Rates set to stay on hold in 2023 Sri Lanka’s central bank (CBSL) kept interest rates unchanged today and we expect it to leave rates on hold for the rest of the year as it aims to strike a fine balance between supporting a struggling economy and clamping …
25th January 2023
Stubbornly high inflation will prompt further RBA rate hikes Inflation rose further last quarter and remains far too high for the RBA’s liking. Accordingly, we’re sticking to our non-consensus forecast that the Bank will lift the cash rate to 3.85% by …
Some nuggets of comfort for the RBNZ The Q4 CPI data revealed a smaller rise in non-tradeable prices than the RBNZ had expected but, with those prices still rising at a worrying pace, it is not clear that this alone will be enough for the Bank to drop …
24th January 2023
We expect the Bank of Canada to hike by 25bp… (15.00 GMT) … and clients can register here for our Drop-In following that decision (17.00 GMT) We think rates will be raised by 25bp in Thailand and be left on hold in Sri Lanka Key Market Themes Today's …
The flash PMIs for January provide further evidence that the euro-zone economy has so far avoided the deep downturn that most economists anticipated, whereas the US and UK surveys still point to recessions in both cases. Supply shortages have become less …
As 2023’s calendar of central bank meetings began, we held a special briefing on the first Federal Reserve, European Central Bank and Bank of England policy decisions of the year. Chief Global Economist Jennifer McKeown lead a discussion with economists …
A closer look at Spain’s inflation data shows that there are significant measurement difficulties affecting both energy and core price data. However, we still expect measured headline inflation to remain lower in Spain than in most of the euro-zone and …
Recent data have shown that activity in the US is weakening as we had expected while that in the euro-zone has been surprisingly resilient. The resilience seems to reflect a combination of supply and demand factors, including easing shortages, lower gas …
The outlook for emerging markets is looking better than it did just a few weeks ago. Most obviously, China’s shift to living with COVID means that its economy will rebound far sooner than we had previously thought. That will provide a lift to countries …
The Central Bank of Nigeria (CBN) raised the benchmark rate by 100bp, to 17.50%, today in a surprisingly aggressive decision. But with incoming data likely to add to evidence of easing price pressures, we are not convinced that this hawkish tilt will …
Interest rate cuts still some way off Hungary’s central bank (MNB) left its base rate on hold today, at 13.00%, and we don’t think that it will cut its main policy interest rates until late-2023. In the meantime, we expect that the MNB will continue to …
Persistent price pressures may prompt more tightening from Banxico The small rise in Mexico’s headline inflation rate, to 7.9% y/y, in the first two weeks of January means that there is a growing risk that Banxico delivers a bit more tightening beyond the …
Recession on the cards for 2023 The renewed fall in the flash UK composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 petered out in early 2023. That supports our view that the economy is …
Further improvement in activity amid high prices pressures The increase in the flash euro-zone Composite PMI for January left it consistent with the economy roughly stagnating. With employment intentions and price pressures still high, there is nothing …
Further improvement in activity amid high prices pressures The increase in the flash euro-zone Composite PMI for January was a little better than expected and left it consistent with the economy roughly stagnating. With employment intentions and price …
While China’s reopening has improved the prospects for copper demand, the price has, in our view, surged by more than can be justified by developments there alone. We expect the copper price to drop back over the next few months as several advanced …
Big Budget giveaways will have to wait until March 2024 December’s worse-than-expected public finances figures suggest the Chancellor will wait until closer to the next election before announcing any significant tax cuts and/or spending rises. Public …
Borrowing overshoot further limits chances of big Budget giveaways December’s public finances figures provided more evidence that the government’s fiscal position is deteriorating fast. And high government spending in the early months of 2022/23 and the …
The flash PMI might have edged up in the euro-zone in January… (09.00 GMT) … but we think it fell back in the UK (09.30 GMT) We expect central banks in Hungary and Nigeria to keep interest rates on hold Key Market Themes We don’t think government bond …
23rd January 2023
Recession on the cards in 2023 The renewed fall in the flash UK Composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 started to peter out in early 2023. While still very high, the price indices …
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
Pakistan’s central bank (SBP) raised its policy rate today by a further 100bps (to 17.0%), and we expect more tightening over the coming months amid concerns about high inflation and the worsening external position. Interest rates have now been raised …
The shift away from variable towards fixed-rate mortgages in many European countries over the past 15 years means that it will take longer than in the past for interest rate hikes by the ECB to feed through to household interest expenditure. This …
Further tightening on the cards Pakistan’s central bank (SBP) raised its policy rate today by a further 100bps (to 17.0%), and we expect more tightening over the coming months amid concerns about high inflation and the worsening external position. …
