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More ECB rate hikes to come Today’s 50bp rate hike came alongside hawkish comments which are consistent with our view that the deposit rate will peak at 3%, significantly higher than the consensus forecast and a touch above what was priced into the …
15th December 2022
The SNB’s 50bp rate hike, to 1.00%, was in line with expectations but, more importantly, the Bank also raised its medium-term inflation forecast slightly, hinting that policymakers believe future hikes may be needed. We now think a further 25bp rate …
Today’s 25bp rate increase by the Norges Bank, to 2.75%, takes it very close to the end of its tightening cycle. But we think the Bank is a long way from pivoting to loosening policy. At its meeting in November, the Bank signalled that it would raise …
SNB hikes by 50bp, hints at more to come The SNB’s 50bp rate hike, to 1.00%, was in line with expectations but, more importantly, the Bank also raised its medium-term inflation forecast slightly, hinting that policymakers believe future hikes may be …
Norges Bank tightening nearly over, but pivot a long way off Today’s 25bp rate increase by the Norges Bank, to 2.75%, takes it very close to the end of its tightening cycle. But we think the Bank is a long way from pivoting to loosening policy. The …
October’s fall in output sets the tone for a bleak Q4 Industrial production in the euro-zone declined by 2.0% m/m in October with all the largest economies showing a reduction in output. While output held up better than we had expected in Q3, this is …
14th December 2022
Core inflation likely to come down more slowly than Riksbank hopes The increase in Sweden’s measure of core inflation to 8.0% was a touch below expectations but it still marks a new 31-year high. With CPIF inflation having risen to well above the …
Recession still likely, despite improvement in sentiment The further recovery in the ZEW in December confirms that sentiment in Germany has improved a bit, but it remains at a very low level and we still think Germany is now already in a recession. The …
13th December 2022
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
9th December 2022
The end of the cycle is nigh… Next Thursday will see the last scheduled meetings of the year for several European central banks. The ECB and BoE will grab most of the attention, but the SNB and Norges Bank will also be in action and we expect both to …
Fall in inflation won’t stop 25bp Norges Bank hike The declines in headline and core inflation in November won’t stop the Norges Bank from raising interest rates by 25bp next week. But they support our view that the tightening cycle is very nearly over. …
We expect the Norges Bank to raise its policy rate by 25bp next week, to 2.75%. Signs that the economy is weakening by more than expected might encourage policymakers to nudge down their interest rate forecast. But we still suspect that the policy rate …
8th December 2022
The Bank is most likely to slow the pace of rate hikes to 50bp next week. But we forecast a further 100bp of hikes next year to a peak deposit rate of 3%. The key principles guiding QT will be that it is steady and slow. There is a case for the ECB to …
The SNB is likely to look through the recent fall in inflation and hike rates by 50bp next Thursday, to 1.0%, in line with market expectations. We now think that this will be the end of the tightening cycle. Recall that the SNB raised its policy rate by …
German industrial output resilient but still set for contraction German industrial production once again held up better than expected in October. But this resilience was driven partly by a recovery in construction which tends to be volatile. We still …
7th December 2022
German industrial output resilient but still set for contraction German industrial production once again held up better than expected in October. But this resilience was driven partly by a recovery in construction which tends to be volatile. We expect …
We are nudging up our euro-zone GDP forecast slightly to reflect the small improvement in the economic data in recent months and an easing of the energy crisis. Nonetheless, we still think euro-zone GDP will contract much more than the consensus …
6th December 2022
Households cutting back amid high inflation The sharp drop in euro-zone retail spending in October is consistent with our view that – notwithstanding the slight uptick in some business surveys recently – the economy is entering recession. With …
5th December 2022
Recession likely to be shallower We had been forecasting the Swiss economy to contract by 1% in 2023 but, with recent data suggesting that it is holding up better than we had anticipated, we now think GDP will be unchanged in 2023 compared to this year. …
2nd December 2022
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
Labour market to soften from here, but remain tight The record-low euro-zone unemployment rate of 6.5% in October is likely to be as good as it gets for the region’s labour market. But the rise in unemployment from here will probably be small. The …
1st December 2022
Stable inflation keeps pressure off SNB The low inflation rate in November supports our view that the Swiss National Bank will not need to raise interest rates much further in the current cycle. Indeed, there is a growing chance that policymakers raise …
Peak headline inflation won’t stop ECB hiking Euro-zone inflation may now be past its peak but with the core measure unchanged in November and set to remain well above 2% next year, we expect the ECB to hike rates by 50bp or 75bp in December. The fall …
30th November 2022
Peak headline inflation won’t stop ECB hiking Euro-zone headline inflation may now be past its peak but with core inflation unchanged in November and likely to stay well above 2% throughout next year, we expect the ECB to press on with another 50bp or …
Headline inflation close to a peak, but core may rise further November’s fall in headline inflation in Germany and Spain suggest that the euro-zone headline rate will come in lower than we had anticipated when it is published tomorrow, and is now close …
