SARB readying for rate lift-off The South African Reserve Bank’s (SARB’s) Monetary Policy Review (MPR) published this week put monetary policy normalisation back in the centre of attention, and it now seems that policymakers are unlikely to stand pat for …
8th October 2021
Even the more modest 194,000 gain in non-farm payrolls in September is “decent” enough for the Fed to announce at next month’s meeting that it will begin tapering its asset purchases, especially now the threat of a government debt default has been pushed …
Peruvian politics: not so extreme after all President Castillo’s cabinet reshuffle this week points towards more pragmatic policymaking which, while a possible headwind to near-term growth, should boost Peru’s medium- to long-term prospects. The president …
There have been rumours this week that the government will extend some of the emergency spending measures that are soon due to expire. They are unlikely to be extended in their current generous form, however, which suggests the economy faces a large …
One measure of the dislocation of global trade is that container ships with capacity for a million twenty-foot containers are sitting idle off China’s ports. (See the trade data preview below.) The power cuts that began to affect industry at the end of …
Moves in wholesale natural gas and electricity prices have continued to dominate this week in the euro-zone, with the price of European natural gas having doubled over the past month and currently trading almost 12% higher than it was just a week ago. …
Halloween came early this year in Sweden It might not be Halloween until the end of the month but the 3.8% m/m drop in Sweden’s GDP Indicator in August (released on Wednesday) was a horror show in its own right. (See here .) (Incidentally, the fact that …
Poland-EU tensions crank up a notch The decision this week by Poland’s Constitutional Court to rule that some EU laws are in conflict with the Polish Constitution has sent shockwaves through Europe. The ruling gets to the heart of the conflict over the …
Truth be told, neither Boris Johnson’s nor Rishi Sunak’s speeches to the Conservative Party Conference this week contained anything new on the economic front. Instead, the most notable development came in an interview to the BBC in which PM Johnson …
What rising energy prices mean for inflation The recent jump in energy prices will put upward pressure on inflation across the region, but the impact should prove short lived and is unlikely to worry policymakers. In some places inflation is already …
Parts shortages severely denting car industry The huge fall in new car registrations to their second-lowest September level since 1968 suggests that supply shortages are starting to hamper goods consumption. According to our seasonally adjusted figures, …
The RBNZ hiked rates by 25bp this week even as the RBA still sounded dovish. The near-term outlook for both economies is similar. Both are emerging from prolonged lockdowns with around 80% of the eligible population having received one jab and more than …
Persistent shortages are a growing downside risk India is the latest major economy to be facing concerns about energy supply. Coal-fired power plants have on average enough stocks to last only four days, well below usual levels. (See Chart 1.) Chart 1: …
Rally in oil prices to end next year This month’s OPEC+ meeting went as we expected with the group raising production quotas by 400,000bpd and shrugging off pressure to increase output further. As a result, the price of Brent crude rose to over $83pb on …
7th October 2021
It’s hard to argue against the Canada Mortgage and Housing Corporation’s (CMHC) latest warning that house prices look vulnerable to a correction. Indeed, we expect prices to fall in several cities by 2023. The forecasters at CMHC spared the rest of our …
1st October 2021
Prime Minister Harold Wilson’s quip that “a week is a long time in politics”, which he made during one of the UK’s seemingly never-ending crises in the 1960s, aptly describes the Democratic Party’s implosion. Slow motion train wreck This was the week when …
Full disclosure? SSA debt exposure to China Reports suggesting that many developing countries, including some in Africa, have larger external debts to China than officially reported somewhat reinforce concerns about a lack of transparency and, at the very …
CEE: loose fiscal policy set to persist in 2022 Government budget drafts approved for 2022 this week in Czechia and Poland and further details of social support in Hungary suggest that fiscal policy will remain supportive of growth in Central Europe and …
Mexico & Colombia: pace of tightening to diverge Central banks in Mexico and Colombia raised their policy rates by 25bp yesterday and more rate hikes are in the pipeline in both economies. The pace of tightening will remain gradual in Mexico but, similar …
The 3.4% euro-zone inflation rate recorded in September (up from 3.0% in August) is probably not the peak. (See here .) Surging European gas prices, which have risen by more than twenty-fold from last year’s lows, prompted us to revise up our forecasts …
Clouds are darkening over the outlook for the UK economy. A combination of broadening shortages, the fuel crisis, less fiscal support and the risk of higher interest rates will make it difficult for the UK economy to perform as well as its European peers. …
United façade at the Riksbank set to be tested Against the backdrop of the recent hawkish shifts by the US Fed and the Bank of England – and the start of hikes in Norway – the release of the minutes from the Riksbank’s last policy meeting underline that …
Pacquiao throws his hat into the ring The next presidential election in the Philippines is not until May, but the contest is already generating plenty of headlines with former boxing world champion Manny Pacquiao (PacMan to his fans) this week announcing …
No major pullback in power supply last month Early data suggest that recent electricity rationing may be the result of power companies being unable to keep up with the strength of demand, rather than a substantial pullback in electricity supply. According …
Rising living costs will eventually worry RBA We brought forward our forecast for the Bank of England’s first rate hike from 2023 to 2022 last week as second-round effects of higher commodity prices have started to emerge. A similar story is unfolding in …
