Argentina and the IMF to tango again? An IMF delegation is set to meet with Argentine officials in Buenos Aires today to discuss the country’s $44bn program that – in the Fund’s words – had “ gone off track ” in August under the previous Peronist …
5th January 2024
Data released this week support our key calls on the euro-zone for the upcoming year. First, the economy looks likely to be weaker than most anticipate. Although the final euro-zone Composite PMI for December, released on Thursday, was revised up from the …
PSL injection to provide modest lending boost While bond yields in developed economies have regained some ground this week, the opposite has been the case in China, with the 10Y CGB yield dropping to a near four-year low of 2.52% today. This suggests …
Remittance inflows to remain robust The World Bank reported in its latest Migration and Development Brief that India remained the world’s largest recipient of remittances in 2023. Remittances jumped to US$125bn (3.4% of GDP) last year, from US$111bn in …
Manufacturers keep losing market share overseas Just as we predicted a few months ago, the outperformance of Japan’s stock market relative to US stocks has unwound as the yen has strengthened in recent weeks. (See Chart 1.) Chart 1: Yen/Dollar vs. …
A cooling economy will give the RBA cover Earlier this week, the Australian Financial Review published its quarterly survey of economists. By and large, the perception amongst forecasters seems to be that the RBA will retain its hawkish bias for the …
Egypt tightening the purse strings as IMF deal nears In Egypt, 2024 started off with a raft of price hikes as officials seek to tighten fiscal policy and warm relations with the IMF ahead of an anticipated enhancement of the current deal. The increases …
4th January 2024
Zambia secures latest IMF tranche as debt talks drag Zambia received the latest $187m tranche of its IMF deal this week as it continues to make progress with its fiscal performance despite a tough external backdrop. This may help to push long-running debt …
22nd December 2023
Data this week showed that the population jumped by 430,000 in the third quarter alone, almost as much as the official full-year permanent resident target of 465,000. Nonetheless, the November CPI data showed a much-needed slowdown in rent inflation, …
This week saw a renewed attempt from some Fed officials to push back against market expectations for interest rate cuts but, with core PCE inflation running at an annualised pace of below 2% over the past six months, this final flurry of hawkishness isn’t …
The final week ahead of the holiday period is drawing to an end with the US dollar somewhat weaker across the board. Unlike last year, the BoJ’s final policy meeting proved a(nother) damp squib, with policymakers equivocating somewhat on the timing of …
Argentina: Milei takes a chainsaw to the state Having announced large cuts to public spending as well as a steep devaluation of the peso last week, this week President Milei took a first big step towards fulfilling his campaign promise of reducing the …
Below-consensus growth Most countries in Asia will record faster economic growth next year, but 2024 still promises to be a difficult year for the region. Exports from the region have rebounded in recent months, but this is unlikely to last, if as we …
Fiscal rules no game changer for CEE public finances EU finance ministers agreed on a new set of fiscal rules this week, but this doesn’t change our view that concerns about public debt dynamics will grow in parts of Central and Eastern Europe (CEE) over …
PBOC moving cautiously to ease further The Loan Prime Rates (LPR) were left unchanged for a fourth consecutive month on Wednesday. But today’s coordinated reductions in commercial bank deposit rates suggest that the PBOC is still on an easing path. Lower …
Revised data showing that real GDP contracted by 0.1% in Q3 has fuelled the debate as to whether the UK entered a technical recession over the second half of this year. But focussing on small falls (or increases) in GDP misses the point: the bigger …
Will the RBI follow the lead of other central banks? India’s economy has held up exceptionally well in 2023 due to strong government spending and investment. Meanwhile, timely data show a renewed surge in food prices. This is a worry for the RBI as the …
Wage growth poised to lose momentum Earlier this week, we found out that Westpac’s leading index edged up once again in November and is consistent with a pickup in economic growth over the next six months. That raises the risk that labour demand will be …
Policy rate hike in January now looking unlikely It came as a surprise to no one that the Bank of Japan left policy settings unchanged at this week’s meeting . Even so, yields on 10-year JGBs plunged by nearly 10bp since then, whereas 10-year Treasury …
Red Sea crisis adds to Egypt’s external strains Attacks on cargo ships in the Red Sea have prompted major shipping companies to reduce their traffic through the Suez Canal. This deals a blow to Egypt’s hard currency revenues when it desperately needs …
21st December 2023
ECB is talking but investors aren’t listening This week brought more pushback from ECB policymakers against expectations for rates to start falling in the first half of next year. But investors have largely ignored them, and arguably for good reason. …
Household net worth fell in the third quarter, although the recent resurgence in bond and equity prices means that should soon be reversed. It is too soon to sound the all-clear for households’ finances, however, given that the debt service ratio is set …
15th December 2023
The Fed’s shift away from its “higher for longer” messaging (and European central banks attempts at maintaining a hawkish stance) pushed relative interest rate expectations against the US dollar, leaving it weaker against nearly all major currencies this …
Ethiopia restructuring like to drag on after default Ethiopia’s sovereign default appears imminent after the government missed a coupon payment on its 2024 $1bn Eurobond. The prominence of Chinese and private bondholders on the continent continue to …
Argentina’s fiscal measures: mission impossible? With Argentina’s economy deep in crisis territory, the new Milei administration wasted no time in announcing a stabilisation plan for the economy this week. This included a steep devaluation of the peso and …
