New RBI leadership and inflation drop tips balance Two big developments this week have tipped the odds in favour of a repo rate cut at the RBI’s next meeting in February, or potentially even in an unscheduled meeting before then. The first was the …
13th December 2024
B ut a dramatic shift in policy approach still unlikely The Central Economic Work Conference (CEWC), an annual gathering at which China’s leadership discusses targets and priorities for the following year, concluded yesterday. We discussed the key …
Tankan adds to case for December hike Q3 private consumption revised down Real GDP growth for the third quarter was revised up to 0.3% q/q from 0.2% in the second estimate released on Monday. However, private consumption was revised down from a 0.9% q/q …
This page has been updated with additional analysis since first publication. October worse than it looks, long-term outlook bleak October’s euro-zone industrial production data look much worse without Ireland, where the data are notoriously volatile. The …
Inflation in South Africa is now running at extremely low rates by historic standards. While we think it will edge up from here, the extent of spare capacity in the economy and tight fiscal stance mean inflation will remain lower than consensus …
Tight labour market will muddy the waters Although the Reserve Bank of Australia predictably left rates on hold at its meeting on Tuesday, the Board didn’t exactly try to hide the fact that it was in a more dovish mood. Indeed, the Bank stated that it was …
This page has been updated with additional analysis since first publication. Economy at risk of contracting, partly due to the Budget The 0.1% m/m fall in GDP in October is the second such decline in a row and means there is every chance that the economy …
This page has been updated with additional analysis since first publication. Tankan points to sluggish growth The mediocre increase in business conditions across all firm sizes in the latest Tankan suggests that the activity is unlikely to rebound …
Given our dovish view of ECB policy, we expect German Bund yields to fall back in 2025, and to diverge further from US Treasury yields. Unlike the Bank of Canada (BoC) and the Swiss National Bank (SNB), the European Central Bank (ECB) cut its policy rates …
12th December 2024
Risks to Russia’s macroeconomic stability are mounting on the back of the recent credit boom and sharp rise in interest rates. Our EM financial risk indicators show that Russia is now at high risk of a banking crisis. We don’t expect these risks to …
Next Thursday, we expect the Riksbank to reduce its policy rate from 2.75% to 2.5% as it closes in on the end of its loosening cycle. In contrast, we think Norges Bank will leave its policy rate unchanged again next week at 4.5% as it waits until early …
Overview – The backdrop to our new real estate forecasts is a small reduction in our GDP forecasts and higher level of interest rates than previously. This weighs on the outlook, and we have trimmed our total returns expectations to 5.5-6.0% p.a. over the …
Deterioration in global outlook has increased the downside risks to UK GDP growth… …but Trump’s election win and the UK Budget have boosted the upside risks to UK inflation MPC to keep rates at 4.75% in December and to continue to cut by 25 basis points …
Capital inflows into EMs have been resurgent over the past few weeks amid a broader improvement in global risk appetite. Looking ahead, however, likely policies from President-elect Trump point to a renewed strengthening in the US dollar – an environment …
OPEC+ alters Gulf’s economic outlook Following our previous Weekly , OPEC+ announced that it would be pushing back the start date of when it will unwind oil production cuts to April 2025 and that the pace of increase will be slower than we had previously …
Today’s ECB policy statement and press conference suggest that policymakers are increasingly confident of meeting their inflation goal and increasingly conscious of downside risks to the economy. We think the outlook is weaker than the Bank believes and …
The latest data have shown that China is benefitting from a pick-up in government spending, the US economy continues to grow at a decent pace, and other advanced economies had a soft start to Q4. Outside China, forward-looking indictors point to weaker …
To see how our latest European property forecasts stack up against the other regions we cover and against other asset classes, please see our new Global Returns Dashboard here . Overview – The recovery in property values is underway. But we think it will …
Despite being around multi-decade lows, we think credit spreads of US investment-grade (IG) corporate bonds could fall further still over the next year or so. Last month, the option-adjusted spread of the ICE BofA US IG Corporate Index reached its lowest …
ECB likely to accelerate policy easing next year While the ECB’s decision to cut its deposit rate by 25bp was widely expected, the accompanying statement suggests that policymakers are less concerned than previously about upside risks to inflation and …
PPI gives Fed green light to keep cutting rates Ignore the fact that PPI final demand prices increased by a slightly bigger than expected 0.4% m/m in November. The components that feed into the Fed’s preferred PCE index were universally weak and, together …
Note: When this Update was first published, China's state media had relayed the content of the CEWC readout but the readout itself had not been published. The Update has now been updated to reflect the contents of the readout that was published late on …
The Brazilian central bank’s aggressive interest rate hike yesterday may help ease concerns that fiscal dominance will take hold. But we think that measures to keep government debt servicing costs artificially low will ultimately form part of the solution …
The Office for National Statistics’ (ONS) November house price data release indicates unusually large increases in new build house prices in recent months. We suspect that this reported rise does not reflect genuine trends in the current market. In fact, …
