While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
1st November 2024
The main economic news in the euro-zone this week were the stronger-than-expected GDP figures for Q3 and inflation figures for October, as well as a concerted effort by ECB policymakers to play down the need to accelerate the pace of rate cuts. So it is …
Elevated services inflation not a deal breaker Markets have continued to dial back expectations for policy loosening by the RBA following the release of Q3 CPI data this Wednesday. They are now fully pricing in a rate cut only by May, whereas they were …
LDP loses majority for first time since 2009 We already indicated last week that the LDP might lose its majority in last Sunday’s House of Representatives election, but the fact that it failed to achieve a majority even once we include the seats of …
The US election next week is likely to have major ramifications for geopolitical ties, trade, and financial markets in the MENA region. (All our analysis on the impact of the US election on EMs can be found on our dedicated webpage here .) Attention in …
31st October 2024
The US dollar has continued to edge higher this week even in the absence of much economic data, suggesting that the gradual shift in the US election odds in favour of former president Trump continues to provide a tailwind for the greenback. With a week …
25th October 2024
Trump-Musk Bromance: Economic implications Elon Musk has become one of Donald Trump’s biggest campaign supporters and donors in recent months, contributing $75 million to his America PAC and sharing the stage at events with the former President. Musk and …
Has Poland’s consumer recovery gone into reverse? The downside surprise in Polish retail sales data this week was the biggest at any point in the past decade. (See Chart 1.) In contrast to expectations for a slight slowdown in growth to +2.0% y/y in …
Brazil: fiscal dominance on the cards? Policymakers at Brazil’s central bank have sounded increasingly alarmed in recent media comments. Part of that reflects concerns that the economy may be overheating. We looked at that in detail in a piece earlier …
Bank steps up the pace of loosening The Bank’s shift to a larger interest rate cut this week, which took the policy rate down to 3.75% (see here ), created some confusion among commentators. Some wondered why the Bank felt the need to act more …
Dead Nigeria Shell oil deal sign of local firm worries This week Nigeria rejected Shell’s sale of its onshore oil business, the latest multinational attempt to divest from Nigeria. Lower foreign investment makes us less hopeful on Nigeria’s oil production …
Having behaved “normally” over the summer, gold has slipped back into anti-traditional-driver mode in recent weeks. The ~4% rise in the gold price since the start of October has come alongside sharp rises in US Treasury yields and the dollar. Soberingly, …
This week’s news has persuaded us that the ECB is likely to cut interest rates further and faster than we previously thought. We now see a greater-than-even chance of a 50bp rate cut in December, and think the “terminal” rate in this cycle will be below …
Why does the new rule allow more borrowing? The Chancellor, Rachel Reeves, has confirmed that in next week’s Budget she will shift from targeting the Public Sector Net Debt excluding the Bank of England (PSND Ex BoE) measure of government debt to another …
Weak GDP data may give BoK second thoughts National accounts data published on Thursday showed that Korea only narrowly avoided a technical recession, with GDP expanding by just 0.1% q/q in Q3 after a 0.2% decline in Q2. The main drag came from exports, …
Fiscal package may be revealed in two weeks At its 12 th October press conference, the Ministry of Finance (MoF) offered some reassurances that fiscal spending would pick up in the final months of this year and stay supportive into 2025. But it didn’t …
The past week has been one of the more eventful for India in recent memory on the geopolitical front. The most eye-catching development was an agreement with China on patrolling arrangements along their disputed border in the Himalayas. News of the …
October surprise? The result of Japan’s Lower House election should be clear by early Monday morning. The new prime minister, Shigeru Ishiba, called Sunday’s vote to take advantage of a revival in the government’s popularity since he replaced Fumio …
Inflation concerns appear misplaced At an event organised by the Peterson Institute this week, RBNZ Governor Adrian Orr suggested that the Bank was likely to be more circumspect about loosening policy going forward. The Governor argued that it was …
Al-Sisi demands review with IMF Comments from Egypt’s President al-Sisi over the past week pushing back against the pace of reforms under the current IMF deal has alarmed investors a little, but the bigger picture is that Egypt’s economy is in a far …
24th October 2024
The US dollar has made further gains this week as US data continue to come in strong, contrasting favourably with the ECB’s surprisingly dovish policy announcement and softer inflation data in other G10 economies. With the US election drawing nearer and …
18th October 2024
SARB lays out requirements for lower rates The South African Reserve Bank’s Monetary Policy Review (MPR) released this week made clear that recommitting to fiscal consolidation and pushing through structural reforms are key to creating extra space for …
Fundamental frailties back to the fore The risk premium in oil prices collapsed this week after reports suggested that Israel would not target Iran’s oil and nuclear facilities in any retaliatory strike. Brent oil prices have fallen from a high of around …
Brazil: trying to tighten the purse strings (again) A proposed “spending review” in Brazil would, if approved by President Lula, ease fears about the state of the public finances and reduce the chances of aggressive rate hikes by the BCB. There are three …
External developments: the good, the bad & the ugly The current account data released across the region over the past week show that external positions have continued to improve in some countries (notably Turkey), while in others they are deteriorating …