Russia’s economic hit: just how large? Analysis by the US Treasury Department published this week gained a lot of attention for highlighting that Russia’s economy is now 5% smaller due to the war and sanctions than it otherwise would have been. The blog …
Fed & markets catching up with inflation reality The Fed’s embrace of interest rate cuts next year is understandable when the latest data suggest that core PCE inflation is rapidly closing in on the 2% target. The plunge in expectations in the aftermath …
If the main objective this week of the Bank of England’s Monetary Policy Committee (MPC) was to keep interest rates unchanged at 5.25% and avoid fuelling even more bets on rate cuts, then it looks like a case of mission accomplished. Even so, the Bank’s …
ECB is not for turning… yet In contrast to the Fed, but similar to the Bank of England, this week the ECB pushed back against expectations that it would start to cut interest rates in early 2024. (See our Drop-in here .) In the ECB press conference, …
Vietnam in the “lean US camp” Vietnam this week played host to President Xi Jinping of China and in doing so became the only country in the world this year to have received state visits from the leaders of both the US and China. During Xi’s visit, the …
Market capitalisation closes in on US$4trn The latest leg up in the Sensex triggered by the announcement of the BJP’s thumping victories in three state elections has continued into this week, helped by a broader rally in global equities following the …
“Big Australia” isn’t going anywhere We found out yesterday that population growth in Australia hit a record high of 2.4% y/y in Q2, as the post-pandemic boom in net overseas migration continued apace. (See Chart 1.) Moreover, we estimate that, allowing …
Services sector running red-hot The strong Q4 Tankan released this week adds to the case for the Bank of Japan to abandon ultra-loose monetary policy. Of particular importance is that the Tankan shows mounting signs of overheating in the services …
Weak sentiment isn’t the main headwind China’s leadership gathered earlier this week for the Central Economic Work Conference (CEWC), which is held every December to discuss the economic targets and policy settings for the following year. The …
Egypt: Year one of al-Sisi’s third term will be crucial Figures over the weekend showed that inflation in Egypt slowed but, with President al-Sisi all but confirmed to be re-elected, policy moves over the coming weeks will dictate how inflation develops …
14th December 2023
The greenback has rebounded this week on the back of another batch of robust data out of the US economy, including today’s non-farm payrolls report . That stands in sharp contrast to the continued weakness in the euro-zone, where data on the German …
8th December 2023
Markets call the Fed’s bluff on higher for longer Markets abandon higher for longer The Fed may not be quite ready to abandon its tightening bias at this week’s FOMC meeting, but the markets are no longer buying its “higher for longer” mantra. Markets …
The Bank of Canada this week reiterated that strong immigration is putting upward pressure on inflation because housing supply is failing to keep up. Yet the Bank surely can’t be oblivious to the negative impact of high interest rates on construction. …
All eyes on Essequibo Tensions between Venezuela and Guyana escalated this week after Venezuelans approved all five questions in last Sunday’s (rubberstamp) referendum, including the establishment of a new state in oil-rich Essequibo, internationally …
Kenya jacks up rates to support the shilling Kenya’s central bank (CBK) delivered a chunky 200bp interest rate hike, to 12.50%, on Tuesday with officials making clear that the move was an effort to support to the shilling. The statement said that “there …
What we’ve learned from the State Tribunal drama The debate around whether Polish central bank governor Glapinski could be brought before the State Tribunal and be removed from his post took more twists and turns this week. But at this stage the events …
The further drop in UK market interest rate expectations this week means that investors now think the first interest rate cut will happen in June next year instead of August. And investors are now pricing in an 80% chance of a cut by May. That has led to …
Note: We’ll be discussing the Fed, ECB and Bank of England December decisions and the policy outlook for 2024 in an online briefing on Thursday, 14 th December . Click here to register for the 20-minute session. Last week we brought forward the timing of …
Faith in the state backstop as strong as ever Earlier this week, Moody’s downgraded the outlook on China’s sovereign credit rating from “stable” to “negative” and made similar changes to its ratings outlook for Chinese banks, local governments and …
Falling fertility in Korea Recently released figures show the fertility rate (the number of babies expected to be born per woman during her lifetime) in Korea fell to a new all-time low of just 0.7 in the third quarter of the year. This is the lowest …
Sensex surges as BJP wins big in state elections The financial market reaction to the announcement of the BJP’s victory in three state elections is perhaps an indication that investors are confident that next year’s general election will deliver another …
Services inflation continues to accelerate The economic data released this week seem to vindicate the Bank of Japan’s caution when it comes to abandoning ultra-loose monetary policy. For a start, the timely Tokyo CPI showed that inflation slowed from …
Not higher, not longer Earlier today, the Treasury and the RBA published an updated Statement on the Conduct of Monetary Policy. The revised statement clarified that the RBA’s objective is to return inflation to the mid-point of its 2-3% target. That led …
Egypt: aftermath of election to prove pivotal Next week Egyptians will head to the polls to vote in the presidential election and, while it is widely expected President al-Sisi will be re-elected, the vote could act as a trigger for policy moves that are …
7th December 2023
The greenback’s grind lower has continued this week amid falling US Treasury yields and strong appetite for risk. While comments from numerous Fed speakers (including Chair Powell today) continued to point to an extended pause, PCE data and November’s …
1st December 2023
