Bank Al-Maghrib joins the EM rate cutters Morocco’s central bank, Bank Al-Maghrib (BAM) announced this afternoon that it has cut its key policy interest rate by 25bp, to 2.75%. We expect that the Bank will continue to tread cautiously, as the governor has …
25th June 2024
Price inflation slows for first time in almost a year The second consecutive moderate 0.3% m/m rise in house prices in April could be a sign that the increase in home listings this year has cooled the market. We think rising supply will eventually be …
July cut on shaky ground The stronger monthly gains in the Bank of Canada’s preferred core price measures in May will give the Bank some cause for concern after starting its loosening cycle in June. However, with some of that strength due to factors that …
If the results of France’s election, or actions of the next French government, trigger contagion to other euro-zone countries’ bond markets, the ECB could respond by purchasing their bonds using the Transmission Protection Instrument (TPI). Under some …
Overview – China’s economy is on course to expand by 5.5% this year, buoyed by policy support and strong exports. But we remain less sanguine about the medium-term outlook. Domestic Demand – A ramp up in fiscal spending should boost domestic demand in …
A return of President Trump to the White House would be a shot across the bows for global efforts to reduce emissions – particularly as he would almost certainly withdraw the US from the Paris Agreement again . But while he could deal another blow to the …
Prime Minister Modi begins his third term with a weakened mandate, but an economy that is primed to grow by 6.5-7% per year between 2024 and 2026. That would put India on course to become the world’s third largest economy within the next couple of years. …
Overview – The next government, which the polls ahead of the election on 4 th July suggest will be a Labour one, will benefit from a combination of lower inflation, lower interest rates and faster economic growth than most are expecting. We think that a …
Growth in the Gulf economies is likely to pick up in the coming quarters, particularly as oil output starts to rise from October. We think non-oil sectors will continue to grow strongly. But the outlook will become more challenging from 2025 as oil prices …
Emerging Asia Chart Pack (June 2024) …
Are signs of recovery sustainable? Is inflation receding enough for more central banks to join the global easing cycle? Do upcoming elections pose a risk to the economic outlook? Our senior economists for held two special briefings on Monday, 1st …
24th June 2024
Nearly all major emerging market (EM) currencies have fallen against the US dollar so far this year, but we think the downside for most of these currencies is limited from here. While most EM currencies are starting the week on a strong note, they have a …
There is huge uncertainty about whether fertility rates have reached a floor in those countries with the lowest rates. But even if they start to rise again, it is almost unavoidable that a rising number of countries will experience falling populations …
The recent encouraging inflation data reinforce our view that the Fed will cut interest rates in September. We remain confident that core inflation is heading back to the 2% target, which should allow the Fed to cut rates again in December and by even …
France elections and market risk …
This Update summarises the answers to some of the questions which clients raised in our recent online briefing about the forthcoming French legislative elections. The questions are divided into three sections: politics, economics, and markets. (The online …
Our China Activity Proxy suggests that economic growth weakened in May on the back of a fall in services activity. Industry also slowed, following months of outperformance. We doubt this marks the start of a downturn just yet – fiscal stimulus and strong …
Strong services inflation and fall in peso to keep Banxico in hawkish mood The continued strength in core services inflation in Mexico in the first half of June, combined with the post-election slump in the peso and heightened political uncertainty, means …
You don’t need fluent French to understand what France’s finance minister was referring to when he warned of “un scénario à la Liz Truss” if the far right wins in upcoming legislative elections. Bruno Le Maire’s warning about a repeat of the turmoil that …
Domestic demand driving the recovery The Polish activity data for May were a mixed bag with retail sales bouncing back, while industry suffered a renewed contraction. With domestic demand likely to stay strong over the coming months, we maintain our …
We held an online Drop-In session late last week to discuss the outlook for monetary policy following the June policy meetings of the Bank of England, US Federal Reserve and ECB. (See a recording here .) This Update answers several of the questions that …
This page has been updated with additional analysis since first publication. Business sentiment still poor June’s decline in the Ifo business climate indicator (BCI) to a very low level highlights that even after Germany’s economy grew in Q1, it is far …
In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing previews upcoming US PCE inflation data, outlines the fiscal challenges facing the next UK Chancellor and explains how Chinese manufacturing …
23rd June 2024
The Summary of Deliberations from the Bank of Canada’s June meeting reiterated that further interest rate cuts are likely but gave little away about how quickly the Bank will move. With another two CPI releases before the July meeting, our sense is that …
21st June 2024
Bond buying redux PBOC Governor Pan Gongsheng this week again flagged the PBOC’s plans to start buying and selling government bonds and again argued that this wouldn’t constitute QE. (See our earlier discussion of the issue here .) The purpose of the new …
