The ECB’s hawkish conversion appears to be all but complete, with more officials this week joining the ranks of those calling for rates to rise in July – some more explicitly than others. Perhaps most notably, President Lagarde said on Wednesday that she …
13th May 2022
Following the 0.1% m/m fall in GDP in March , we now think the economy is halfway towards a recession (two quarters of falling output in a row). (See here .) If GDP was flat in April, May and June, then it would be 0.1% lower in Q2 relative to Q1. We’ve …
Rise in bond yields becoming a concern The rupee dropped to an all-time low against the US dollar this week but, as we noted here , the big picture is that it has held up much better than most other EM currencies over the past few months. One reason is …
Encouraging Q1 data, but headwinds growing The past week has brought a flurry of GDP releases, with most countries in Asia now having reported GDP data for the first quarter. (See here .) The figures have been encouraging. Despite a surge in virus cases …
Golden Week encouraging The strong rebound in mobility over Golden Week suggests that virus fears are waning for many consumers. After stay-at-home spring holiday periods in 2020 and 2021, last week finally saw a seasonal spike in mobility. (See Chart 1.) …
With inflation set to surpass 6% later this year, we expect real household disposable income to fall at the fastest pace since the early 1990s recession. (See here .) In response, Labor leader Albanese this week suggested that the minimum wage should be …
Risks to Egypt’s debt dynamics building Egypt’s draft budget for FY2022/23 showed that officials remained committed to keeping fiscal policy tight but, with debt servicing costs rising sharply and the currency set to weaken, there are increasing concerns …
12th May 2022
The slump in home sales in April, combined with the unexpected fall in hours worked, point to downside risks to GDP last month. While hours worked are set to rebound in May, there is likely to be much more weakness to come for the housing market. Home …
6th May 2022
Inflation at multi-decade highs The past week has shone the spotlight on the region’s inflation problem. April CPI figures showed that inflation rose to its highest level since 2000 in Colombia, since 1998 in Peru and since 1994 in Chile. Data out of …
Fed moving expeditiously The Fed’s policy statement this week warned that the FOMC is “highly attentive to inflation risks” and, as a result, in his post-meeting press conference Chair Jerome Powell acknowledged that “there is a broad sense on the [FOMC] …
Making sense of the Russian ruble’s rally While the Russian ruble has weakened against the dollar today, it has been on a remarkable rally in the past week or so – it is now at a two-year high of 66/$ and is twice as valuable against the dollar compared …
Green shoots in SA recovery repeatedly uprooted Recent flooding in a key province and warnings this week that power cuts could reach unprecedented levels are the latest in a long list of blows to South Africa’s economy that have repeatedly stifled any …
As anticipated, this week’s Monetary Policy Report was the third in a row in which the Bank of England revised up its inflation forecast over the next two years and revised down its GDP forecast. But it was the Bank’s dramatic cuts to its GDP forecast and …
Schlegel won’t rock the boat at the SNB The SNB announced this week that Martin Schlegel will succeed Fritz Zurbrügg as Vice-Chair of the Governing Board after Mr Zurbrügg retires at the end of July. Mr Schlegel is part of the furniture at the SNB, having …
Widening bond spreads a cause for concern We agree with investors that the ECB is likely to raise interest rates by 25bp in July. We first made the call in late March, when even the most hawkish members of the Governing Council were talking about hiking …
Backing off on tech regulation In a sign that officials are turning less hostile toward tech firms the Politburo last week pledged to “promote the healthy development of the platform economy”. This was followed by similar statements from the PBOC and …
Jump in inflation likely to be temporary Interest rates in the Philippines look set to rise soon, but the tightening cycle is likely be gradual. Figures published earlier this week show that headline inflation in the Philippines increased from 4.0% y/y in …
Power shortages pose upside risk to inflation The ongoing heatwave in India is prompting a surge in electricity demand that power companies are struggling to meet. (See Chart 1.) In fact, power shortages at peak times were more widespread in April than in …
High inflation print may spook consumers The rise in headline inflation to 2.5% in the Tokyo measure for April released today (see Chart 1) will be replicated in the nationwide data in two weeks’ time, lifting inflation above the 2% target for the first …
RBA starts the climb The RBA finally came around to our long-held view that rate hikes would be needed in the first half of this year and hiked rates at the meeting on Tuesday. Admittedly, we had expected the Bank to hike by 15bp, bringing rates back to …
Gulf to swoop in following EU-Russia oil ban With the EU set to phase out imports of Russian oil, we think there is a strong chance that the Gulf countries will eventually step in to raise output more quickly, providing a fillip to economic recoveries. …
5th May 2022
South Africa’s ANC: reforms gaining momentum? Momentum appears to be building within South Africa’s ruling ANC party to shift towards a more private sector-led economic model. But given its track record so far, we wouldn’t hold our breath. An ANC draft …
29th April 2022
An early preview of Colombia’s election Left-wing Gustavo Petro continues to lead in the polls ahead of Colombia’s presidential election next month, and will probably face the conservative Federico Gutiérrez in a run-off vote in June. Both candidates had …
The CFIB Business Barometer remained very strong in April and seems to bode well for the short-term outlook, but signs of a sharp slowdown in the housing market suggest that higher interest rates may cause residential investment to fall faster than we …
Hungary’s imbalances in the spotlight Hungary’s central bank this week gave its most vocal assessment yet about the risks posed by growing macro imbalances. Policymakers now seem to be moving closer towards a joint tightening of monetary and fiscal policy …
