BoT tightened in 2023 policy despite weak data The Bank of Thailand surprised most economists and financial markets last year when it continued to tighten monetary policy even as inflation dropped well below target (see Chart 1) and growth slowed. Chart …
5th April 2024
While we learnt this week that inflation in the euro-zone fell a bit more than expected in March, to 2.4%, some commentators pointed out that the monthly increase was quite high, at 0.8%, and was even higher than in February (0.6%). However, most of the …
Identifying pockets of risk amid the optimism The positive news on India shows no signs of abating. The final composite PMI reading for March released this week rose to a 90-month(!) high. (See Chart 1.) That was underpinned by strength in both the …
Fiscal risks building in parts of CEE The larger-than-expected 2023 budget deficit figures released across parts of Central Europe this week underline our concerns about the fiscal challenges facing the region, particularly in Hungary. The better news …
Whether you’re a monetarist or not, it’s hard to ignore the big rise in the annual growth rate of M4 money coming out of the pandemic being a harbinger of the surge in CPI inflation. Shortly before CPI inflation surged from 0.3% in November 2020 to a …
PBOC eases auto loan policy to stimulate demand On Wednesday, the PBOC scrapped the regulatory minimum down payment for car loans on all passenger vehicles, giving banks the freedom to offer higher loan-to-value ratios. This latest attempt by the central …
No rush to cut rates The minutes of the RBA’s March meeting, published earlier this week, revealed that the Bank has now abandoned its tightening bias. Indeed, for the first time since May 2022, the Board didn’t discuss the option of raising rates higher. …
Tankan points to persistent strength in inflation Bank of Japan Governor Ueda today provided the strongest hint yet that the Bank is keen to hike interest rates further in the second half of the year. He noted that the probability of attaining a …
The threat of an outright conflict between Iran and Israel is at its highest point since the war in Gaza began. A full-blown war would not only have major repercussions for Iran’s own economy, but the spillovers into oil markets could have a significant …
4th April 2024
Brazil: Copom signals it will tread more cautiously The minutes to the Brazilian central bank’s meeting last week (at which it cut the Selic rate by 50bp, to 10.75%, as expected) confirmed our view that Copom will soon start to slow the pace of easing. …
28th March 2024
The US dollar has eked out small gains against some major currencies so far this week, leaving the DXY index just below 105 at the time of writing. During an otherwise quiet week, the February PCE data release out of the US tomorrow may add to the …
Zambia moves closer to full debt restructuring deal Zambia secured an debt restructuring deal with private bondholders this week. It looks like it has the seal of approval from official creditors, paving the way for the country to finally exit default. …
The economy made a strong start to 2024, but that was partly due to the end of strike disruption and the record warm winter. We expect GDP growth to slow sharply next quarter, persuading the Bank of Canada to start its loosening cycle in June. GDP surges …
Confirmation that France’s budget deficit was much higher last year (5.5%) than assumed in the government’s 2024 budget (4.9%) adds to concerns about Europe’s public finances. Indeed, Germany, France and Italy are all likely to be tightening fiscal policy …
China is driving the global renewable rollout… It came as no surprise to see China loom large in the International Renewables Energy Agency’s provisional statistics on renewable energy capacity in 2023. As shown in Chart 1, China added more than twice as …
Hungary shifting down the monetary easing gears The post-meeting communications from Hungary’s central bank (MNB), after it slowed its easing cycle on Tuesday , support our view that the pace of rate cuts is set to slow further over the coming months. The …
Everyone knows that one reason why the recession was so small and short is because higher interest rates had a smaller drag on the economy than in the past. But it’s less appreciated that future interest rate cuts may not boost the economy as much either. …
Streets of Baltimore The collapse of the Francis Scott Key bridge, which was hit by an out-of-control container ship this week, could result in a lengthy disruption to the Baltimore port. Nevertheless, since that port is the 15 th largest in the country, …
CEO visits underscore China’s continued appeal President Xi held a rare, highly-publicised meeting in Beijing with a visiting US business delegation this week. The optimistic take is that, facing economic weakness and collapsing FDI, China’s leadership is …
Egypt policy shift to get final seal of approval Egypt’s recent policy shift has been met with a lot of optimism among investors but it will not be painless and economic growth will be sluggish this year and next. And there is a lot more work to do to …
Inflation risks linger on At first glance, it would appear that much of the data released this week went the way the RBA was hoping. First, we found out that CPI inflation is on track to undershoot the Bank’s expectations this quarter. Second, retail …
BoJ won’t provide much help in supporting yen With the yen hitting a 34-year low of just under 152 against the dollar on Wednesday, the Ministry of Finance’s Masato Kanda noted that the government will respond resolutely to “excessive” yen weakness and …
Singapore’s core inflation not as sticky as it seems Singapore experienced one of the biggest post-pandemic inflation spikes in Asia. Core price pressures even now are among the highest in the region. (See Chart 1.) Chart 1: Core Inflation (%, y/y) …
External position looks secure Balance of payments data released this week show that India’s current account deficit narrowed from US$11.4bn (1.3% of GDP) in Q3 2023 to US$10.5bn (1.2% of GDP) in Q4. Taking a longer perspective of the four quarters to Q4, …
The US dollar has bounced back from its brief drop after the FOMC’s policy announcement and Chair Powell’s press conference, and is ending the week stronger across the board. To some extent that is surprising: the FOMC’s overall message arguably had a …
