An unexpected loss of momentum The PMIs suggest that China’s economy lost some momentum in January, despite tailwinds from recent policy easing. We think the slowdown at the start of the year will probably prove temporary, as fiscal stimulus should …
27th January 2025
The experience from other advanced economies is that there’s no hard and fast rule for how long it will take for the labour market to loosen in response to rate hikes by the Bank of Japan. But with the real policy stance set to remain loose, we expect the …
Donald Trump unsurprisingly dominated the news cycle in his first week back in office. To make sense of what he's pledged, threatened and suggested so far, Group Chief Economist Neil Shearing is on The Weekly Briefing from Capital Economics to discuss …
24th January 2025
The first week of the new Trump administration hasn’t thrown up any huge surprises in terms of policy announcements. But there remains considerable uncertainty about the impact of those policies and others mooted on commercial real estate. In this note we …
Trump ups the ante against Russia Comments by President Trump that he would tighten US trade and sanctions policy against Russia if Putin does not agree to negotiate an end to the war in Ukraine are likely to have been received with anger in Moscow. The …
The dollar is ending President Trump’s first week back in office on the backfoot. Between the absence of immediate tariffs in this week’s flurry of executive orders, Trump’s renewed attacks on the Fed, and some improved PMI surveys in Europe, the dollar …
Nigeria becomes BRICS latest partner country We think Nigeria’s recent admittance as the BRICS’s latest “partner” member adds to the evidence that the government is trying to straddle the geopolitical divide between US- and China-led blocs. After being …
President Donald Trump’s first week back in office kicked off with a bang. He signed around 100 executive orders and strongly signalled that there were more policy changes to come. The week’s developments give us more confidence in our earlier assumptions …
An especially ‘Blue Monday’ for Canadians President Trump used his first week (back) in office to double down on threats to impose a 25% tariff on imports from Canada, with the added detail that this could come into effect on February 1 st . As we …
Small rise in sales does not mark beginning of the recovery The small rise in existing home sales in December reflects deals that came together in September and October, when mortgage rates hit a nadir of 6.2%, getting across the line. Given the recent …
At face value, the latest batch of flash PMIs suggest that economic activity remained weak in Europe at the start of the year and lost some momentum in the US. Meanwhile, price pressures seem to be increasing everywhere, meaning that most central banks …
The Trump administration’s first week has given policymakers in Latin America – and Mexico in particular – plenty to fret about. Unsurprisingly, migration has been a major focus for President Trump so far. His inauguration speech mentioned “returning …
In the first glimpse into how the economy has started the new year, this week’s data took another turn for the worse. First, according to the CBI Industrial Trends Survey (ITS) of the manufacturing sector, in Q1, the optimism, expected activity and …
Europe appeared to be out of President Donald Trump’s firing line this week, with the harshest comments reserved for Mexico and Canada. This contributed to the euro rising from 1.02 against the US dollar to 1.05. The currency also benefitted from the …
We forecast bond yields to fall over the rest of 2025 in Germany, the UK, and New Zealand, even though we think the relief rally in US Treasuries is over. And we anticipate yields to rise in Japan. The global sell-off in bonds seems to have paused. Bonds …
Homegrown problems a bigger risk to growth Our assumption is that Trump will impose a 10% tariff on all US imports (including on Korea), most likely sometime in the second quarter. On its own this would not have a huge impact on Korea, since a universal …
Inflation eases, but Copom still set to deliver 100bp hike next week Brazil’s headline inflation rate eased to 4.5% y/y in the first half of January, but signs that underlying price pressures continued to build mean that Copom will press ahead with …
We think that next week the Riksbank will cut its policy rate for the final time this cycle, reducing it from 2.5% to 2.25%. After that, we do not see a need for policymakers to loosen policy any further as there are already emerging signs of an economic …
Week 1/208: A national emergency and Davos President Trump hit the ground running by declaring a National Energy Emergency on his first day in office. We covered the implications of this for energy markets in this in-depth report here . One of the key …
This page has been updated with additional analysis since first publication. Stagflation concerns remain at the start of 2025 Despite the small rise in the composite activity PMI from 50.4 in December last year to 50.9 in January, at face value it is …
Having hit a record high, we expect the trade-weighted US dollar to climb further in 2025. While the short-term danger that a strong dollar poses to the world economy tends to be overblown, the bigger risk is that is worsens external imbalances which …
Impact of 10% tariff on India would be small Although President Trump mentioned tariffs only briefly in his inauguration address, the White House released a memorandum soon after setting out the administration’s broad plans. As we explained here , …
This page has been updated with additional analysis since first publication. Growth remained sluggish in January We expect data released next week to show that the euro-zone economy grew by only 0.1% q/q in Q4, and January’s PMIs point to a similarly poor …
Strong exports and investment supporting the economy Taiwan’s economy picked up in Q4, and we expect GDP growth to remain robust over the coming quarters, helped by continued strong growth in information and communication technology exports. The advance …