Indonesia export ban may prove short lived Indonesia has caused turmoil in global commodity markets over the past week with its decision to ban exports of palm oil. The country is the biggest palm oil producer in the world, accounting for over 50% of …
We doubt that the unexpected 1.4% annualised decline in first-quarter GDP will stop the Fed from hiking its policy rate by a bigger 50bp next week or from launching quantitative tightening. The Fed will stress the ongoing strength of employment growth, …
GDP to fall as inflation rises Data for Q1 published this week showed that the euro-zone eked out a 0.2% q/q expansion at the start of the year. However with economic conditions having worsened recently we think that GDP will post a small contraction in …
Stefan Ingves would struggle to keep a secret Much of the analysis following the start of repo rate hikes by the Riksbank yesterday has pushed a narrative that the Bank’s messaging was more hawkish than expected and its decision to raise rates as a …
We understand why our new forecast that interest rates will be raised from 0.75% now to a peak to 3.00% next year has generated a lot of interest among clients. After all, it assumes that rates will peak higher than investors (2.50%) and other analysts …
A strong stimulus-led rebound still looks unlikely The readout from today’s Politburo meeting repeated Xi’s call earlier in the week for all-out efforts to strengthen infrastructure construction. This was framed in the context of medium-term goals to …
Repo rate hike on the horizon MPC members have been in a chatty mood this week, with both Jayanth Varma and Ashima Goyal giving interviews to the press. Despite being at opposite ends of the policy spectrum (Mr Varma is the most hawkish member of the …
Inflation now surging in Australia The 2.1%q/q rise in headline inflation and the 1.4% rise in trimmed mean inflation in Australia in Q1 were much stronger than the RBA was forecasting. Admittedly, the strength in inflation has been largely driven by …
BoJ ups the ante once again The Bank of Japan remained under pressure to defend its 10-year yield target this week and conducted fixed rate auctions offering to buy an unlimited amount of bonds every day. The amounts purchased in the auctions on Tuesday …
Oman to debut income tax in the Gulf Reports suggest that, despite the boost to Oman’s public finances from high oil prices, the government is sticking to fiscal tightening, with a personal income tax likely to be introduced in 2023. Under Sultan Haitham, …
28th April 2022
The surge in consumer price inflation in March leads us to think that the Bank of Canada will now rapidly raise its policy rate to 2.5% by the end of the year. The jump in inflation to 6.7% in March (see here ) seems to have been an even bigger surprise …
23rd April 2022
Brazil’s election race starts to narrow While Brazil’s presidential election is some way off, the race has taken centre stage in the past week. Former president Lula of the left-wing Workers’ Party has been the front-runner in opinion polls for around a …
22nd April 2022
European officials have increasingly looked to Africa to replace gas supplies from Russia. In principle, the continent’s major producers like Nigeria and Angola (and in the medium term, potentially Mozambique and Tanzania) could benefit. But it’s unclear …
With Fed officials seemingly competing to try and sound more hawkish than their peers, a 50bp rate hike next month appears nailed on – even though this week also brought further tentative signs that inflation is set to ease soon. Fed readying …
Russia: crisis easing, but challenges await Comments from Elvira Nabiullina this week during her appearance in the State Duma to be reappointed as CBR governor for another five-year term underline the view that the most acute phase of Russia’s economic …
The news on the economy was distinctly downbeat this week with evidence of a consumer slowdown mounting (see here and here ) and the IMF predicting that the UK economy will grow by just 1.2% in 2023, the slowest among G7 countries. But that did not stop …
We first said in late March that we thought the ECB was likely to raise rates as soon as July. This was because inflation had been higher than expected for several months in succession and we thought it would continue to surprise on the upside, while the …
Boom time for Salmon prices In an otherwise extremely quiet week for tier-1 macroeconomic data releases, the publication of weekly salmon price data from Statistics Norway stood out. In short, it’s boom time for the fishing industry. The export price of …
Currency slide will continue The renminbi had been defying the gravitational pull of a collapsing interest rate differential with the dollar. In recent days, something seemed to give. The onshore currency lost 1.8% against the dollar this week. The slide …
Softer trade figures a sign of things to come There are growing signs that demand for the region’s exports are starting to soften, a trend we expect to continue over the coming months. Figures published on Wednesday show that Taiwanese export orders …
UK trade deal would have limited impact UK Prime Minister Boris Johnson’s two-day visit to India – which concludes today – has garnered plenty of headlines. Underpinning the visit are talks between PM Johnson and counterpart PM Narendra Modi towards a …
RBA bringing forward rate hikes The Reserve Bank of Australia is increasingly coming around to our view that rate hikes will be needed before long. The minutes of the RBA’s April meeting revealed that the Bank is becoming concerned about the second-round …
BoJ intervenes again to cap 10-year yields With 10-year yields again at the ceiling of the BoJ’s 0±25bp target band, the Bank launched another fixed rate auction on Wednesday. Then, on Thursday, it announced consecutive fixed rate auctions for a total of …
Egypt looks to tourism to bolster FX revenues Egyptian officials appear to be hoping for a revival of the tourism sector as part of their strategy to improve the external position, but we still think that the currency will need to weaken further. The …
21st April 2022
ECB President Christine Lagarde suggested at today’s post-meeting press conference that the Bank would be sticking to its plans for policy normalisation, despite inflation surprising to the upside since the last meeting. She highlighted the hit to …
14th April 2022
