In his speech late last night, Christopher Waller became the first Fed Governor to throw his weight behind St Louis Fed President James Bullard’s call for 100bp of rate hikes by the middle of the year. Nevertheless, we expect Chair Jerome Powell to push …
25th February 2022
For Canada, the main impact of the Russia-Ukraine crisis so far has been to push up the terms of trade to the most favourable on record. That could lead to the Bank of Canada becoming more hawkish than many of its peers, particularly as there has yet to …
The Bank of England has yet to provide any clues to how Russia’s invasion of Ukraine on Thursday may influence how far and how fast interest rates need to rise. (All our analysis on the conflict is collated on one page of our website. See here .) The …
Back in safe-haven mode Just weeks after hawkish messaging from the ECB helped to weaken the Swiss franc against the euro (see here ), the Russia-Ukraine conflict has put the currency back into full-on safe-haven mode. Perhaps unsurprisingly, the exchange …
By far the biggest news this week has of course been the Ukraine crisis, and we have written extensively about the implications for the global economy, all of which you can find here . In this Weekly , we will bring out a few key points about what it …
Virus cases reach record levels Most of the focus of the past week has been on events in Ukraine. You can follow our coverage of the crisis here . Having fallen sharply on the day of Russia’s full-scale invasion, financial markets across the region …
The government will lay out its economic agenda for this year at the annual session of the National People’s Congress (NPC), which kicks off next Saturday. Here are a few pointers on what to expect: Lower growth targets, both explicit and implicit The 14 …
Clients can find Capital Economics’ detailed coverage of the Russia-Ukraine crisis, including research on the potential impact on the global economy, energy markets, financial markets and Eastern Europe on our dedicated webpage here . For India, the key …
Soaring energy prices not a big drag on Australia The conflict in Ukraine is likely to keep commodity prices elevated in the near term. But in a worst-case scenario, the price of Brent crude oil could settle at US$120-140bbl for three to six months. And …
Russia-Ukraine crisis highlights fossil fuel reliance The spike in energy prices following Russia’s invasion of Ukraine has highlighted just how reliant Japan still is on imported energy. Imported fossil fuels still made up 85% of Japan’s energy supply in …
This morning Russia has launched an invasion of Ukraine and in this Weekly we discuss the main channels through which the conflict may affect the Middle East and North Africa. Russia’s President Putin announced earlier today that a “special military …
24th February 2022
Communications from the Bank of Canada this week suggest that, as well as raising interest rates next month, the Bank will also begin quantitative tightening (QT). With inflationary pressures broadening in January and house prices rising at the fastest …
18th February 2022
Colombia’s recovery: set to lose steam The Q4 national accounts figures out of Colombia this week showed a staggering 4.3% q/q rise in output last quarter, taking GDP back to its pre-crisis trend – making it one of the few EMs in this position (and the …
South Africa’s upcoming budget speech will probably contain better-than-projected fiscal results, allowing the finance minister to extend temporary spending measures without undermining near-term budget targets. But this will increase the risk of …
In a week when we learned that producer price inflation, retail sales and industrial production all came in hotter than expected in January, interest rate expectations nevertheless declined, as markets digested a relatively dovish set of minutes from the …
Another week of Russia-Ukraine tensions Russia-Ukraine tensions dominated the headlines again this week and financial markets whipsawed on concerns about an imminent invasion and reports of shelling in eastern Ukraine. But an announcement by President …
This week saw tensions between Russia and Ukraine get close to boiling point. We have written extensively about the economic implications of a further escalation on both our Emerging Europe and Commodities services and all of our research on the topic can …
Earlier this week brought murmurs of a de-escalation in the Russia/Ukraine border crisis. But tensions seem to have flared up again in recent days. We have no particular insight on the likely outcome, but we can offer some thoughts on the economic impact …
Yet another blow to Riksbank’s dovish stance Statistics Sweden made a bid for the most eyebrow-raising data release of the week with the news this morning that core inflation jumped from 1.7% in December to 2.5% in January. (See here .) We, the consensus …
Ukraine crisis adds to inflation risks The main channel through which the Ukraine-Russia crisis could affect Asia is higher oil prices. Our current inflation forecasts assume that the price of a barrel of Brent crude will drop back to US$70 by the end of …
More policy support for homebuyers Back in November, we made the case that policy support would soon drive a rebound in home sales. Policymakers had signalled a shift to a more supportive stance, initially by telling banks to step-up mortgage lending. And …
LIC stake sale will boost public finances… Local media has been awash with commentary about the long-awaited initial public offering (IPO) of Life Insurance Corporation (LIC) after the state-owned behemoth this week submitted its draft prospectus. From a …
No budget repair before interest rates rise Treasury Secretary Steven Kennedy used his opening statement to the Senate Economics Committee this week to argue that fiscal policy should remain accommodative until interest rates have been normalised. …
Services spending rapidly recovering The 1.3% q/q rise in Q4 GDP was a touch weaker than anticipated but left output just 0.2% below its Q4 2019 level, a similar performance to the euro-zone or the UK. Particularly encouraging was the marked rebound in …
PIF gets a (small) hold of Aramco The Saudi government’s transfer of 4% of its stake in the state oil company, Aramco, to the Public Investment Fund (PIF) will not diversify government revenues as Crown Prince Mohammed bin Salman would like to claim and …
