While today’s decision by the Riksbank to raise the repo rate back to zero was never really in doubt, the fact that two of the Deputy Governors opposed the move lends support to our non-consensus view that policymakers will end up cutting rates back into …
19th December 2019
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but, with growth set to remain weak and the rupiah holding up well, we think further easing is likely in the new year. Having cut rates by a cumulative 100bp so far this year, the central …
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Sub-Saharan Africa. While growth in Sub-Saharan Africa will almost certainly …
The Bank of Japan didn’t surprise anyone by keeping interest rates unchanged today and we think it will remain on hold for the foreseeable future. The Bank’s decision to leave its short-term policy rate at -0.1% and its target for 10-year bond yields …
Despite a rise in oil prices over the past couple of months, the Canadian dollar and the Norwegian krone have underperformed most other G10 currencies. Nonetheless, we expect both to fare better next year. Since the start of October, the price of Brent …
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Latin America. First, growth is likely to disappoint in 2020 . Economies across the …
18th December 2019
Although the anaemic performance of the euro-zone economy is expected to weigh on occupier demand, real estate equity markets suggest that confidence in property markets has held up. We think that this will spark an improvement in investment activity next …
If enacted, we estimate that the Trump Administration’s reported proposals for altering fuel efficiency standards in automobiles will mean that US gasoline consumption will be around 0.3m bpd higher than would otherwise be the case by 2026. This would be …
The Bank of Thailand (BoT) left its policy rate unchanged today, but further rate cuts are likely next year. Having cut interest rates twice this year already (in August and November) today’s decision to leave rates unchanged at 1.25% came as no surprise, …
The People’s Bank has made another small downward adjustment to the rates it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and encourage banks to cut lending rates . …
Boeing’s decision to halt production of the 737 Max aircraft could deliver a big hit to the manufacturing sector just as prospects were beginning to brighten. If it the shutdown lasts the entire quarter we estimate it could knock up to 0.5%-pts annualised …
17th December 2019
We expect the global economy to bottom out around the first quarter of 2020, with growth recovering thereafter. However, the pace of this recovery will be relatively slow and, perhaps most importantly, it will be spread unevenly across regions. The US …
The muted market reaction to news of a provisional trade deal between the US and China lends weight to our view that the trade war’s grip on metals markets will ease over the coming year. While we are bearish on the outlook for iron ore and Chinese steel, …
We don’t think that China will import the $40bn of agricultural goods that it has reportedly pledged to buy from the US. As such, the impact on prices should be fairly minimal . Last Friday, the US and China reached a ‘Phase One’ trade deal. (See our …
16th December 2019
The details of the reported “Phase One” trade deal between the US and China are sketchy and we are not convinced that it will hold. While the deal removes a downside risk, it does not justify a change in our central forecasts for GDP growth in the US, …
The “Phase One” trade deal apparently agreed with China is a small positive for the outlook to the extent that it removes the threat of further tariffs. But we doubt the rollback of existing tariffs or the promise of China ramping up purchases of US goods …
Flash PMIs for December are consistent with advanced economies having lost momentum in Q4, and forward-looking indicators are yet to suggest that a material rebound is around the corner. Using flash PMIs for the US, euro-zone, UK and Japan, we estimate …
Protests in Chile will probably result in a shift towards permanently looser fiscal policy. But it would take a long time for the debt ratio to become a concern, so any corresponding rise in bond yields over the next five years is likely to be fairly …
Political uncertainty has eased following the election result, but the housing market fundamentals leave little room for a recovery in price growth or transactions in 2020. Combined with waning support from Help to Buy, weak housing market conditions will …
Australia’s government pledged to increase spending in today’s Budget update. And its pessimistic forecasts for nominal GDP growth suggest that tax revenue may continue to surprise on the upside, leaving scope for additional fiscal stimulus in the …
India’s monthly goods trade deficit widened in November and we expect this to continue into 2020. Nevertheless, with imports of key commodities set to remain low, we think that the external shortfall will still remain small by historic standards. Data …
The Russian central bank governor’s post-meeting press conference was characteristically cautious, supporting our view that following today’s 25bp interest rate cut, there will probably be just one more 25bp reduction (to 6.00%) in the current easing …
13th December 2019
One of the biggest disappointments of this decade has been the stubborn weakness of global productivity growth. While we do not think that this is a permanent shift, a turn-around does not look imminent. And any improvement depends in part on countries …