Weaker-than-expected euro-zone PMIs in June leave us confident in our view that bund yields will edge down over the coming months, while we doubt spreads will fall back much in France or Italy. This also supports our view that the euro will remain on the …
Despite more central bank policy announcements this week, most currencies fluctuated within a tight range and the dollar seems set to end the week broadly flat – boosted a bit by the release of PMI data earlier today. Our sense is that this may remain the …
SA: GNU stability will face reform challenges The announcement that a Government of National Unity (GNU) has been formed in South Africa, led by the ANC and DA has triggered a rally in local financial markets. But this may prove to be the easy part; …
The latest flash PMIs suggest that GDP growth in most major advanced economies slowed at the end of Q2. But weaker services activity hasn’t translated to softer price pressures, meaning central banks will take a gradual approach to loosening policy. Our …
Sales barely budge in May Existing home sales were essentially flat in May which is somewhat puzzling given that pending home sales and home purchase mortgage applications, which lead transactions by a month, both fell meaningfully in April. Either way, …
Fiscal outlook deteriorates further Deficit going from bad to worse This week the CBO released new projections showing that the Federal deficit is expected to be $1.9trn, or 6.7% of GDP, in the current 2024 fiscal year that ends this September. (See Chart …
Recent political uncertainty in France has taken a big toll on equities there, but stock markets elsewhere in the euro-zone have generally avoided major selloffs. That’s broadly consistent with past episodes of country-specific flare-ups in the region, …
This week's weaker-than-expected activity data in China seems to be at odds with the broadly flat or slight increases in base metals prices this week. (see Chart 1.) The big picture however is, that the data released this week add to the argument that …
With all eyes on France, it is easy to forget that the Netherlands has also been experiencing political disruption over the last 12 months. But politics there has proved less disruptive to markets and we expect economic growth in the Netherlands to …
IMF praises Milei but more to be done The eighth review of Argentina’s $44bn IMF programme, which was published this week, is a whole-hearted endorsement of President Milei’s economic record. It notes that the “program remains firmly on track” and that …
Strong population growth supporting retail sales Retail sales volumes performed a little better than we expected in April, but that seems to be largely due to strong population growth, with the interest rate-sensitive sectors performing poorly. Stats Can …
Economic soft landing not budging the polls It is striking how little recent economic events have influenced the polls ahead of the general election on 4 th July. This week’s news that CPI inflation fell to 2.0% in May meant that, just as we predicted …
This week, the European Commission (EC) announced its intention to open “Excessive Deficit Procedures” (EDPs) against five euro-zone countries: France, Italy, Belgium, Slovakia and Malta. The decisions need to be signed off by the European Council, but …
Thailand – supportive fiscal policy Most countries in Asia are planning to tighten fiscal policy as they aim to put government finances on a more secure footing following a sharp rise in debt levels during the pandemic. One exception to this is …
With inflation back to target the stage is set for a decline in interest rates. Indeed, we think that the 10-year gilt yield will have dropped to 3% by end-26. But we don’t think that will lead to much in the way of property yield compression. Rather, …
Space for interest rate cuts narrows across CEE The Hungarian central bank’s decision to opt for a smaller 25bp interest rate cut at its meeting this week fits into a broader theme of policymakers in several parts of the EM world moving towards a slower …
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
Bond index inclusion a positive for government… The Indian government’s long-awaited ambition to have its local currency bonds included in global indices will finally come to fruition next Friday when JPMorgan Chase adds the country to its GBI-EM Global …
Will this snap election mark the end of the France's political turmoil? And will the election results convince the bond vigilantes to stand down? Our senior Europe and Markets economists held this assessment of the French legislative election results and …
This page has been updated with additional analysis since first publication. Back to stagflation? The sharp drop in the euro-zone Composite PMI in June suggests a solid recovery in the euro-zone economy is not a done deal, with activity having apparently …
This page has been updated with additional analysis since first publication. Sticky price pressures may mean rate cuts are slower and smaller June’s composite PMI suggests the economic recovery lost a bit of momentum towards the end of the second quarter. …
Rebound suggests lower inflation is beginning to support consumption The larger-than-expected increase in retail sales in May more than reversed the rain-driven weakness in April. And with inflation falling back to target, Bank Rate likely to be reduced …
This page has been updated with additional analysis since first publication. Better news doesn’t mask fiscal challenge awaiting next government May’s public finances figures delivered some better news on the fiscal position after the recent run of …
We think the S&P 500 will make further gains over the coming months, even though it’s already fared well this year and is approaching our existing end-year forecast. As such, we’ve revised that forecast up. Meanwhile, we think equities elsewhere will …
Inflation slowdown creates dilemma for BoJ The minutes of the Bank of Japan’s April meeting released this week confirmed that many Board members were concerned about a renewed strengthening of price pressures caused by the weak exchange rate. Those …