17th February 2022
Latin American inflation troubles continue The recent batch of January inflation data across Latin America made for grim reading and, despite the hawkish response by central banks, inflation rates will remain high in the coming months. To recap, there …
11th February 2022
SONA: no bonanza, but tilt to more fiscal support The economy was a key theme in Thursday’s State of the Nation Address (SONA) in South Africa as President Cyril Ramaphosa vowed to press ahead with his reform drive but gave some ground to those in his …
The news this week that CPI inflation climbed to a new high of 7.5% in January prompted another surge in interest rate expectations. Fed funds futures now puts the odds of a 50bp hike in March at more than 50/50 and are pricing in 160bp of tightening for …
Adam “the hawk” Glapinski takes flight Comments from Poland’s central bank Governor Glapinski this week that the NBP will do whatever it takes to tackle inflation underline the hawkish shift from the NBP this year. This supports our view that interest …
One thing that stands out about the Bank of Canada’s forecasts is its optimism about prospects in 2023. While the Bank’s forecast for GDP growth of 4.0% this year is in line with the consensus, its forecast for a 3.5% gain in 2023 is 0.5%-points higher …
The further surge in US CPI inflation from 7.0% in December to a 40-year high of 7.5% in January and some hawkish comments by US Fed officials have rattled global financial markets this week, with UK markets being caught in the crossfire. And recent …
Consumers still holding back Last week we flagged a rise in the number of people travelling during Lunar New Year, which is up 40% compared with a year ago. But data published in recent days suggests this improved mobility has not translated into stronger …
Governor Ingves is not for turning We were surely not the only ones to have thought, “What is the Riksbank playing at?”, following the damp squib of its policy announcement on Thursday morning. Recall that the Bank barely changed its dovish messaging, and …
Anybody expecting the ECB to completely undo the hawkish policy shift that Christine Lagarde delivered at last week’s meeting will have been disappointed by this week’s numerous policy statements. Admittedly, Ms Lagarde herself adopted a more balanced …
The RBI’s policy announcement – in which rates were left unchanged – was the main event this week and our initial response can be found here . One key takeaway was that the Bank remains relaxed about the inflation outlook, even as inflation appears to be …
Singapore budget to focus on revenue raising The focus of Singapore’s 2022 budget next Friday will be on steps to raise revenues to help deal with a rapidly ageing population. The government is set to confirm a delayed hike in the Goods and Services Tax …
Bank readies artillery to defend yield target Expectations for a global monetary tightening cycle lifted 10-year Japanese government bond (JGB) yields to just three basis points shy of the top end of the Bank of Japan’s ±0.25% target range yesterday. (See …
Domestic tourism set to recover The conventional wisdom is that the complete reopening of the border from 21 st February will weigh on Australia’s economic activity. After all, in 2019 Australian tourists spent around $6bn (1% of GDP) more abroad than …
Saudi oil sector taking its foot off the brakes In a TIME interview this week, Saudi Arabia’s Energy Minister Abdulaziz bin Salman (AbS) provided the strongest signal yet that the Kingdom may eventually move to an oil policy focussed on increasing its …
10th February 2022
Brazil and Mexico continuing to struggle While there were some positive signs from the latest activity data for Brazil and Mexico, both economies seem to have started 2022 on the backfoot. The main headline this week was that provisional Mexican Q4 GDP …
4th February 2022
As it turns out, employment gains were much stronger than previously thought over the final few months of last year and the Omicron wave did little to slow the pace of growth in January. With the exodus from the labour force apparently smaller than …
The data releases this week suggest that the Omicron wave was more disruptive than we anticipated, but there are already positive signs that the economy will strongly rebound this month. Employment falls sharply in January The 200,000 slump in employment …
South Africa’s President Cyril Ramaphosa, facing an intra-party leadership contest in December, is set to use next week’s State of the Nation Address (SONA) as an opportunity to drum up support. From the perspective of fiscal policy, this is likely to …
What came through most clearly in yesterday’s Monetary Policy Committee (MPC) statement was the signal that the MPC will act to quash rising cost, price and wage expectations. We unpacked the Bank of England’s February meeting, at which it raised interest …
Weak lira not having the desired trade effect? The latest indicators raise concerns that the boost to Turkey’s competitiveness from a weak lira that the government has been banking on as part of its new growth model may not be having the desired effect. …
“Mr Establishment” gets the job Today’s appointment of Jens Stoltenberg as Governor of the Norges Bank shows that worries of potential political nepotism ultimately fell on deaf ears, and completes the trifecta for top jobs for the ex-PM and Finance …
We said in our Drop-in on Tuesday that there would be a high bar to clear for the ECB to change its plans and raise interest rates this year. Three days later, after some strong inflation data, that bar now seems to have been cleared! January’s inflation …
Hong Kong outbreak pushes back reopening hopes In many countries, Omicron outbreaks have burnt themselves out in weeks and inflicted relatively little economic damage. Hong Kong may be different. The city is wedded to a zero-COVID approach in hope of …
Omicron impact likely to be mild The Philippines has been hit harder than any other country in the region by the pandemic, but the past week has at least brought some good news. The country was the first in Asia to bit hit by an Omicron wave. But daily …
Governor Lowe coming around to rate hikes It’s striking that just six months ago RBA Governor Lowe stated that he couldn’t understand why markets were expecting rate hikes in 2022 or early 2023. But this week the Governor announced the RBA would end its …