Overview – Tight policy, deteriorating terms of trade and, in Mexico’s case, US trade protectionism will keep GDP growth in Latin America weak and below consensus expectations in the coming years. Fiscal risks will remain in the spotlight as governments …
Headline inflation back within target The fall in headline consumer price inflation to back within the RBI's target range in November, along with the change of leadership at the central bank into a seemingly less hawkish direction, mean the stars are …
Overview – Although their recent performance leaves much to be desired, we believe that both Antipodean economies are on the cusp of a cyclical upswing. But while the RBNZ has ample room to support the recovery without stoking inflation risks, the same …
Bumper SNB rate cut, further to come This morning’s 50bp rate cut by the SNB, which brought the policy rate to 0.5%, came as a surprise to most economists. That said, it was balanced by a revised policy statement which implies that policymakers think this …
Housing market resilient to higher mortgage rates November’s RICS survey provides further evidence that housing activity and prices remained resilient to the rise in mortgage rates in November. And our view that mortgage rates will start to fall again …
Muddied communication from BoJ makes December meeting a close call On balance, we’re sticking to our forecast of a 25bp rate hike next week With inflation overshooting BoJ’s forecasts, further tightening next year likely The outcome of the Bank’s upcoming …
This page has been updated with additional analysis since first publication. RBA to stay its hand as labour market tightens With the labour market still firing on all cylinders, there’s little need for the RBA to rush to loosen policy. Accordingly, we …
Fiscal fears and overheating economy trigger a bumper hike Brazil’s central bank stepped up the pace of tightening with a larger-than-expected 100bp hike, to 12.25%, to the Selic rate and made clear that there will be at least two more 100bp increases, to …
11th December 2024
With pressures on public spending continuing to grow, this has raised the chances that the Chancellor, Rachel Reeves, raises spending further in her 2025 Spending Review. If she raises spending and funds it with higher taxes, that would probably add to …
Surging inflation will force another large rate hike The renewed acceleration in Russian inflation to 8.9% y/y in November, and likelihood of further increases in the coming months, argue strongly in favour of another large interest rate hike from the …
Although the Bank of Canada cut interest rates by another 50bp today, its communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and instead saying it “will be evaluating the …
The Treasury market has been quite subdued since the US election, including today d espite a slightly disconcerting CPI report . We don’t expect it to become a whole lot more volatile in 2025 either, even allowing for concerns about the fiscal outlook. We …
Fed to continue with gradual policy normalisation Another 25bp rate cut incoming next week Fed’s projections will ignore potential impact of tariffs and immigration curbs Fed’s independence probably safe Fed to continue steady policy easing We expect …
50bp cut will not be repeated Although the Bank of Canada cut interest rates by another 50bp today, the accompanying communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and …
Core price pressures remain slightly elevated, as housing eases The 0.31% m/m increase in core CPI in November, which left the annual core inflation rate unchanged at 3.3% for a fourth month in a row and pushed the three-month annualised rate up to an …
Overview – GDP growth in the Middle East and North Africa will accelerate in 2025 on the back of higher oil production in the Gulf. The UAE will be the Gulf’s top performing economy and, elsewhere, we expect that growth in Egypt and Morocco will …
Our forecast that commercial real estate is set for a modest recovery is dependent on our view that a decline in gilt yields will help stabilise property yields. But if interest rates don’t fall back the outlook for returns could be a lot more …
Softer-than-expected inflation points to further SARB cuts in 2025 The smaller-than-expected rise in South Africa’s headline inflation rate, to 2.9% y/y, in November, coupled with the surprise contraction in GDP in Q3, means that the monetary policy …
While emerging market (EM) dollar bonds have gained some ground lately, they have underperformed US high-yield corporate bonds in total return terms, and we suspect they will continue to lag next year. The stripped spread of the JP Morgan Global EMBI …
10th December 2024
2025 will be a far quieter year in terms of elections than this year was. But there are some key votes that will, among other things, determine whether Argentina’s President Milei builds support for his radical stabilisation plan and whether the Czech …
The price of natural gas in Europe was thrust into the spotlight during Europe’s energy crisis and remains a key political and industrial pressure point. In short, we expect natural gas prices in the EU to halve over the coming years as global LNG …
The peak in new apartment supply has passed, with completions set to drop back sharply over the next few years. If demand continues to hold up well as we expect, this should put downward pressure on the vacancy rate and support a modest pick-up in rent …
Investors’ enthusiasm for AI appears to have supported an increasingly broad set of equities of late, even if much of the associated rise in market capitalisation remains concentrated in a few of the largest firms. In August we noted that investors had …
While mortgage interest cost (MIC) inflation has historically turned negative during, or after, loosening cycles, we expect it to remain positive this time and rebound from 2026. This is because, in contrast to previous monetary policy cycles, the …
