Limited impact so far All of our coverage of the turmoil in the global banking system can be found on our dedicated webpage . There are also some webinars on the crisis you can listen to on demand. (See here .) For Emerging Asia, the impact has so …
17th March 2023
Euro-zone bank equities have come under severe pressure this week after troubles at some US regional banks and at Credit Suisse raised concerns about the health of banking systems more generally. At the time of writing, the Eurostoxx bank index is down …
While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength in the US dollar and weakness in equities. The Swiss …
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates slightly. But given the wider signs of …
CBR keeps Q2 rate hike on the table The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the …
Core inflation and wage growth strong The strength of wage growth and core inflation will reinforce ECB policymakers’ conviction that, provided the region’s banks don’t come under further sustained pressure, their tightening cycle is not over. It came as …
RRR cut not a major easing move The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates …
We don’t think the collapse of SVB, problems at Credit Suisse and volatility in markets will deter the Norges Bank from raising its policy rate by 25bp next week, to 3.0%. If anything, the risks are skewed towards a 50bp hike. And we think the policy rate …
Limited contagion, but Indian banks a worry Our coverage of the collapse of SVB and the turmoil at Credit Suisse and their implications for the global economy and financial markets can be found on our dedicated webpage . For India, the fallout so far has …
Amid growing concerns about the global economic backdrop , financial markets not only believe that the RBA is done tightening, but that rate cuts are on the horizon. (See Chart 1.) However, we’re not convinced. The latest data don’t yet show domestic …
Global financial risks creeping up The troubles at Silicon Valley Bank and Credit Suisse have dominated the headlines this week and have further weakened the case for the Bank of Japan ending Yield Curve Control (YCC). Market expectations for the Fed …
Fed’s discount window lending hits record high The Fed’s weekly balance sheet publication (H.4.1) shows the scale of the stresses in the financial system, with outstanding emergency loans standing at $318bn yesterday, up from $15bn a week earlier. To put …
16th March 2023
The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened worryingly fast, but the overall situation is still long way short of the type of strains seen during the worst parts of the Global Financial …
We think the SNB will push ahead with rate hikes despite the Credit Suisse crisis, and raise the policy rate by 50bp to 1.5% next Thursday. By its own exacting standards, inflationary pressures in Switzerland are acute with core inflation reaching its …
We expect Russia’s central bank to leave its policy rate on hold (10.30 GMT) US industrial production probably fell back in February (13.15 GMT) Clients can watch today’s Drop-In on banking sector turmoil and central banks here Key Market Themes The ECB …
Commodity prices have tumbled as concern about a banking crisis has grown. The downside risks to our forecasts, which we recently attributed to higher interest rates, now include banking sector stress. There has been a renewed fall in commodity prices …
The direct impact on real estate of the collapse of two US regional banks over the weekend is likely to be relatively small. But we expect lending criteria to become more cautious in the short-term, which will weigh on the supply of real estate debt. …
Investors have taken today’s 50bp rate hike by the ECB as dovish, and the peak deposit rate now priced into markets is between 3% and 3.25%. We think the risks are skewed towards rates going higher than this and the economy performing much worse than …
We have already outlined some different scenarios of how things might evolve from here and it is still possible that the situation calms down quickly. But in this Update , we think through how the more adverse of our scenarios might evolve. There are …
Close call, but if the situation doesn’t deteriorate further we think there will be a 25bps hike Beyond that, fading of banking worries and stronger data required for more hikes Markets may be underestimating how far interest rates will be cut next year …
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
The newsflow this week has been dominated by the problems at Silicon Valley Bank (SVB) and Credit Suisse which have raised concerns over the health of the global banking system. If concerns continue to mount, this would pose downside risks to currencies …
Tighter credit conditions add to headwinds facing construction Single-family housing starts continued their weak start to the year in February with a marginal month-on-month increase. While forward looking indicators appear to have turned a corner, …
