Europe Economics Update Will Italy suffer a repeat of 2018? Italy’s next government is unlikely to bring the country’s future in the euro-zone into doubt, in a repeat of the turmoil that we saw after the 2018 election. But it will probably run looser fiscal... 26th July 2022 · 3 mins read
Europe Economics Update ECB embarks on treacherous rate hike cycle The ECB’s 50bp rate hike today is likely to be the first move in a sustained interest rate hiking cycle which we think will bring the deposit rate to around 2% next year. We also think the Bank will... 21st July 2022 · 3 mins read
Europe Economics Update ECB won’t stop Italy’s spreads from widening It looks like Italy is heading for an early general election. While that won’t necessarily cause an economic and financial crisis, bond spreads are likely to widen regardless of what the ECB announces... 21st July 2022 · 3 mins read
Europe Economics Update Italian political drama complicates ECB debate If the return of political instability in Italy leads to an early election, government bond spreads are likely to widen, whether or not the ECB agrees the details of the Transmission Protection... 14th July 2022 · 3 mins read
Europe Economics Update Will the ECB be worrying about the euro? The euro hit parity against the US dollar today and we wouldn’t be surprised if it falls further. While we think it would take big moves in the trade-weighted exchange rate for the ECB to intervene in... 12th July 2022 · 3 mins read
Europe Economics Update German wage settlements likely to keep inflation high Very high inflation and low unemployment are driving German unions to seek big pay rises in this year’s collective negotiations. We think nominal pay growth will be in the region of 4-5% this year and... 7th July 2022 · 4 mins read
Europe Economics Update Another look at Italy’s debt arithmetic It seems most likely that Italy will be able to put its public debt ratio on a gradual downward trajectory, even as interest rates rise, by running primary budget surpluses. But if 10-year government... 5th July 2022 · 3 mins read
Nordic & Swiss Economics Update Riksbank to front-load rate hikes and accelerate “QT” As expected, this morning’s 50bp interest rate hike by the Riksbank, to +0.75% saw it join the ranks of the “50bp club”. But while policymakers resisted the urge to join “Club Fed” with a 75bp hike... 30th June 2022 · 3 mins read
Europe Economics Update Domestic price pressures in the euro-zone are strong High inflation in the euro-zone isn’t all down to energy prices and global demand-supply imbalances. Domestic price pressures are also very strong, bolstering the case for tighter monetary policy. 28th June 2022 · 2 mins read
Europe Economics Update Gas crisis heightens German recession risk Recent developments have further increased the chance that there is a complete end to Russian exports of gas to Germany. If this occurred, it would lead to a substantial fall in manufacturing output... 28th June 2022 · 3 mins read
Nordic & Swiss Economics Update Norges Bank joins the “50bp club” This morning’s decision by the Norges Bank to raise its key policy rate by 50bps, to 1.25%, was in line with our non-consensus forecast. Also, as we predicted, the Bank all but confirmed that it will... 23rd June 2022 · 2 mins read
Europe Economics Update Loss of majority curtails Macron’s second term plans French President Emmanuel Macron faces five difficult years after losing his absolute majority in parliament. Proposed reforms, including to pensions and benefits, will be diluted if they happen at... 20th June 2022 · 3 mins read
Europe Economics Update New ECB instrument, same old problems The best way for the ECB to contain peripheral bond spreads would be via a new programme of unlimited, flexible bond purchases. This may be what happens eventually, but we suspect it will take longer... 17th June 2022 · 4 mins read
Nordic & Swiss Economics Update Erik Thedéen a safe pair of hands to succeed Ingves The appointment of Erik Thedéen as the new Governor of the Riksbank will only strengthen the relationship between the Bank and the financial regulator, and could result in more macroprudential powers... 17th June 2022 · 2 mins read
Europe Economics Update Consumption to increase despite low confidence Despite consumer confidence remaining extremely low, we now think household spending in the euro-zone will edge up in Q2. Excess savings and a tight labour market have helped to cushion the blow from... 17th June 2022 · 3 mins read
Europe Economics Update Demand for labour to remain strong in the euro-zone Strong demand for labour, not a lack of potential workers, has driven the euro-zone’s unemployment rate to a record low. Employment gains have been biggest in public services and we expect demand for... 16th June 2022 · 4 mins read