The August activity data suggest that Japan’s economy is still struggling to gain momentum. The 4.1% m/m plunge in retail sales was par for the course given the severe Delta wave. More worrying is the 3.2% m/m drop in industrial output coupled with a …
Improving tax revenue aiding the fiscal position Data released this week show that after five months of FY21/22 (April to August), the cumulative central fiscal deficit stood at 31% of the overall annual budget estimate. That is far smaller than normal …
Oil price rally opens the door for fiscal loosening The price of oil hit its highest level in nearly three years this week and, combined with rising output, will help budget and current account positions in the Gulf will improve. This could open the door …
30th September 2021
Weak recovery suggests further easing is likely Pakistan’s decision to raise interest rates earlier this week came as a surprise to many ( although not to us ), and we think another surprise could be in store at the Bank of Thailand’s scheduled meeting on …
24th September 2021
Chile and Peru most exposed to Evergrande fears Fears over Evergrande, a highly-leveraged Chinese property developer, rocked global markets earlier this week. Latin American economies are among the most exposed to problems in China’s property sector. In …
SSA: Vaccine woes to persist even with supply boost This week brought the prospect of an improvement in Sub-Saharan Africa’s vaccine supplies, but the region is still likely to struggle to catch up with the rest of the world in the global vaccination …
Appetite for further monetary tightening wanes Central banks have started to slow tightening cycles in recent weeks and, in Turkey’s case, begin cutting interest rates. As inflation pressures ease, this pattern is likely to continue. But the Czech …
There are two reasons why we now think the Bank of England’s Monetary Policy Committee (MPC) will hike interest rates in 2022 rather than in 2023. First, underlying wage growth and inflation expectations have risen by more than we expected. These are …
This week, some of the world’s major central banks, from the US Fed to the Bank of England , hinted that they will be shifting towards tighter monetary policy in the months ahead. Indeed, the Norges Bank this week hiked its policy rate, the first G10 …
The federal election confirms that the government will continue to play a larger role in the economy than before the pandemic, which is one reason to think that inflation will be higher in the coming years than in recent decades. The election itself was a …
The phoney interest rate ‘war’ in Norway is over Norwegian policymakers would make terrible poker players because they have a habit of telling you what they will do and do not bluff. Accordingly, having finally started the long-awaited and well-signalled …
This week the focus was on the Fed, which appears intent on announcing a QE taper at the next FOMC meeting in early November. Next week the focus will shift to fiscal policy, with the Democrat’s plans to boost infrastructure and social welfare spending …
Freedom may be PM Suga’s parting gift Local media reports suggest that PM Suga is eager to lift all state of emergency declarations before leaving office next week. That would be good for our view that the economy will stage a strong rebound back to …
A matter of time before Evergrande defaults Evergrande failed to pay a $83.5mn coupon on an offshore bond due at noon today in Hong Kong (midnight Thursday in New York). It now has a 30-day grace period to make the payment before the company is in …
Rising house prices threaten financial stability The 17.4% annual rise in house prices in August was the strongest in nearly two decades and prices are set to rise the most since the 1980s by year-end. A speech by RBA Assistant Governor Bullock this week …
Exports to resume, but local rollout takes priority Health Minister Mansukh Mandaviya this week announced that India will resume exporting COVID-19 vaccines from October. India stopped supplying vaccines to the rest of the world in April when it was …
Qatar a beneficiary of surging gas prices The recent surge in global gas prices has raised concerns in Europe about the impact on inflation and activity, but Qatar could stand to benefit on the back of rising LNG exports and prices. Stronger demand for …
23rd September 2021
SA: withering commitment to fiscal consolidation Momentum behind proposals for a basic income grant (BIG) in South Africa appear to be building, suggesting that the authorities are leaning towards providing more fiscal support than their harsh austerity …
17th September 2021
Argentina’s PASO boosts bonds The loss for Argentina’s ruling Peronists in the open primary (PASO) for mid-term legislative elections in November suggest that the political tides might be shifting and boosted local financial markets. But the country’s …
Energy prices adding to inflationary pressures The recent surge in European gas and coal prices will push headline inflation further above central bank’s targets in most countries in the coming months. European coal and natural gas prices have surged over …
While the data released this week showed retail spending picking up in August as price gains moderated, the figures are still consistent with a sharp slowdown in consumption growth in the third quarter while underlying inflationary pressures continue to …
On the back of the surge in inflation from 2.0% in July to 3.2% in August and the blistering increases in wholesale gas and electricity prices, investors are now pencilling in a rise in Bank Rate from 0.10% to 0.25% in Q1 2022 and to 0.50% at the start of …
Rising inflation eating into spending power Data published this week highlight the twin drags of weak pay growth and rising inflation to households’ real incomes. We expect inflation to fall sharply next year, but the risks to our forecast are to the …
Policymakers at a three-pronged fork in the road Next week’s three central bank announcements from Sweden, Switzerland, and Norway (in that order) promise to offer something for everyone, whatever their predilection on the policy front. The Riksbank will …
Indonesia and Taiwan on hold There are four major monetary policy meetings scheduled in the region next week. While we expect the central banks of Indonesia and Taiwan to leave rates unchanged, we are pencilling in a hike by the State Bank of Pakistan …
