Surprise hike, but cuts still likely in H2 In a surprise move, Taiwan’s central bank (CBC) today raised its main policy rate by 12.5bps (to 1.875%), but with the economy struggling badly and inflationary pressures set to ease further, we think this was …
23rd March 2023
SNB looks through Credit Suisse turmoil and hikes by 50bp This morning’s 50bp interest rate hike by the SNB, to 1.50%, was in line with expectations and shows that, like the ECB and Fed, Swiss policymakers have not been distracted from their …
Norges Bank not done yet The Norges Bank’s 25bp rate hike was accompanied by new guidance signalling that it is likely to raise rates further in May. Together with the new, higher interest rate forecast, this supports our view that the policy rate will …
More tightening still to come The central bank of the Philippines (BSP) today slowed the pace of tightening as it raised its main policy rate by 25bps (to 6.25%), and hinted that the tightening cycle was now approaching an end. Although inflation has now …
PMIs continue to paint gloomy picture March’s flash PMIs corroborate our view that the economy will see a mild recession this year. The manufacturing PMI improved but was still contractionary, as demand remained weak. Meanwhile a further rise in the …
Government energy subsidies take 1%-pt off inflation Headline inflation fell from 4.3% in January to 3.3%, largely in line with our 3.2% forecast. The main driver of the slowdown was energy inflation, which flipped from 14.6% into outright deflation at …
The 25bp rate hike and new projections unveiled by the Fed today were towards the more dovish end of potential outcomes. Despite recent strong economic data, officials acknowledged the likely hit from the banking sector turmoil and left their end-year …
22nd March 2023
Bank likely to be feeling more confident about inflation outlook The latest Summary of Deliberations reveals that the Bank of Canada is not overly concerned by signs of sticky core inflation elsewhere, but the Bank still needs to see more evidence of …
Fed opts for dovish hike The 25bp rate hike and new projections unveiled by the Fed today were towards the more dovish end of potential outcomes – with officials acknowledging the likely economic hit from recent banking sector turmoil and leaving their …
US natural gas prices have plummeted recently amid subdued demand and elevated stocks. However, demand is expected to revive this year and next, which will put upward pressure on prices. The price of US gas (Henry Hub) has collapsed from a peak of $9.7 …
Crude stocks rise again, but it’s the Fed that will move oil prices Commercial crude stocks rose slightly this week, although product stocks fell as domestic demand and exports both picked up. But all eyes are on the Fed’s monetary policy meeting later …
Although the recent flare-up of financial stability concerns has been a US-Europe story, its reverberations could be global. Economists from across our Asia coverage held a special online briefing about what the turmoil in the banking sector could mean …
We expect the Fed to raise its policy rate by 25bp later on Wednesday (18.00 GMT) The SNB and Norges Bank are both likely to hike rates on Thursday (08.30 & 09.00 GMT) The latest UK inflation data support our view that the BoE will hike by 25bp too …
Recent data suggest the economy’s strong start to the year was mostly sustained in February, with consumption growth set to accelerate in the first quarter, payroll employment growth robust and, partly reflecting that strength, core inflation still much …
Even if the banking sector turmoil doesn’t grow into a broader economic crisis, we still think equities in emerging markets (EMs) will struggle over the next couple of quarters in local-currency (LC) terms. Since confidence in the financial sector started …
Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has …
Although recent strains in the banking sector mean that the economic outlook is especially uncertain, in our view equities are unlikely to perform particularly well, regardless of how things play out. It goes without saying that, over the past year or so, …
Spill-overs from the turmoil in the global banking system to India have been limited so far, but the big unknown is whether difficulties will flare up at home. Bank problems can arise via multiple channels. There may be banks that have not adequately …
The UK commercial real estate (CRE) debt market seems to be in a better position than the US, where troubled regional banks were the main providers of finance. That said, credit conditions are also set to tighten in the UK which will make refinancing more …
Strains in the global banking sector have flared up at a time when Latin America was in the midst of a period of economic weakness. Regional GDP fell in the final quarter of last year and surveys for early 2023 have been soft. Latin America’s banks have …
The Help to Buy: Equity Loan scheme was designed to counter an alarming drop in housebuilding and home ownership among young adults. It succeeded to some extent on both fronts, so the loss of the policy when the housing market is in the midst of a …
Jump in core inflation seals the deal on a 25bp hike next week The rise in South Africa’s headline inflation rate, to 7.0% y/y, in February may be a sign that the intensification of loadshedding in recent months is fuelling price pressures. So long as …
Reacceleration in inflation supports the case for another rate hike The reacceleration in CPI inflation in February may be enough to tilt the Bank of England towards raising interest rates from 4.00% to 4.25% tomorrow despite the recent turmoil in the …
Reacceleration in inflation may force 25bps rate hike The reacceleration in overall CPI inflation from 10.1% in January to 10.4% in February (consensus 9.9%, BoE 10.2%) and core inflation from 5.8% to 6.2% (consensus 5.7%) may be enough to tilt the Bank …
