More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
3rd December 2021
As the labour market is nearing a full recovery and wages are rising strongly, we now expect the Bank to hike interest rates in April, rather than waiting until July, as we previously expected. Fourth-quarter GDP growth not as strong as it looks …
Powell signals turning point in inflation fight Fed Chair Jerome Powell’s congressional testimony this week was markedly more hawkish. We wouldn’t characterise it as a full-blown Volcker moment. But there could be parallels with former Chair Alan …
Omicron not yet likely to stop further rate hikes One of the key talking points this week has been the spread of the Omicron variant, which has sparked renewed fears about the effectiveness of vaccines and tighter restrictions. Recoveries are likely to …
CEWC to discuss policy easing amid slowdown China’s leadership will gather soon for the Central Economic Work Conference (CEWC), an annual meeting that sets economic targets and policy priorities for the coming year. The discussions are private but a …
Immunity to high inflation won’t wane While there are still far more questions than answers surrounding the new Omicron variant, in a worst-case scenario we think it would temporarily derail Japan’s economic recovery and cause underlying inflation to …
Omicron is reducing socialising Just one week after the emergence of the Omicron COVID-19 variant there are lots of anecdotal reports of Christmas parties being cancelled and some tentative evidence that activity has softened. In the week before the …
Rising inflation piles pressure on CBSL The economic situation in Sri Lanka is going from bad to worse, with a surge in inflation undermining the credibility of the central bank (CBSL) and making a debt default all the more likely. Data released earlier …
“You shall not pass!” [the CHF 1.04 per euro mark] We were ahead of the curve in arguing that the SNB would wave goodbye to the implicit ceiling of CHF 1.05 per euro that it defended in earnest during the early stages of the pandemic. (See here .) …
In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. Indeed, Vice President Luis de Guindos said this week that “the high rate of inflation we’re experiencing …
A week ago we argued that the reopening of the border was unlikely to ease labour shortages much. Indeed, the government has now delayed the re-entry of the 235,000 visa holders stuck overseas until mid-December to ward off the Omicron variant. However, …
Finance Ministry could respond to new virus wave India reported its first cases of the Omicron variant yesterday. Plenty of uncertainty remains about the new variant, but we outlined some of the key factors that could determine the extent of the economic …
Low vaccine coverage and large tourism sectors mean that the non-Gulf economies are particularly vulnerable to the emergence of the Omicron variant. Meanwhile, the drop in oil prices and the likelihood that OPEC+ raises oil output more slowly than …
2nd December 2021
New face but same gradual tightening at Banxico Mexican President López Obrador delivered another (unhappy) surprise to markets this week by unexpectedly changing his nomination for Banxico’s next governor from Arturo Herrera to Victoria Rodríguez. But we …
26th November 2021
Turkey tumult Safe to say that this week has been dominated by the collapse in the Turkish lira and we’ve been helping clients navigate through the crisis and its implications across our services. All of the research that we’ve published can be found here …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
For most of this week our Europe economics team have been re-evaluating their forecasts due to the prospect of more COVID-19 restrictions on the continent. We weren’t. That’s because a combination of higher infections since the summer, high vaccination …
Canada avoiding another winter wave Winter is coming but, unlike Europe and the US Midwest too, Canada hasn’t seen a new wave of coronavirus infections. By this time last year there were already signs of a rapid pick-up in the most-populated Canadian …
B.1.1.529 and China The median analyst expectation, according to Consensus Economics, is for China’s exports to rise a further 5% next year, when measured in dollars. Some are expecting another double-digit gain. We are the only analysts on the survey …
A concerning new virus variant identified in Southern Africa has already prompted the re-imposition of restrictions on travellers from the region and triggered a flight to safety in global financial markets. A tightening of local containment measures is …
SNB starting to show its hand Having risen through the CHF 1.05 per euro mark last week for the first time since mid-2015, the Swiss franc rose by a further 0.5% this morning on the back of the worries about the B.1.1.529 variant . This was mirrored in a …
Mid-range chip production boost While the breakdown of PM Kishida’s new ¥31.6 trillion (6% of GDP) supplementary budget released today was dominated by measures already leaked to the media last week, it did reveal that only ¥22 trillion (4% of GDP) will …
Recent hikes not the start of Asian tightening cycle Attention over the past week has been on the region’s more hawkish central banks, following rate hikes in Korea and Pakistan . Both countries, along with Sri Lanka (which unexpectedly left rates …
The reopening of the international border took centre stage this week. With 92% of the eligible population having received their first jab, New Zealand has now fully abandoned its Zero-Covid strategy and intends to reopen the border by April 2022. …
Winter parliament session set to disappoint The winter session of parliament begins on Monday with all indications point to it being a disappointment on the reform front. Fractious politics in the Rajya Sabha (upper house of parliament) – where PM Modi’s …
What could the SPR release mean for the Gulf? The US-led release of oil reserves did little to bring down the price of oil as President Biden would have hoped and we suspect that the move is unlikely to drastically alter the outlook for the Gulf …
25th November 2021
