Falling yields ease pressure on yield target Long-term government bond yields have retreated from their recent highs in both the US and Japan, with the yield on 10-year Japanese government bonds (JGB) now the lowest it has been since mid-March. (See Chart …
29th July 2022
Housing downturn to bite next year Australian Treasurer Jim Chalmers revealed on Thursday that the government now expects GDP growth to slow from 3.75% in the financial year that ended in June to 3% in 2022/23 and to 2% 2023/24. Our view is that the …
Gulf would benefit from possible OPEC+ policy shift Next week’s OPEC+ meeting may provide the first hints of the group’s production policy beyond September and if, as we expect, they opt to remove quotas, the Gulf stands to benefit most. On its current …
28th July 2022
Colombia’s gaping trade deficit Recently released trade data showed that, somewhat surprisingly, Colombia’s trade deficit widened in May. This was driven by two factors. First, having jumped in April due to the surge in global energy prices, exports …
22nd July 2022
CPI inflation has finally peaked but this will not be enough to prevent further large interest rate hikes from the Bank of Canada, especially as there is little evidence yet that the weakening housing market is weighing on construction. Some positive …
Default and devaluation in Ukraine Policymakers in Ukraine devalued the hryvnia this week and asked creditors to suspend debt repayments, which will free up funds for the government, but will add to inflation and increase balance sheet problems elsewhere …
Who would have thought that one of the most noteworthy parts of the news on the UK economy this week would be the government’s debt interest payments on its index-linked gilts? But with the battle to become the next Prime Minister reaching its final …
Fed officials may have briefly contemplated an even bigger hike following the news of the further surge in inflation in June but, with inflation expectations dropping back and the incoming news on activity softening, we expect another 75bp hike next week. …
Almost exactly ten years on from Mario Draghi’s “whatever it takes” speech, the ECB this week had another attempt at keeping a lid on peripheral bond spreads as it kicked off its first tightening cycle in more than a decade with a bigger-than-expected …
Tanzania, Kenya secure IMF funds The approval this week of an IMF package for Tanzania and the latest disbursement of a loan for Kenya will ease near-term balance of payments pressures. The Fund has pushed fiscal consolidation in both countries but, in …
Danish policymakers won’t be rushed Given that Denmark’s Nationalbank operates an exchange rate peg with the euro, it was no surprise to see it mirror the 50bp rate hike by the ECB on Thursday afternoon. If anything, the only surprise was that it took …
Remittances to support external position Remittances (money transferred by foreign workers back to their home countries) are an important and often underappreciated source of foreign currency for India. The RBI’s latest monthly bulletin released this week …
Further tightening over the coming months We published our latest Emerging Asia Economic Outlook this week, which contains our detailed forecasts. Here are three key calls from the report. Key Call 1: Growth will slow GDP figures due over the coming …
Developers likely to remain under pressure Last week, we discussed the threat to the housing market from the growing number of home-buyers halting their mortgage payments on uncompleted properties. Those boycotts have expanded and now affect at least 319 …
Commodity prices falling With the price of Brent crude oil and some other commodity prices having fallen in recent weeks, the inflation outlook has become a little more nuanced. However, domestic inflationary pressures are still strengthening. The drop in …
Mobility softening as virus cases surge New Covid-19 cases are now nearly twice as high as they were at the peak of the Omicron wave in February. The government has so far ruled out declaring another state of emergency, which makes sense as the number of …
Referendum a key step in president's power grab Tunisians will vote on proposed constitutional amendments on Monday, which could cement President Saied’s one-man rule. This may further deter foreign investment, compounding the country's economic problems. …
21st July 2022
The Bank of Canada justified its 100 bp interest rate hike on the basis that front-loading hikes has historically raised the chance of a “soft landing”. With the pace of house price declines already gathering pace ahead of that move, however, we are not …
15th July 2022
The bigger-than-expected rise in CPI inflation to 9.1% in June triggered speculation that the Fed might follow the Bank of Canada with a 100bp rate hike later this month. But the disappointing activity data and drop back in inflation expectations means …
Brazil’s ‘kamikaze’ social transfers Brazil’s fiscal rules took another blow this week after congress approved a constitutional amendment (the so-called ‘kamikaze’ amendment) that will expand social transfers. Spending will increase by 41bn reais, or 0.4% …
The latest population projections released by the UN this week reaffirm that demographics will support strong GDP growth in Sub-Saharan Africa in the long run. But similarly robust income convergence is likely to remain a pipe dream. Chart 1: Total …
Further tightening over the coming months Asian policymakers turned decidedly more hawkish this week, with the Bank of Korea raising interest rates by 50bp for the first time in its history on Wednesday. This was followed by unscheduled monetary …
The apparent race to the bottom on taxes slowed this week with the candidates that had pledged to loosen fiscal policy the most if they became Prime Minister either withdrawing from the contest or being eliminated in the first two rounds of voting by MPs. …
Monday went from bad to worse in Norway Monday proved a day to forget for Norwegian economists and football fans, with another increase in core inflation in the morning compounded by an 8-nil drubbing by England in the evening. Admittedly, the increase in …
Energy rationing now a growing downside risk Governments ramped up efforts this week to prevent possible shortages of energy during the winter. But with the threat of lower Russian gas flows increasing, there is a growing risk of energy rationing that …