29th November 2022
Small improvement in sentiment and fall in inflation The small increase in the EC Economic Sentiment Indicator (ESI) for November suggests that prospects for the euro-zone economy may no longer be deteriorating. We still expect a recession, but it is …
Small improvement in sentiment and fall in headline inflation The small increase in the EC Economic Sentiment Indicator (ESI) for November suggests that prospects for the euro-zone economy are no longer deteriorating. While we still expect a recession, it …
Growth set to slow in Q4 After increasing by 0.2% q/q in Q3, the Swiss economy is set to slow in Q4, although any recession will probably be shallower than we had previously expected, and shallower than in neighbouring Germany. The 0.2% q/q increase in …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
25th November 2022
Riksbank has further to go This week’s 75bp hike by the Riksbank was in line with expectations, and the Bank’s new projections took its policy rate forecast closer to ours. (See here .) The higher interest rate path – despite Stefan Ingves’s suggestion …
ECB account gives little away on next steps There are no significant clues in the account of the ECB’s October meeting about the pace and extent to which the Bank will raise interest rates in December and next year. A 50bp hike seems most likely next …
24th November 2022
This morning’s 75bp increase in the Riksbank’s policy rate was in line with expectations, and both the press statement and Monetary Policy Report are consistent with our view that policymakers will raise rates to a peak of around 3% next year. Beyond …
Small improvement in business climate won’t prevent recession The increase in the Ifo Business Climate Index in November does not change the big picture that the German economy is likely to contract in Q4. November’s uptick in the Business Climate Index …
Tightening cycle not yet finished This morning’s 75bp increase in the Riksbank’s policy rate was in line with the consensus and market expectations while the press statement is consistent with our view that policymakers will raise rates to a peak of …
We think that headline inflation in the euro-zone is nearing its peak and will begin to fall quite sharply early next year. But the core rate will probably peak a little later and decline more slowly. Data released on Monday showing a sharp fall in German …
23rd November 2022
Contraction in Q4 very likely, inflation nearing a peak The flash PMIs for November add to the evidence that the economy will contract in Q4. The price indices suggest that inflation will soon peak, but they remain extremely high by past standards. The …
Contraction in Q4 very likely, inflation nearing a peak The flash PMIs for November add to the evidence that the economy will contract in Q4, with the downturn in the services sector intensifying. The price indices suggest that inflation will soon peak, …
Italy’s draft 2023 budget confirms that, for now, the new right-wing government is committed to fiscal responsibility. As a result, the risk of turbulence in BTP markets has fallen, but it remains high given Italy’s large public debt and the prospect of …
22nd November 2022
Wage growth in Germany will be far lower next year than some headlines about recent wage deals suggest, but it will still rise above levels compatible with core inflation of 2%. German unions demanding and, in some cases, securing pay rises in the region …
18th November 2022
Norway one of Europe’s stronger performers Norway’s Q3 GDP data, published on Friday, were much stronger than expected, consistent with our view that it will be one of Europe’s best performers in the coming quarters. The 0.8% q/q increase in mainland …
Official data to fall into line with surveys We doubt that the recent strength in some of the official euro-zone activity data will last. GDP posted a small expansion in Q3, whereas both we and the consensus had expected zero growth. (See here .) And …
With inflation still more than five times the Riksbank’s target, Stefan Ingves may be tempted to end his marathon stint as Governor with another 100bp rate hike. But we think the Bank is more likely to raise rates by 75bp, to 2.5%, while signalling more …
17th November 2022
Next year will be characterised by falling headline inflation, which should help to prevent interest rate expectations and bond yields from rising much further. But we also expect core inflation to remain above 2% for some time. As a result, we think …
Little sign of goods price pressures easing Final inflation data for October confirm that price pressures strengthened and became more broad-based. Unlike in the US and UK, there is little sign that goods inflation has passed its peak. While headline …
Euro-zone industrial production and GDP have been stronger than we had expected so far this year. Several factors have contributed to this, but one of them is the distortions to Ireland’s economic statistics. The picture in the rest of the euro-zone is …
16th November 2022
Recovery in sentiment won’t prevent recession The rebound in the ZEW and other sentiment indicators in November does not change the fact that the German economy is firmly headed for recession. The rise in the ZEW economic sentiment indicator from -59.2 …
15th November 2022
The eve of recession Euro-zone GDP growth slowed to just 0.2% q/q in Q3 and with all of the timelier surveys pointing downwards, the economy looks set to fall into recession in Q4. Nevertheless, surveys of firms’ hiring intentions suggest that the …
Rise in core inflation will keep Riksbank in hawkish mode Another bigger-than-expected increase in core inflation, to 7.9% in October, will keep the Riksbank focused on slowing demand when policymakers meet next week. We expect a further 75bp rate hike, …
Resilience won’t last much longer The unexpected strength of euro-zone industrial production in September was largely due to the rebound in vehicles production and distortions affecting Ireland’s data. While vehicle output may continue to recover in the …
14th November 2022