Powell keeps his job; Brainard gets a promotion The announcement on Monday morning that President Biden would nominate Jerome Powell for a second term as Fed Chair was largely as expected, although the unexplained delays in making it official may have …
24th November 2021
Overheating in Chile fueling external imbalances Much of the focus on Chile this week has been on the upcoming general election on Sunday and the strength of the Q3 GDP data . But an important development that may have flown under the radar is that …
19th November 2021
Large stimulus locks in strong rebound The stimulus unveiled today by PM Kishida’s new cabinet was broadly in line with expectations and should provide a meaningful boost to the recovery in consumer spending over the coming months. But some of the …
The renewed surge in house prices could persuade the Bank of Canada to raise interest rates sooner than we forecast, although the hit to activity from the devasting floods in BC this week reduces the chance of the Bank becoming more hawkish any time soon. …
Sales and activity both strengthening The 1.7% m/m increase in retail sales values together with the 1.6% m/m gain in industrial production point to a resurgence in momentum in October, following the slowdown in third-quarter GDP growth to only 2.0% …
Turkey roasted In a turbulent week for Turkey, we’ve written various pieces on our services looking at the implications so we’ll summarise the key points in this Weekly . We looked at how a sell-off in the lira could damage the economy and financial …
SARB joining in… This week, the South African Reserve Bank (SARB) joined its EM counterparts in tightening monetary policy, but we don’t think that policymakers in South Africa will hike interest rates as aggressively as those in Emerging Europe and Latin …
“Given these two-sided risks – weaker activity and higher inflation – the labour market story really is the crucial part of it, and we haven’t yet seen enough of that story, post furlough scheme.” ”Don’t forget what our framework is. It’s about inflation. …
After weeks of worrying about surging inflation and what the ECB will do next, developments this week were a stark reminder that the pandemic is far from over. The rapid deterioration in the Covid situation in Austria over the past week has driven the …
Well, that happened quickly! We argued only last week that the SNB would be comfortable with letting the Swiss franc push higher against the euro. (See here .) As it happens, we didn’t have to wait long to be vindicated. The sharp rise in the franc this …
RBA still a long way from raising rates RBA Governor Phillip Lowe pushed back once again this week on financial market expectations of a hike in the cash rate in 2022. Lowe reiterated that the economy would need to perform very differently from the RBA’s …
Lighter touch succeeds in controlling virus flare-up China’s latest COVID-19 outbreak appears to be coming to an end, with new cases dropping back sharply during the past week. (See Chart 1.) This removes one recent headwind to service sector activity – …
Investment facing long-term headwinds In a speech to the Confederation of Indian Industry (CII) this week, Finance Minister Nirmala Sitharaman made an impassioned plea for the private sector to play a greater role in the economic recovery by ramping up …
Encouraging vaccine progress in South East Asia After a slow start, countries across South East Asia are now making encouraging progress with vaccine rollouts. Malaysia has been the frontrunner and has now fully-vaccinated 76% of its population, but the …
Tunisia show little appetite for austerity Tunisia’s government upwardly revised its 2021 budget deficit target this week which, coupled with growing signs of it making concessions to appease the UGTT labour union, adds to our view that the public …
18th November 2021
Core inflation running hot … Another week, another alarm bell for central bankers in the region. This time it was the turn of the October CPI figures, which showed further increases in Chile (to 6.0%), Mexico (6.2%) and Brazil (10.7%). Global energy …
12th November 2021
With the monetary policy normalisation debate heating up recently in South Africa, next week’s MPC meeting is likely to be a very close call. On balance, we think that the first rate hike will not be delivered just yet and the tightening cycle is likely …
It’s finally infrastructure week Infrastructure week has finally arrived, with President Biden due to sign the bill into law on Monday. The infrastructure bill is often touted as a $1.2bn package, but much of that is re-purposed funds. Only $550bn is …
On the face of it, the GDP data released this week suggest that the recovery is ticking along quite nicely. Indeed, the data showed that the economy picked up some pace at the end of Q3, providing a decent platform for the current quarter. (See here .) …
Inflation hits new highs across CEE Inflationary pressures continue to strengthen across Central and Eastern Europe, keeping the onus on central banks to tighten policy aggressively. October inflation data this week provided for ugly viewing. In Hungary, …
Developers don’t depend on dollar bonds This week’s surge in yields on dollar bonds is not a good measure of the stress facing Chinese developers. Bonds issued offshore (including in Hong Kong) made up only 9% of outstanding developer debt last quarter . …
The upside surprise to consumer price inflation in the US in October suggests there are also further upside risks in Canada, although the data next week are unlikely to show as large an increase in inflation. There is a positive correlation of 0.7 between …
Deciphering the SNB’s intentions on the FX front The weekly sight deposit data published by the SNB every Monday morning provide a timely, if imprecise, window into the Bank’s actions in the FX market. The last three data releases suggest that the SNB has …
Price pressures still weaker than in the US Inflation releases on both sides of the Atlantic this week highlighted how price pressures are still weaker in the euro-zone than in the US. Core inflation in Germany rose in October to 2.8% (see here ), much …
