Further easing in core inflation sets up Q2 rate cut February’s inflation data from Norway strengthen our conviction that Norges Bank will cut interest rates much sooner than its forecasts suggest. The decline in headline inflation from 5.3% in January to …
11th March 2024
Out of negative territory but set to remain low CPI inflation turned positive last month for the first time since September, thanks to temporary factors such as the volatility in food and tourism prices around Lunar New Year. But persistent overcapacity …
Wobbly output won’t prevent BoJ from ending negative interest rates While the small rise in Q4 GDP should be followed by a renewed contraction this quarter, we doubt this will prevent the BoJ from ending negative interest rates by the of next month. The …
10th March 2024
South Africa’s struggling PGM producers Lower global metal prices are pushing South Africa’s major producers to contemplate cost-cutting which could lead to lower output and fewer jobs, adding yet another constraint to the modest pick-up in growth that we …
8th March 2024
Today’s softish US non-farm payrolls report , combined with Fed Chair Powell’s relatively neutral testimony to Congress earlier in the week, has put an end to the dollar’s strong start to 2024, and suggests to us that the greenback will remain on the back …
Industrial metals demand will recover this year, boosted by rate cuts and a bit of a recovery in economic growth in advanced economies. That said, recovering supply will cap price rises for some metals, such as aluminium and nickel. Policies outlined at …
Governor Tiff Macklem dropped a hint this week that the Bank of Canada may be ready to cut rates by June. There was little in the data to dissuade the Bank, with unemployment rising and bankruptcies surging, while a productivity rebound pulled down unit …
Fed Chair Jerome Powell’s congressional testimony struck a notably less hawkish tone than we have heard recently from some of his colleagues. And with the economic data this week providing little support for the idea of a renewed upturn in inflation, we …
Today’s favourable reaction in financial markets to February’s US Employment Report probably reflects the inflation-friendly news of softer-than-expected growth in average hourly earnings amid mixed signals from the establishment and household surveys …
Sheinbaum’s policy platform to hit fiscal realities Claudia Sheinbaum, the frontrunner to become Mexico’s next president, revealed her policy plans over the past week which, as expected, are aimed at building on President López Obrador’s legacy. But her …
June rate cut coming The main event this week was the ECB meeting on Thursday where the key message was that officials are getting closer to easing policy but want to see more evidence that wage growth and underlying inflation are moderating before …
Setting the record straight on recent HUF weakness The dispute between the Hungarian central bank (MNB) and the government heated up further this week, which has fuelled a narrative that threats to central bank independence are responsible for the recent …
The rally in the spot price of gold this week to a new record high of over $2,170 per ounce was the result of several financial and macro drivers that should generally keep prices elevated over 2024. Investors grew more confident that the Fed would begin …
Wage growth heading in the right direction The Bank of Canada will be relieved to see renewed labour market slack putting downward pressure on wage growth. While the Bank will need to see wage growth soften further before it pivots to rate cuts, we …
Labour market conditions easing despite employment strength The 275,000 rise in non-farm payrolls in February may, at face value, add weight to the Fed’s view that there is no rush to start cutting interest rates, but the downward revisions to previous …
New Productive Forces, old ideas At the top of the premier’s list of Major Tasks for 2024 in his Work Report is a call to develop “New Productive Forces at a faster pace”. NPF is taking a place alongside “common prosperity” in the lexicon of Xi Jinping …
Much ink has been spilled on the Spring Budget this week. For our part, we discussed the macroeconomic and financial market implications in our UK Drop-In and in our UK Economics Focus . The main takeaway is that while the Chancellor was desperate to use …
Activity holding up The second estimate of Korea’s GDP figures published this week confirmed that the economy grew by 0.6% q/q in the final quarter of last year. Encouragingly, the more recent monthly activity data suggest the economy made a decent start …
The latest IPF Consensus Survey shows that forecasters have upwardly revised their 2024 expectations, which are now more in line with our view. Stronger rental growth help drive that improvement and that has also pushed up returns across the forecast …
US commercial real estate prices may have fallen 15% from their peaks – led by a 30% plunge in office values – but this isn’t over. High interest rates, slow growth and a tough lending environment will continue to weigh on investor demand. But is a …
RBI is stepping in to prevent currency appreciation The Indian rupee has stood out so far this year as being one of only a small handful of EM currencies to have strengthened against the US dollar. (See Chart 1.) Chart 1: Currencies vs. US$ (% change, …
German Industrial Production (January) January increase but activity still weak The rise in Germany industrial production in January reverses only a fraction of the previous falls and does not change our view that the sector will struggle this year. The …
Household spending could be at a turning point The big news out of Australia this week was that the economy just barely managed to limp along last quarter. To be sure, the 1.5% annual rise in real GDP in Q4 was broadly in line with what the RBA had …