After scaling a multi-year high in 2019, we forecast that iron ore prices will fall back over the coming years. This is premised on the continued return of supply from Brazil and Australia following major disruptions earlier this year, as well as a marked …
While the majority secured by the Conservatives in the election clears the path to a Brexit deal being passed by 31 st January and fiscal policy being loosened in a Budget in February, the resulting boost to the economy will be restrained by the risk that …
This Update was originally sent to clients as a Rapid Response immediately after the general election exit poll was published at 10pm on 12 th December 2019. If the exit poll’s estimation that the Conservatives secured a majority of 86 seats in today’s …
12th December 2019
Recent mass retail fund outflows are not good news for the beleaguered UK commercial property market. In our view, this trend is not surprising given declining returns and, while we see downside to our forecasts if outflows don’t stabilise post-election, …
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
Domestic headwinds will continue to weigh on growth next year, even as the external environment starts to improve. We expect this to trigger additional policy easing, with the PBOC likely to cut rates by more than most anticipate and allow the renminbi to …
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
The recent strength of motor vehicle production across Central Europe will be increasingly difficult to sustain as weakness in the German economy persists. The Czech Republic’s vehicle sector is likely to struggle the most as a result, while Hungary’s …
Activity data suggest that South Africa’s economy continued to contract in October . Given the escalation of power sector problems more recently, it’s likely that the economy has now entered recession. Activity figures released today showed that mining …
The statement accompanying the Brazilian central bank’s meeting last night did leave the door open for one more interest rate cut, but on balance we think the easing cycle is at an end. By the same token, the interest rate hikes that are now being priced …
The Philippines (BSP) left its main policy rate at 4.00% today, but with growth likely to disappoint and inflation set to remain below the mid-point of the BSP’s target, we expect more easing next year. Today’s decision to leave the main policy rate on …
The Fed called time on its easing cycle today by leaving the fed funds target range unchanged at 1.50%-1.75% and striking a more upbeat tone in the policy statement. With economic growth stabilising and inflation set to remain subdued, we expect interest …
11th December 2019
Regardless of the outcome of US-China trade talks, we think lower Chinese consumption will weigh on the price of soybeans next year . China typically consumes just under one-third of the global soybean crop and accounts for about two-thirds of the trade …
As business credit growth slowed further in October and business confidence fell to an eight-month low in November, the jump investment in the third quarter does not seem to be a sign of things to come. In last week’s policy statement, the Bank of Canada …
On a net basis, capital continued to flow out of Emerging Markets (EMs) last month, and we think that 2020 will be the seventh consecutive year of outflows. Capital flows play a major role in EMs, as they finance spending and affect financial market …
There is a growing expectation that Russia’s government will adjust the way the National Welfare Fund invests next year. In this Update , we take a closer look at what this means and explain why, contrary to hopes in some quarters, it is unlikely to …
Our election preview contains detailed analysis of the potential impact of the election on the economy and markets. Here we focus on what to watch on Thursday night to get a sense of the result and its implications. When will we know who’s won? The first …
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
Our calculations suggest that an average of the Bank of Canada’s three core inflation measures edged up to a fresh 10-year high in November. But given GDP growth has been below potential for much of the past year and firms report that they are raising …
10th December 2019
Given the government’s tendency to overspend in election years, we think that Ghana’s budget deficit will rise to about 8% of GDP next year. This will heighten investor concerns and put pressure on the currency and sovereign bonds. After narrowing as part …
Alberto Fernández’s government, which takes office today, will soon begin to implement its economic agenda and outline its proposals to resolve the debt crisis. This Update outlines four key things to watch. The first is an extension of capital controls . …
As the markets have priced in a high chance of this Thursday’s election delivering a Conservative majority there is little immediate upside left for the pound or gilt yields, although equities might still get a boost. There is, however, lots of scope for …
Severe power cuts in will weigh on the economy in Q4, and raise the serious risk of another technical recession. Even if the economy does manage to return to growth this quarter, recent weakness has set the stage for a disappointing 2020. Our …
We think that GDP growth in both Australia and New Zealand will fall short of expectations, forcing both the RBNZ and the RBA to cut interest rates more sharply than most expect. The consensus is that both the Kiwi and the Aussie dollar will strengthen …
Saudi Arabia’s 2020 budget makes clear that the authorities are preparing for a prolonged period of low oil prices by introducing fresh fiscal austerity. This, combined with the deeper oil production cuts agreed with OPEC+ last week, has prompted us to …
9th December 2019