We think further tightening by the Bank of Japan will see the 10-year Japanese government bond (JGB) yield rise above that of the 10-year Chinese government bond (CGB), for the first time in more than two decades. The Bank of Japan’s rate hike today had …
The Bank of Japan signalled further tightening when it lifted its policy rate to 0.5% today. With inflation set to remain above its 2% target this year, we expect the policy rate to reach 1.25% next year. The Bank’s decision to lift interest rates to 0.5% …
BoJ signals further tightening As widely anticipated, the Bank of Japan resumed its tightening cycle with a 25bp rate hike to 0.5% at its meeting on Friday. And the Bank’s Outlook report suggests that there’s more to come: the Bank revised up its …
Bank of Japan will lift policy rate to 1.25% next year The Bank of Japan hiked its policy rate to 0.5% today and we think it will lift it to an above-consensus 1.25% by the middle of next year. The Bank’s decision to resume its tightening cycle with a …
Case for RBNZ to ease aggressively remains intact With data released this week showing that inflation in New Zealand remained subdued last quarter, it’s all but certain that the RBNZ will cut rates by another 50bp, to 3.75%, at its meeting next month. …
Uncertainty over Trump’s tariff plans We still have little clarity on the timing or size of any tariff increases President Trump is planning to impose on China. On the one hand, Trump has threatened a 10% tariff to take effect on 1 st February in response …
MAS loosens policy, further easing likely amid low inflation Singapore’s central bank loosened monetary policy today and with inflation likely to remain low and economic growth soft, we expect further easing in the coming quarters. The MAS conducts …
Flash PMI points to pick-up in activity this quarter The continued rise in the composite PMI to its highest point since Q3 last year supports our view that activity will pick up again this quarter. Today’s flash estimate showed that the manufacturing PMI …
Strength in underlying inflation points to further tightening The acceleration in headline inflation and strength in underlying inflation in December should add to the Bank’s confidence that it can resume rate hikes today and over the coming months. In …
23rd January 2025
The news from Davos that President Trump will “ask Saudi Arabia and Opec to bring down the cost of oil” is certainly in keeping with his desire for lower gasoline prices and his clear intention to use energy as leverage over Russia to end the war in …
Although developed market (DM) equities outside the US have purportedly benefited from bargain hunting recently, we doubt they will outperform their counterparts in the US over the course of 2025 as a whole. MSCI’s World ex USA Index of DM equities has …
Renewed rises in market interest rates across the UK, US and euro-zone have prompted questions about the implications for real estate. For now, we think the upside risk to property yields is small. We still anticipate government bond yields to fall back …
Saudi-US relations already on a stronger footing Over the past year, Saudi Arabia’s shift toward China appears to have been on pause as it awaited to see the victor of the US presidential race. With Donald Trump now back in the White House, there are …
Join Chief Global Economist Jennifer McKeown and senior economists from our US, Europe and UK teams for this online briefing all about the first rate decisions of 2025 from the Federal Reserve, European Central Bank and the Bank of England. During this …
When central bankers give guidance on likely interest rates changes in the next month or two, it’s probably best to believe them. But experience shows that banks’ own interest rate forecasts are very unreliable beyond three to six months in the future. …
We held an online briefing yesterday on Mexico’s economy and how it may be impacted by the Trump administration. (Listen to the on-demand recording here .) This Update answers some the key questions that came up. How do you interpret the threatened 25% …
25bp rate cut very likely next week. We expect ECB to lower interest rates further this year than investors anticipate. US trade policy likely to have little impact on euro-zone inflation and monetary policy. The ECB looks set to cut its deposit rate …
Heading for another strong quarter On the surface, the 0.4% decline in retail sales volumes in November looks worrying, but that fall partly reflects households delaying purchases ahead of the December GST holiday. Encouragingly, November’s drop appears …
The declaration of a National Energy Emergency underlines President Trump’s aspiration to extend the US’s dominance in global energy markets, and his willingness to use the US’s clout as leverage will reshape global energy flows during his term. That …
Easing inflation makes February cut highly likely The fall in Mexican inflation in the first half of January, to 3.8% y/y, means that Banxico is likely to continue its easing cycle next month. But with the Fed set to pause its pause its cutting cycle and …
250bp cut likely to be follow with another in March The 250bp interest rate cut by Turkey’s central bank (CBRT), to 47.50%, was accompanied by cautious language in the statement. But given signs that underlying inflation pressures are easing , we think …
Our analysis suggests that most of the recent rise in the household saving rate can be attributed to cyclical rather than structural factors, which means the saving rate will slowly fall as interest rates decline. That lends support to our view that …
Today’s policy announcement confirms that Norges Bank is likely to start cutting interest rates at its meeting in March, almost certainly with a 25bp reduction to 4.25%. We think it will then loosen monetary policy a little more quickly than its latest …
Norges Bank to start cutting in March Today’s policy announcement confirms that Norges Bank is likely to start cutting interest rates at its meeting in March. We think it will then loosen monetary policy a little more quickly than its latest projections …
President Trump’s threats to retake ownership of the Panama Canal reflects its importance for US trade and the country’s strategic interests. It’s possible that these threats are simply another attempt to gain concessions, such as lower fees charged to …