We think CPI inflation edged lower in the UK… (07.00 GMT) …and continued to soften in South Africa in February (08.00 GMT) The Fed will probably press ahead with a 25bp rate hike (18.00 GMT) Key Market Themes A risk-on mood has prevailed today amid …
21st March 2023
While real estate is not the main cause of the current financial turbulence, as it was in the late 2000s, it has played an indirect role and may be implicated in any further instability. And property will also be vulnerable to the effects of recent …
Rebound in sales likely to reverse Existing home sales rebounded in February as buyers took advantage of falling mortgage rates. Weak mortgage applications data point to sales dropping back again in March, but with turmoil in the banking sector contained …
The Central Bank of Nigeria (CBN) raised the benchmark rate by 50bp, to 18.00%, and appeared to lay the groundwork to draw the tightening cycle to a close. The CBN’s decision to raise the benchmark rate by 50bp, to 18.00%, today follows 600bp of …
Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from weaker growth and higher interest rates. That said, there …
Another reason for the Bank to maintain its pause In case the turmoil in the global banking sector left any doubt, the sharper-than-expected fall in headline CPI inflation in February suggests there is little chance that the Bank of Canada will be forced …
Another reason for the Bank to maintain its pause In case the turmoil in the global banking sector left any doubt, the sharper-than-expected decline in headline CPI inflation in February suggests there is little chance that the Bank of Canada will be …
Struggling for momentum February’s activity data out of Poland paint a weak picture and support our view that GDP will, at best, flatline over 2023 as a whole. Even so, the central bank has little scope to help and we expect that high (albeit falling) …
The deal announced yesterday between Sri Lanka and the IMF should eventually pave the way for a sustained economic recovery. However, the tough conditions being imposed as part of the agreement mean the country faces another difficult year ahead. …
Pre-election tax cuts in prospect, but risks to the fiscal outlook growing Despite February’s worse-than-expected public finances figures, we still think the Chancellor may have more headroom to cut taxes/raise spending later this year. But the big risk …
Pre-election tax cuts in prospect, but risks to the fiscal outlook growing The news on the public finances may have raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year. But the big risk is that a further …
With bond yields now dropping back again, the drag from unrealised losses on banks’ capital ratios should start to reverse. However, a sharp increase in losses on banks’ foreign loan portfolio has yet to materialise. While our view that major advanced …
RBA not done hiking yet The minutes of the RBA’s latest meeting confirm that the RBA is close to ending its tightening cycle, but we suspect that the strength of the latest labour force data will prompt it to deliver two more 25bp rate hikes. Contrary to …
Clients can access all our latest research on the banking sector crisis here … … and catch-up on today’s Drop-in on the topic here Canada’s CPI inflation probably fell to 5.4% in February, from 5.9% in January (12.30 GMT) Key Market Themes Financial …
20th March 2023
Overview – The RBI’s tightening cycle is in its final throes and, as the economy softens and inflation drops back to within the central bank’s 2-6% target range, we think rates cuts will materialise in early 2024. Over the longer term, India’s growth …
Stripping away calendar effects, global aluminium production increased slightly last month. We expect output to continue to grow steadily this year, mostly in response to rising demand in China. According to the International Aluminium Institute (IAI), …
In ordinary times, today’s launch of the Intergovernmental Panel on Climate Change’s (IPCC) sixth synthesis report in Interlaken would have been the most high-profile news event to emerge from Switzerland. As it happens, amid the drama of the Credit …
As the dust began settling on a hastily arranged takeover of Credit Suisse by UBS, our economists briefed clients on what’s next in this recent surge in turmoil in the banking sector. In these excerpts from the briefing, you’ll hear them discuss key …
EMs, in general, don’t appear to have suffered large capital outflows over the past 10 days or so amid the turmoil in the global banking sector. But some countries with large current account deficits (Chile, Colombia, Hungary) have seen their currencies …
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
From Latin America’s growth star to weakest link The weaker-than-expected 0.1% q/q expansion in Chile in Q4 of last year confirms that high inflation and tight monetary policy are taking a heavy toll on the economy. We think the economy will contract by …
Click here to read the full report Overview – Both the RBA and the RBNZ have more work to do to rein in the recent surge in inflation. That aggressive monetary tightening is starting to take its toll on economic activity and we expect GDP growth to slow …
Markets remain in a febrile state despite the weekend deal for UBS to buy Credit Suisse and a joint central bank statement pledge to beef up dollar liquidity support. What will it take to restore confidence and end this crisis? Economists from across our …
Credit Suisse solution raises new questions The uncertainty over the long-term viability of Credit Suisse ended over the weekend when it was acquired by UBS – the solution which at face value offers the best chance of re-establishing stability in the …
Neil Shearing Group Chief Economist When things move as rapidly as they have done over the past week, it’s often difficult to see the wood for the trees. Although the situation is still in flux, whether the relative calm of the end of last week marks the …