Near term economic headwinds suggest the slowdown in investment activity in Scandinavia will continue in 2023. However, with policy rates near a peak, and improving economic activity and falling bond yields expected later in the year, we think that the …
Industry resilient, but retail sales hit by high inflation Polish industrial production remained resilient in December but high inflation weighed heavily on real incomes and took its toll on retail sales. On balance, we think that Poland’s economy is …
Fracturing is going mainstream. We argued last year that we were entering a new era of global fracturing , in which the world’s major economies coalesce around rival blocs. Since then, a debate has picked up about what will follow this most recent phase …
Headlines have been dominated by talk of what follows this most recent era of globalisation, forming the basis of this year’s Davos meetings and a new IMF paper warning of a potentially major hit to the global economy. It’s a theme we’ve been discussing …
22nd January 2023
Nigeria’s loan-to-bond swap up in the air Plans by the government of Nigeria to swap central bank loans to bonds have hit a sticky patch, making it unclear whether the country can reap the associated economic gains. Parliamentarians in Nigeria have …
20th January 2023
The US dollar looks set to end the week broadly flat against most other major currencies after, by recent standards, a quiet week in FX markets. But Wednesday may have offered a glimpse of what is to come over the coming months – weak US retail sales and …
We expect rate hikes in Canada, Colombia, South Africa and Thailand… …but expect central banks in Hungary and Chile to leave rates on hold US data likely to show that economic momentum faded in December (Thu. & Fri.) Key Market Themes Although the …
The end of China’s zero-COVID policy continued to support most commodity prices this week, with many industrial metals prices extending their recent rallies. Economic activity appears to be recovering unexpectedly quickly in China and we have upgraded our …
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
Sales continue to fall, but end is in sight The modest fall in existing home sales in December suggests the impact of the spike in mortgage rates last year has largely washed through. The recent fall in mortgage rates has helped to lift homebuyer …
Brazil: watch the labour market Lula has continued to spook investors in Brazil. This week he once again disparaged the focus on fiscal responsibility and also questioned the benefits of central bank independence. And more market-friendly words from his …
We expect the slowdown in investment activity in the second half of 2022 to persist into the first half of 2023. But we think transactions will begin to recover later this year once interest rates have topped out and much of the valuation adjustment has …
Russia’s current account surplus now shifting fast The focus in media reports on Russia’s record current account surplus in 2022 misses the huge deterioration at the end of the year. We think the balance of payments will be squeezed further, raising the …
Join Paul Ashworth , our Chief North America Economist, Stephen Brown , who leads our Canada coverage, and Jonathan Peterson , Senior FX Markets Economist, held a 20-minute briefing shortly after the Bank’s January decision announcement. Paul, Stephen …
We now think German industry will continue to grow in the coming months as lower gas prices, easing supply shortages and high backlogs of orders support production. One of the reasons for the resilience of the German economy in the face of the energy …
With inflationary pressures easing and the global growth outlook improving, we no longer expect the US dollar to breach its late September peak. But we still think that souring risk appetite associated with recessions in developed markets will boost the …
Retail sales appear to have ended 2022 with a bang Retail sales edged down in November but the preliminary estimate of a 0.5% m/m rise in December, despite the double-digit fall in gasoline prices, implies that sales volumes rose sharply at the end of …
Rebounding won An easing of inflation pressures in the US along with China’s reopening have provided a boost to Asian currencies over the past couple of months. The biggest rebound has been in the Korean won, which has now appreciated by 17% against the …
The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, …
Aluminium production growth to struggle in 2023 Global aluminium production growth slowed to 2% in 2022 from 2.7% in 2021. We forecast that weaker output growth in China and another difficult year in Europe will lead to even softer growth this year. …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
The Swiss franc is not immune to the shifting global landscape and we now suspect that it will be broadly stable against the euro in the coming months rather than appreciating. Looking back, the franc has been through three distinct phases since the …
The improvement in recent data and brightening outlook continues to be the key talking point for euro-zone-watchers. In brief, it looks as if euro-zone GDP may not have contracted in Q4 2022 after all, and the prospects for this year have brightened …
The Year of the Rabbit that begins on Sunday will see a revival in outbound tourism from China that we expect to be stronger than recoveries seen elsewhere. China is reopening into a world that has already dismantled most virus controls. Its state-owned …
A partial recovery in Lunar New Year travel The world’s largest annual migration of people is well underway, with millions of Chinese returning to their hometowns to spend the upcoming Lunar New Year holiday with their families. This migration, which …
