Turkey’s central bank continues to impress Turkey’s central bank (CBRT) governor delivered another convincing message at this week’s Inflation Report briefing and suggested that further policy tightening will be delivered over the coming months. Governor …
3rd November 2023
Slowdown spreads to services sector The ISM services index fell to a five-month low of 51.8 in October, from 53.6, adding to the evidence that economic growth is slowing after a blockbuster third quarter. Unlike the renewed slump in the manufacturing …
ECB policymakers stressed this week that rate cuts are a distant prospect. Dutch central bank governor Knot said that rates should remain at their current “cruising altitude” for some time. And governor of the Bank of France Villeroy de Galhau noted that …
Urban households still feeling positive As always, we need to treat Indian labour market statistics with caution, but unemployment data from private think-tank CMIE released this week were noteworthy. They showed that the overall unemployment rate soared …
Looser labour market driving softer wage pressures This page has been updated with additional analysis since first publication. The more modest rise in employment and essentially unchanged hours worked in October suggest that labour demand is easing …
This page has been updated with additional analysis since first publication. Third-quarter strength fading rapidly The muted 150,000 gain in non-farm payrolls in October is another sign that the economy’s strength in the third quarter is likely to unwind …
We can understand if the phase “the lady doth protest too much” sprang to mind when listening to the Bank of England after it left interest rates at 5.25% for the second meeting in a row on Thursday. Indeed, the Old Lady of Threadneedle Street stressed so …
Over half of cross-border settlement now in RMB Earlier this week, the People’s Bank published its annual report on renminbi internationalisation. The message from the 84-page document is that global use of China’s currency has been gaining momentum …
Wage growth looks to finally be slowing in the euro-zone amid weaker economic growth and falling inflation, but it remains too high for comfort. As a result, we think the ECB will wait until a more marked slowdown becomes evident to begin cutting interest …
Headline inflation rises again Figures published this week for Korea show that headline inflation rose from 3.7% y/y in September to 3.8% last month – a third consecutive monthly rise. Inflation has now been above the BoK’s target for 31 consecutive …
This week we held a drop-in on the prospects for commercial property investment in the UK and Europe, which can be found here . This Update provides answers to the most interesting questions that emerged from the discussion. Will prime offices outperform? …
Inflation eased a touch, peak approaching soon Turkish inflation unexpectedly fell to 61.4% y/y in October and while we think inflation is likely to rise again in the coming months, the peak is probably not too far away. The central bank’s aggressive …
We expect Japan’s stock market to underperform that of the US in both local- and common-currency terms over the next couple of years. The effective abandonment of Yield Curve Control by the Bank of Japan has helped yields there continue to climb over this …
Too soon to signal the all-clear Data released this week showed that the Australian consumer isn’t on the skids just yet. Indeed, with retail turnover having surged in September, sales values rose by a solid 0.8% q/q in Q3, their strongest quarterly …
Threat of yen intervention remains As we had expected, the Bank of Japan retained its 1% cap for 10-year yields at this week’s meeting . However, by downgrading that cap to a “reference” and by stopping its daily fixed-rate operations offering to buy an …
CBE stands pat as all eyes turn to post-election meeting The Central Bank of Egypt (CBE) left its overnight deposit rate at 19.25% today but, with pressure on the pound mounting and inflation still well above target, there’s a good chance that …
2nd November 2023
October’s manufacturing PMIs suggest that global industrial activity continued to contract at the beginning of Q4 and forward-looking indicators point to further weakness ahead. The output component of the global manufacturing PMI fell from 49.7 in …
Our Long Run Returns Monitor provides our updated long-term projected returns for major asset classes. All projections in this publication are as of 1st November 2023. Our latest projections have been influenced by the recent body of work that we’ve done …
The SNB has been uncharacteristically active this week, making a string of announcements about monetary policy, its balance sheet, minimum reserve requirement and lessons from the Credit Suisse debacle. None of these change the big picture, but they do …
Egypt’s gas troubles after Israel cuts supplies Egyptian officials confirmed this week that imports of gas fell to zero after Israel turned off the taps, which will curtail efforts to restart LNG exports. And with gas being cut to energy-intensive …
The rise in the US homeownership rate has stalled, driven by a drop in the proportion of under-35s that own their home. That’s down to higher mortgage rates reducing the number of first-time buyers (FTBs) that can afford to buy. Our forecast is for …
The yields of UK government bonds (Gilts) have dropped back in recent days, and we think that they will fall further over the next year or so, even if they settle far above their post-pandemic lows. UK government bond yields have fallen a bit further …
Most EM manufacturing PMIs for October were weaker than expected, largely driven by sluggish domestic and external demand. This weakness has, at least, resulted in input and output price components dropping back, which supports our view that the EM easing …