22nd March 2024
Has Tusk changed the tide in Poland? The 100 day milestone for Poland’s new government is marked today. From an economic perspective, we think there are three key points worth highlighting about how the outlook has and hasn’t changed. First, the release …
Further attacks by Ukraine on Russia’s oil refining sector were the major driver of crude prices this week with the price of Brent remaining firmly above $85 per barrel. Reports that the US had urged Ukraine to halt the strikes may have tempered the price …
LGFVs stepping up land purchases Despite the collapse in home sales, construction activity has retreated only modestly in recent years. We think the bulk of the correction has yet to come , with construction activity likely to halve by the end of this …
Argentina: another strong budget outturn Coming hot off the heels of last week’s successful debt swap, there was further good fiscal news in Argentina this week. Budget data showed another large primary surplus in February (albeit smaller than January’s …
SARB: will rate cuts ever come? The South African Reserve Bank (SARB) looks set to leave interest rates on hold at 8.25% next week and it now seems an easing cycle won’t begin until after May’s election, the outcome of which could even persuade the SARB …
The Fed wasn’t as hawkish as we had expected this week and, assuming the recent upturn in core inflation proves temporary, there is still a good chance that interest rate cuts will begin in June. Fed content with more gradual inflation fall Despite recent …
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
The Bank of England was never going to do anything except keep interest rates at 5.25% this week, but we and the financial markets were surprised that it took further steps in preparing the ground for the first interest rate cut. (See here .) As a result, …
Data released this week broadly support our view that the euro-zone economy will have stagnated in Q1. The Composite PMI rose a touch in March but remained consistent with GDP flatlining. And the ZEW painted a similar picture. Admittedly, we also learned …
Political uncertainty in Vietnam on the rise One of Vietnam’s key appeals to foreign investors is its political stability relative to other low-income countries in the region. (See Chart 1.) Along with low labour costs and an improving business …
Election season is here After a seemingly interminable wait, the Election Commission this week finally confirmed the dates for the general election. Almost a billion people are eligible to vote, making it the largest expression of democratic principles …
Rate cut in August remains plausible At its meeting earlier this week, the RBA dialled down its hawkish bias, with Governor Bullock noting that “the risks to the outlook are finely balanced”. However, her statement may well have been a little premature. …
Run-off in bond holdings will accelerate The Bank of Japan didn’t disappoint at this week’s meeting as the Bank ended negative interest rates, Yield Curve Control and its ETF purchases. Even so, 10-year JGB yields declined and the yen weakened to as low …
Egypt: appreciation for the CBE’s policy shift After the “Super Wednesday” devaluation on 6 th March, the pound has appreciated over the past week or so and it appears as though officials have (so far) stuck to their pledge to let the currency move more …
21st March 2024
Stronger-than-expected CPI and PPI data out of the US were the key catalysts for the greenback’s rebound this week, as investors continued to pare back their expectations for the Fed to cut its policy rate. These expectations will be put to the test next …
15th March 2024
A good and bad week for Milei There was renewed optimism about Argentine president Javier Milei’s economic plans earlier this week. The government secured a successful swap of local currency debt (equal to about $50bn), extending the maturity profile of …
It was generally a strong week for commodity prices despite the US dollar nudging higher. Oil prices rose by ~3% after the IEA revised its forecasts towards a tighter oil market and following the attacks by Ukraine on Russia’s oil refineries. While, in …
Pressure building in Turkey ahead of the election Pressures on Turkish policymakers are building ahead of the local elections on 31 st March as capital inflows have slowed and FX reserves are falling again. We doubt the central bank will hike interest …
Fed to stress caution amid inflation uncertainty We still expect the Fed to cut interest rates in June, although we don’t expect officials to provide a strong steer either for or against at next week’s FOMC meeting. The updated Summary of Economic …
Households are offsetting the impact of high interest rates by paying down less of their debt. While that has helped the economy to avoid recession, it also suggests there will be less of a boost from interest rate cuts than in the past, because …
Nigeria eyes up return to Eurobond market The Nigerian naira’s latest devaluation has taken it closer to fair value and, with investor sentiment towards Nigeria improving, the government is lining up a fresh Eurobond sale. That may help to plug the budget …
Campaign will boost demand but also supply On Wednesday, the State Council published an action plan to promote the large-scale upgrading of equipment and trading-in of consumer goods. We already discussed the implications of the latter in our previous …
January’s GDP figures received the most attention this week, mainly as they suggested the economy may have exited recession. (See here .) But while there was better news on demand, the same cannot be said for the supply-side of the economy. The rise in …
CBC on hold despite booming economy Despite the booming economy, inflation in Taiwan has been falling back in recent months. Accordingly, we expect the central bank (CBC) to leave interest rates unchanged at its meeting on Thursday. GDP growth has …
ECB postpones some big decisions After 15 months of waiting, this week the ECB finally published the outcome of its operational framework review. We set out the key points here . In the near term, the status quo will largely be maintained, with the …
