euro-zone inflation data, published this morning, will dampen policymakers’ concerns about the strength of domestic price pressures. But with underlying inflation still too high for comfort, this won’t be enough for the Bank to change its …
17th January 2024
Some ECB Governing Council Members have called for an increase in reserves requirements, primarily in order to reduce the Eurosystem’s interest expenditure. If implemented – which we think is likely – this would have the effect of tightening monetary …
10th January 2024
Industrial output in Germany is likely to follow November’s decline with further falls this year. While the recent fall in natural gas prices could help to stem the bleeding in the near term, energy costs are still high. And weak demand will compound …
9th January 2024
Data released this morning showed that bank lending in the euro-zone picked up towards the end of last year. But we doubt that this is the start of a sustained turnaround. We expect the impact of tight monetary policy to weigh on lending and keep the …
2nd January 2024