We think the Bank of Japan’s continued steps towards policy normalisation are consistent with somewhat higher JGB yields and a significant rebound in the yen over the coming quarters. To recap, the BoJ made another tweak to its Yield Curve Control (YCC) …
The underperformance of wind and solar equities since early 2021 has largely been driven by higher interest rates, which disproportionately affect the cost of renewables projects. But while the days of ultra-low financing costs are behind us, our …
We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a 20-minute Drop-In webinar at 3pm GMT today. (Register here .) The Bank’s decision to leave interest rates at 5.25% for the second time in a row and to double down on the …
This publication has been updated with additional analysis from the post-meeting press statement and press conference. CNB in ‘wait and see’ mode The Czech National Bank’s (CNB’s) decision to leave interest rates on hold again today, at 7.00%, was …
Although consumer spending has remained remarkably resilient in the US so far this year, it has weakened in other advanced economies. And as the lagged effects of high interest rates filter through to households in an environment of low consumer …
Productivity acceleration bearing down on unit labour costs Data today confirmed that the surge in GDP in the third quarter was driven by a 4.7% annualised jump in productivity, the biggest gain since 2020. While it remains to be seen whether this is the …
The AI revolution will make EM income convergence – or “catch-up growth” – harder as richer economies are better equipped to deploy the technology on a wide scale. It poses a particular headwind to the services-driven economic development path pursued by …
Bank doubles-down on rates staying high for long The Bank’s decision to leave interest rates at 5.25% for the second time in a row and the doubling down on the message that rates cuts are a long way away supports our view that Bank Rate will stay at 5.25% …
We have just published new in-depth analysis which tracks a worrying path for Italian public debt out to mid-century, showing how the country’s fiscal position is set to become only more fragile in an environment of higher rates but still-sluggish …
Brazil’s central bank (BCB) cut the Selic rate by 50bp, to 12.25%, at yesterday’s Copom meeting and signalled again that further similar reductions lie in store over the next few meetings. Even so, with strong wage growth set to keep inflation above …
We think that the decision today by Norges Bank to leave its policy rate on hold at 4.25% signals the end of its tightening cycle. Contrary to the Bank’s communication, we do not expect a hike in December given that inflationary pressures should continue …
We expect industrial rents in Belgium to outperform the rest of the euro-zone on the back of a brighter economic outlook, very tight supply and a larger rise in e-commerce. We forecast annual average rental growth to reach 3.5% p.a. for the period …
Although Treasury yields have fallen back in recent days, the big picture is that they are still much higher than they were when headline and core inflation peaked more than a year ago in the US. In this Focus , we examine the role of inflation in the …
This page has been updated with additional analysis Inflation unchanged and set to stay low Swiss headline inflation remained unchanged in October at 1.7% and although the core rate rose for the first time in eight months we expect inflation to stay below …
Despite the sharp downward pressure on the ringgit, Malaysia’s central bank (BNM) left policy rates unchanged (at 3.0%) today. We expect the central bank to keep the policy rate on hold for the rest of this year and throughout 2024. The decision was …
This page has been updated with additional analysis since first publication. Drag from net trade will be offset by boost from stockbuilding The slump in the trade balance in September increases the risk that the Australian economy entered a recession in …
The government today confirmed that it intends to welcome an increasing number of permanent residents in the next couple of years. Even if the number of permanent residents continues to rise, however, the record number of temporary residents currently in …
1st November 2023
By leaving rates unchanged while continuing to flag the possibility of further tightening to come, the Fed indicated today that it remains in ‘wait and see’ mode. But Chair Jerome Powell appeared to strike a more dovish tone in his press conference and we …
Retail sales continue to boom as industry comes off the boil Russian retail sales continued to expand at a strong clip in September, but industrial production growth was less impressive. Higher interest rates and inflation will weigh on activity in the …
Fed’s tightening bias likely to be dropped soon By leaving rates unchanged while continuing to flag the possibility of further tightening to come, the Fed indicated today that it remains in ‘wait and see’ mode. But we suspect the data over the coming …
The Treasury’s Quarterly Refunding announcement (QRA) today may have eased some upward pressure on Treasury term premia, but we think these premia are unlikely to fall further over the coming years. Although the Treasury today increased the auction size …
The September JOLTS data suggest that the labour market is loosening at a slightly slower pace, but still point to a sharper fall in wage growth ahead. There is little support for the idea that resilient activity growth in the third quarter will lead to a …
The PMI surveys released so far for China weakened in October with the manufacturing PMIs falling back into contractionary territory. We think China’s demand for commodities will be supported by further fiscal stimulus over the next few months, but a …