New forecasts We published our quarterly European Economic Outlook this week, which contains all of our latest forecasts for the euro-zone, its member states and the ECB. In this Weekly , we will highlight three of our key calls on the economic outlook. …
Tax revenues surging The Bank of Japan’s flow of funds figures show that the budget deficit was a still large 6.6% of GDP in the year to March. (See Chart 1.) In fact, we estimate that the deficit widened sharply in Q1 to around 10% of GDP in …
INR settlement unlikely to see widespread use The RBI announced earlier this week that it has put in place a mechanism for international trade to be settled directly in rupees “in order to promote growth of global trade” and “support the increasing …
Labour market tightening rapidly On balance, the economic data released this week are consistent with our view that the Reserve Bank of Australia will tighten policy more aggressively than most anticipate. Admittedly, the further slide in consumer …
Mortgage boycotts bode ill for housing market Homebuyers across China are banding together to pause mortgage payments in response to construction delays on presold apartments. These mortgage boycotts have spread rapidly in the past week, affecting over …
Biden looks to Saudi for a helping hand US President Joe Biden will head to Saudi Arabia on Friday in an effort to mend a frayed relationship between the two countries and, probably, to push for the Kingdom to raise oil output more quickly. President …
14th July 2022
Political risks take centre stage Resurfacing political risks in some parts of Sub-Saharan Africa are another threat to recoveries that are already facing multiple headwinds, while at the same time raising the pressure on several governments to provide …
8th July 2022
With the June employment report suggesting fears of an imminent recession are misplaced, the Fed looks set to press ahead with aggressive rate hikes over the coming months. That said, recent sharp declines in commodity prices may, if sustained, soon give …
Argentina: not budging on the peso The UK isn’t the only country suffering tumult sparked by a finance minister’s resignation. Earlier in the week, Argentina was thrown into crisis after Martin Gúzman, the architect of the country’s latest IMF deal, …
Late last month, Xi Jinping reaffirmed the goal of achieving “around 5.5%” GDP growth for the year. The economy grew 4.8% y/y on the official figures in Q1 so faster growth is needed, on average, over the rest of the year. But it is almost certain that …
The falls in commodity prices this week point to some relief ahead for CPI inflation, but the Bank of Canada will be more focused on the rises in long-run inflation expectations and wage growth in the latest data, prompting a larger 75 bp interest rate …
MNB pulls out all of the stops to support the forint Hungary’s economy is now under substantial pressure. The forint has slumped and interest rates have been hiked aggressively. The only way through this is to accept the pain of a weak currency and …
25bp or 50bp? The Bank of Korea (BoK) has raised interest rates by 25bp five times so far this cycle, and further hikes looked nailed on for the central bank’s meeting on Wednesday. But whereas the consensus is expecting the BoK to step up the pace of …
Headwinds to strengthen in H2 The 0.7% m/m increase in Statistics Sweden’s GDP Indicator in May (data released on Wednesday) was stronger than we had expected and means the economy is all but certain to have grown more quickly in Q2 than the 0.6% q/q rise …
At time of writing, the euro is at its weakest in almost two decades, hovering above our end-year forecast of parity with the US dollar. As our Global Markets team explained earlier this week in the Capital Daily , the euro’s depreciation has reflected …
Weak economy may lead to looser fiscal policy There are two reasons why whoever fills Boris Johnson’s shoes as Prime Minister after his resignation this week is unlikely to significantly change the path of policy or the economy. First, all PM hopefuls …
Trade tweaks to have offsetting impact… Following the reintroduction of the sovereign gold bond scheme in June, the government has further stepped up its attempts to reduce gold imports, with the Finance Ministry hiking the basic import tax on gold from …
Capital spending plans strongest on record The most striking development in the Q2 Tankan was the surge in capital spending plans for the fiscal year that started in April. (See Chart 1.) Chart 1: Tankan Capital Spending Plans & Business Investment (% …
GDP growth looking solid this year The available evidence suggests that Australia’s households are so far shrugging off the headwinds from rising interest rates and falling real incomes. In last week’s Weekly , we discounted the weakness in the ABS’ …
A tough month for oil The price of Brent crude has fallen over the past month as global recessions fears have mounted but, while we think oil prices will fall over the next few years, they will remain elevated by recent levels. Since reaching a high of …
7th July 2022
Recent inflation figures out of the region and remarks from central bank officials point towards more, and potentially larger, interest rate hikes in most African economies over the coming months. A key exception is South Africa, where the latest …
1st July 2022
Petro picks a moderate The news that Colombia’s President-elect Gustavo Petro has chosen José Antonio Ocampo as his finance minister provides an early sign that Petro will govern as an economic moderate. Mr Ocampo is a well-respected economist, a former …
Threat from Turkey’s corporate FX debts grows Plans announced late last week by Turkey’s banking regulator add to the growing risks stemming from corporates’ large FX debt burdens. Late last Friday, the regulator announced that corporates will no longer …
Surveys of pricing intentions suggest that firms are confident of being able to both make recent price rises stick and to follow them up with further big increases over the next year. So the news that consumers have a slightly smaller savings buffer than …
We learned this week that consumer spending lost more momentum through the second quarter than initially thought, while the incoming survey evidence for June suggests the quarter ended on a weak note. Second quarter GDP growth weak, but not negative The …