The recession that probably wasn’t Developments over the past week have increased the chances that the Bank of Japan will end negative rates in March rather than our current forecast of April. For a start, following several weeks of discouraging data on …
The good news is our China team has solved a nagging question about Chinese construction: why has it held up so well, even as sales and starts have collapsed? The bad news is that their conclusions point to a painful adjustment with massive implications …
7th March 2024
Given our view about monetary policy, we expect government bond yields in some developed markets such as the UK to fall markedly this year. In some other places, like the euro-zone, we doubt central banks will have much impact on yields. And we see scope …
We doubt that ECB policy will have much impact on German bond yields this year and next – if anything, risks are skewed to the upside. But the outlook may be a bit brighter for Italian bonds, and we expect the Italian-German spread to narrow. The yield of …
This year is a particularly busy one for elections in the emerging world, and these votes raise the risk of fiscal giveaways that worsen public debt dynamics. We think the risks are greatest in Tunisia, followed by South Africa and Romania. Elsewhere, …
Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
The preliminary China trade data released today suggest that China’s commodities demand was robust in the first two months of the year. Crude imports should stay elevated, but iron ore and coal imports may trend lower over the next few months. Growth in …
The raft of policy reforms announced by the Egyptian authorities yesterday, including a devaluation of the pound and new IMF deal, has put the economy on a path out of its current crisis. There have been false dawns before, but we think that momentum is …
Imports set for stronger gain in first quarter The January trade data point to a potentially larger drag on first-quarter GDP growth than we had assumed, albeit mainly because imports look to have been stronger than previously believed. In nominal terms …
Improvement in trade balance may not be a good thing Although the economy appears to have received a large boost from net trade at the start of 2024, the plunge in imports does not bode well for domestic demand and raises the risk that an inventory …
We discussed the implications of Russia’s election in a Drop-In on Tuesday, 12 th March. Click here to watch the 20-minute online briefing. The outcome of Russia’s presidential election taking place over 15-17 th March is not in doubt: Putin is all but …
Lagarde likely to dash remaining hopes of April rate cut The ECB decision to leave rates unchanged and the key messages in the press release were in line with expectations. In the forthcoming press conference we suspect that Christine Lagarde will kill …
Inflation drops, Banxico on course for rate cut this month The drop back in Mexico’s headline inflation rate to 4.4% y/y in February, alongside the weakness of the latest activity data, leaves Banxico on course to cut interest rates at its next Board …
Rates on hold throughout 2024 Bank Negara Malaysia (BNM) left its overnight policy rate on hold (at 3.0%) today, and hinted in its statement that it was in little rush to change interest rates any time soon. This supports our view that the policy rate …
End of mortgage rate fall slows prices The smallest month-on-month increase in house prices since September suggested that the boost to house prices from the decline in mortgage rates since last summer is over. With mortgage rates now edging up, house …
Export volumes hit record high China’s export values rose y/y at the fastest rate since May, with export volumes reaching a record high. We doubt the sustainability of this strength, however, since exporters now have more limited scope to reduce prices to …
The surge in the terms of trade explains some of the resilience of Australia’s economy as it has probably encouraged the government to spend more money than it would have done without soaring mining tax revenues. The key point though is that Australia’s …
This page has been updated with additional analysis since first publication. Regular wage growth will receive a boost in Q2 While the jump in overall wage growth in January was entirely driven by volatile bonus payments, regular wage growth will receive a …
6th March 2024
The net giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may help end the recession before an election later this year. But fiscal policy is still being tightened in 2024/25 and that tightening will continue after the election and will probably …
Today’s UK budget announcement contained no major surprises, leaving our forecast for the 10-year Gilt yield to fall further this year and sterling to struggle against other major currencies intact. Our UK Economics service is the place to look for the …
The January JOLTS release showed no evidence of a resurgence in labour demand. With forward looking indicators still pointing to a sharp easing in wage growth, there is little to suggest that the labour market will drive renewed inflationary pressures. …
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
The announcement of an agreement over a new IMF package for Egypt, coming on the back of the rate hike and devaluation earlier today, represents a shift towards more orthodox policymaking. While it is still early, Egypt now appears to be on the path out …
China’s government is planning further fiscal loosening and hinting at rate cuts this year, with the aim of boosting economic activity. We think the policy backdrop is sufficient to support commodities demand this year, although for metals used in …
Bank gives little away The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that the Bank is gaining greater confidence that inflation is moving in the right direction. We …
NBP keeps rates on hold, limited window for rate cuts this year The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and the scope for monetary easing this year looks relatively limited. We still think there is a …
