Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . CBE delivers, but more tightening still needed The Central Bank of Egypt (CBE) announced that it raised interest rates by 200bp, taking the overnight …
30th March 2023
Hawkish CNB will turn to cuts in Q3 The Czech National Bank (CNB) left its policy rate on hold today, at 7.00%, for a sixth meeting in a row, and we now think that rate cuts are unlikely until the second half of this year. The decision to leave rates …
29th March 2023
Higher interest rates continue to hurt housing more than consumer credit February’s money and credit data release suggests that higher interest rates were a further drag on lending in February, particularly in the housing market. That’s before the recent …
Further tightening unlikely The Bank of Thailand (BoT) raised its main policy rate today by 25bps, to 1.75%. While most analysts expect at least one more hike we think a sharp drop in inflation will allow the central bank to hold fire and that this marks …
Economic activity to remain weak this year Economic growth in Vietnam slowed sharply in the first quarter of 2023 and we expect economic activity to remain weak this year given the challenging external demand backdrop and the lagged impact of monetary …
Sharp slowdown in inflation will prompt RBA pause next week The further sharp fall in inflation coupled with the softness of consumption will probably prompt the Reserve Bank of Australia to pause its tightening cycle next week, though we still expect one …
MNB to keep rates higher for longer as inflation risks persist Hungary’s central bank (MNB) left its benchmark base rate on hold today (at 13.00%) and it is looking increasingly likely that this rate will not be cut until Q4 at the earliest. The phasing …
28th March 2023
Softness in retail sales raises risk of RBA pause The tepid rise in retail sales in February all but locks in a contraction in sales volumes in Q1 and adds to the case for the RBA pausing its rate hiking cycle next week. The 0.2% m/m rise in retail sales …
Resilience unlikely to last The fifth successive monthly increase in the Ifo Business Climate Index (BCI) in March suggests that Germany is still benefitting from falling energy prices and easing supply problems and has yet to feel the full effects of …
27th March 2023
Deposits flow from small to big banks The Fed’s H.8 release shows that deposits at small banks declined by $120bn, to $5456bn, in the week ending Wednesday March 15 th . (SVB collapsed on the preceding Friday afternoon.) Borrowings increased by an even …
24th March 2023
Investment weakening even before banking woes The 1.0% m/m fall in durable goods orders in February indicates that business equipment investment was continuing to weaken even before the banking turmoil arose. With business confidence likely to have taken …
Activity remains resilient, despite global banking issues The flash PMIs suggest the economy’s strong start to the year was sustained in March. But with the full drag from high interest rates yet to be felt, our hunch is still that the economy will enter …
Strong PMIs point to further ECB hikes The strong batch of euro-zone flash PMIs for March means it is now all but certain that the economy expanded in Q1 while both employment conditions and price pressures remained very strong. With the banking turmoil …
Too soon to conclude February’s rebound will be sustained The 1.2% m/m rise in retail sales volumes in February was much better than the consensus forecast of a +0.2% m/m rise (CE +0.5% m/m). That suggests the recent resilience in activity hasn’t yet …
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 …
23rd March 2023
Bank of England may not yet be finished in its battle with inflation The Bank of England followed the US Fed’s example by forging ahead today with a 25bps interest rate hike and signalling that it may not yet be finished in its battle with inflation. As a …
This webpage has been updated with a Table and Chart of the key figures. Stronger services inflation to keep Banxico tightening Mexico’s headline inflation rate dropped back by more than expected, to 7.1% y/y, in the first half of March but the further …
CBRT keeps rates on hold after one-off cut in February Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% today as policymakers kept monetary conditions loose to support activity after the earthquakes in February. Interest rates are …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
21st March 2023
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 …
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 …
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 …
20th March 2023
Confidence declining even before banking turmoil Some of the hit to confidence from turmoil in the banking sector will have been captured in the University of Michigan’s consumer sentiment provisional reading, which fell to 63.4 in March, from 67.0, but …
17th March 2023
Surveys point to renewed weakness soon The February industrial production data were marginally stronger than we had expected, with manufacturing output rising by a further 0.1% following the earlier 1.3% m/m surge in January. But with the surveys going …
CBR keeps Q2 rate hike on the table The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the …
RRR cut not a major easing move The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates …
Fed’s discount window lending hits record high The Fed’s weekly balance sheet publication (H.4.1) shows the scale of the stresses in the financial system, with outstanding emergency loans standing at $318bn yesterday, up from $15bn a week earlier. To put …
16th March 2023
ECB prioritises inflation fight The ECB’s decision to raise interest rates by 50bp today was the riskiest of the available options – we think investors would have understood if the Bank decided to pause. But the Bank has hinted that it could offer new …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. The rupiah has held up relatively well over the past week despite the turmoil in global …
Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
Investment outlook still gloomy despite upside machinery orders surprise The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, pointing to a …
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
15th March 2023
Just when financial markets appeared to be calming down after the SVB saga, the sell-off in European bank shares has resumed this morning due to concerns about the viability of Credit Suisse. At this stage, a huge amount is unclear, but a few points are …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But there is a risk …
Chancellor a bit more generous, but may fall short on long-term growth Today’s Budget has taken a bit of a backseat given the renewed worries about the global banking system, but the Chancellor was a bit more generous than we expected and we suspect he …
This report has been updated with additional analysis and a table and chart of key data. Inflation past its peak Saudi Arabia’s headline inflation rate slowed to 3.0% y/y in February on the back of an easing of both food and non-food inflation. We think …
A stronger start to 2023 Activity data for the first two months were broadly as expected, showing a jump in consumer spending coupled with modest gains in investment and industrial output. High-frequency data suggest that this recovery has continued in …
Strong inflation data unlikely to outweigh financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is …
14th March 2023
Wage growth eases despite labour market remaining tight The labour market remained tight in January. Even so, the Bank of England will breathe a sigh of relief as wage growth is easing. But the fallout from Silicon Valley Bank’s collapse suggests that the …
Fed, Treasury and FDIC lay out fire break for banking system In the wake of the collapse of Silicon Valley Bank ($215bn in assets) – which has been followed today by the demise of Signature Bank ($110bn) – the Fed, Treasury and FDIC have acted …
12th March 2023
Hours worked rise strongly despite employment slowdown Employment growth slowed sharply in February but the rise in hours worked suggests that the economy performed well last month. With the low unemployment rate putting upward pressure on wage growth, …
10th March 2023
Employment strong, but rest of report suggests 25/50bp Fed hike debate still unresolved While the above-consensus 311,000 increase in payroll employment last month confirms that the super-sized 504,000 gain in January wasn’t just a seasonal distortion, …