All systems go on 50bp A string of soft data releases this week should give the Bank of Canada the necessary confidence to step up the pace of monetary easing at its meeting next week. September’s CPI report , on Tuesday, showed headline inflation at 1.6% …
No gamechangers, but some new approaches The housing ministry’s press briefing on Thursday left investors understandably underwhelmed: there were no substantial new measures and little new detail on plans to support the property sector. The Hang Seng …
The data this week confirmed that retail sales rose strongly in September and industrial production suffered only modestly from hurricane and strike disruption, with our third-quarter GDP growth estimate still at 3.5% annualised. That said, with the full …
Until now, all the focus has been on the Chancellor’s £22bn fiscal “black hole”. This week a different, bigger, number hit the headlines: a £40bn “funding gap”. Why the change? A crucial distinction is the time period they relate to. The £22bn “black …
Property prices flat last month One reason the Bank of Korea pushed back against the prospect of another near-term rate cut at its meeting last week was fear of a rebound in property prices that might threaten financial stability. We think this concern is …
The euro-zone construction output data for August, released earlier today, were the final activity data to be published ahead of the preliminary euro-zone Q3 GDP data release in two weeks’ time. While activity data for the third quarter have been a mixed …
Activity data point to softer patch for economy The latest activity data have brought further evidence that India’s economy has entered a softer patch. Household consumption growth appears to be slowing. The RBI’s latest consumer confidence survey for …
Government to increase supplementary spending Prime Minister Ishiba said this week that the customary supplementary budget due before the end of this year will be larger than last year’s ¥13tn (2.2% of GDP). This is probably motivated by the upcoming …
Firms will take higher labour costs on the chin With the Australian labour market remaining resilient as ever, financial markets have come around to our view that the Reserve Bank of Australia won’t cut interest rates before Q1 2025. That’s a notable …
BRICS+ to meet with a notable absentee Next week’s BRICS+ summit in Russia is likely to focus on the group’s further expansion after Egypt and the UAE (along with several other countries) joined last year. Notably, however, Saudi Arabia – which was also …
17th October 2024
Hurricanes add to upside inflation risks Inflation risks more balanced Based on the combined CPI and PPI data, we calculate that the Fed’s preferred core PCE deflator price measure increased by 0.24% m/m in September which, at 2.9% annualised, is a little …
11th October 2024
The stronger labour market data makes the Bank of Canada’s decision in October a close call but, with upside inflation risks fading, and demand still very weak, we think the Bank will want to bring interest rates to a more neutral stance relatively …
Another week of upside surprises to US data and hawkish noises from some FOMC members have helped the US dollar build on last week’s rebound. With money markets now shifting towards discounting a potential pause in the Fed’s incipient rate cutting cycle – …
Kenya’s second consecutive 75bp cut Kenya’s lowered its policy rate by 75bp this week and continued disinflation alongside an improved external environment mean that Kenya will deliver further monetary loosening over the coming months. Similar trends are …
Worrying developments in Mexico There had been a lot of debate about what to expect from Claudia Sheinbaum ahead of her inauguration as Mexico’s (first female) president and her first two weeks in office have provided the first insights into where her …
Some encouraging signs in the latest CPI data The batch of September inflation data out of the region this week offered some welcome signs for central banks. In Hungary, the headline rate fell to 3.0% y/y – its lowest rate since January 2021 and slightly …
It makes sense that businesses and households are getting jittery ahead of the Budget on 30 th October. After all, it’s no secret that taxes will rise. This explains the falls in both business and consumer confidence in September. (See Chart 1.) (Our …
Stimulus bazooka wouldn’t stop prices from falling After investors were disappointed by the lack of major new fiscal stimulus from Chinese policymakers this week, the Ministry of Finance is expected to announce a more sizeable package on Saturday. Since …
France needs austerity Having survived a vote of no confidence on Tuesday evening, on Thursday France’s government presented its 2025 budget. The key points had been well signposted in advance: €60bn of savings next year, equivalent to 2% of GDP, made up …
Bank of Korea cuts The Bank of Korea kickstarted its easing cycle earlier today with a 25bps cut. As we outlined here , with GDP growth struggling and price pressures very weak, further easing is likely over the coming months. BI unlikely to cut again …
RBI on course for December rate cut In a busy week for India Watchers, the key event was the Reserve Bank’s policy announcement on Wednesday. The MPC opted to keep the repo rate unchanged at 6.50%, with new member Nagesh Kumar the sole dissenter. But …
Consumer support and a larger deficit Tomorrow’s press conference will provide a platform for the Ministry of Finance (MoF) to reveal its fiscal plans. The stakes are high - most observers agree that recent stimulus announcements won’t amount to much …
Easing monetary restraint is the need of the hour As was widely anticipated, the Reserve Bank of New Zealand cut its Official Cash Rate by 50bp at its meeting on Wednesday. But it’s worth noting that the Committee sounded rather dovish. In contrast to …
Record growth in household incomes The Q2 household income data released this week were much stronger than we had anticipated. Indeed, both nominal and real disposable income have risen the most on record over the past year, leaving aside the temporary …
Saied’s second term could prove a messy one In a no shock result, Kais Saied secured a second term as Tunisia’s president by a landslide. His first five years in power were typified by a shift back to autocracy and shunning necessary reforms. The next …
10th October 2024