ECB prioritises inflation fight The ECB’s decision to raise interest rates by 50bp today was the riskiest of the available options – we think investors would have understood if the Bank decided to pause. But the Bank has hinted that it could offer new …
How will the Bank of England play its March rate decision following recent turmoil in the US and European banking sectors? Paul Dales, Ruth Gregory and Ashley Webb held an online briefing for clients shortly after the MPC announcement. During this …
Bank Indonesia (BI) today left interest rates unchanged (at 5.75%), and signalled that with inflation falling back more quickly than expected, rates would be left on hold over the coming months. In the event that the rupiah comes under sustained …
Neil Shearing Group Chief Economist While the joint statement issued last night by the Swiss National Bank (SNB) and FINMA (the Swiss regulator) offering to provide Credit Suisse with liquidity “if necessary” appeared a little half-hearted, the statement …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. The rupiah has held up relatively well over the past week despite the turmoil in global …
Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
Rebound doesn’t change recessionary outlook The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, but that still points to a fall in capital …
Investment outlook still gloomy despite upside machinery orders surprise The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, pointing to a …
Economy is tipping into recession With the New Zealand economy in for more pain on the heels of the Q4 GDP decline, we expect the RBNZ to start cutting rates towards the end of the year. The -0.6% q/q drop in production GDP was weaker than most had …
15th March 2023
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
We think Japan’s exports rebounded by 7.0% y/y on February (23.50 GMT) The ECB may not hike rates tomorrow due to fears of a banking crisis (13.15 GMT) Sign-up here for our US Drop-in on our outlook for the US economy (15.00 GMT) Key Market Themes The …
The Budget has taken a bit of a backseat given the renewed worries about the health of the global banking system, but the Chancellor, Jeremy Hunt, was a bit more generous than we expected and probably plans to splash more cash ahead of the 2024/25 …
Tentative signs of stabilisation, but risks abound House prices fell at a slower pace in February and the sharp improvement in the sales-to-new listing ratio offers some hope that they will soon stabilise. While the turmoil in the global banking sector …
Crude stocks rise, but all eyes are on the banks Commercial crude stocks rose this week, but product stocks fell. That said, the bigger picture remains one of subdued domestic demand, which we expect to remain the case for some time yet. After a dip in …
Fed has difficult decision to weigh financial stability needs against inflation target. On balance, we think the Fed will still push ahead with a 25bp hike. But inevitable pull-back in bank lending means Fed should be cutting before year-end. The Fed …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But to the extent that …
Just when financial markets appeared to be calming down after the SVB saga, the sell-off in European bank shares has resumed this morning due to concerns about the viability of Credit Suisse. At this stage, a huge amount is unclear, but a few points are …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But there is a risk …
Economy likely to remain weak despite some encouraging signs GDP figures released today for Sri Lanka highlight the scale of the economic damage caused by last year’s political crisis and debt default. While there are some tentative signs that the worst …
Chancellor a bit more generous, but may fall short on long-term growth Today’s Budget has taken a bit of a backseat given the renewed worries about the global banking system, but the Chancellor was a bit more generous than we expected and we suspect he …
A preferential rate to facilitate wine exports is the latest addition to Argentina’s myriad exchange rates, but it doesn’t address the fundamental problem that the peso is overvalued. We estimate that the currency needs to fall by around 30% to restore …
SA economy in less dire straits; Inflation in Nigeria at new 17-year high January’s hard activity figures out of South Africa came in stronger than expected, reducing the chances of a technical recession. But momentum remains extremely weak. Elsewhere, …
Resilience in January unlikely to last The rise in industrial production in January was entirely due to strong growth in Germany and Ireland, with all other major euro-zone economies recording a fall in output. We expect industry to struggle this year as …
Even as the economy has slowed nominal all-property rental growth has held up relatively well. But that largely reflects the impact of high inflation, which is now falling. In any event, underlying supply and demand conditions are ultimately the more …
