Turkey’s gross international reserves have hit a record high recently which, on the face of it, suggests that the policy U-turn since May has helped to diminish the country’s balance of payments vulnerabilities. But the central bank’s large on- and …
14th December 2023
The ECB left interest rates on hold today and pushed back against expectations that it will start cutting rates as soon as March next year. However, we think inflation and GDP growth will be lower than the ECB forecasts next year and anticipate five 25bp …
This week, we held a series of property roundtable discussions with clients in our London office as part of our World in 2024 series. In this Update, we outline our thoughts on the most interesting questions raised, covering electoral uncertainty and …
The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent soft wage and inflation data mean the Bank may not wait as long as …
Today’s decision by Norges Bank to hike its policy rate by 25bp to 4.50% marks the end of its tightening cycle. Looking ahead, we have pencilled in a faster pace of rate cuts next year than policymakers currently anticipate as we expect a weak economy and …
The target from COP28 to triple global renewable generating capacity this decade is encouragingly ambitious. But as our Climate Reporting Tools show, the goal will be easier to achieve in some countries than others, and attention will also be needed on …
Today’s SNB decision and statement were largely in line with expectations as the policy rate was held at 1.75% and policymakers removed any mention of FX sales. We think the latter decision signals that loosening is imminent and will probably first …
The most immediate impact of South Africa’s pension reform, due in September 2024, is that contributors will be allowed early access to some of their retirement savings, which could provide a near-term lift to consumption. Similar measures introduced in …
Falling mortgage rates breathe life back into the market Declining mortgage rates have already generated a significant improvement in demand, with the new buyer enquiries and sales expectations balances recording their strongest readings for over a year …
The Fed’s reluctance to acknowledge that it will need to begin cutting its policy rate soon – to prevent a run-up in real rates – was predictable enough based on its intransigence ahead of previous turning points in the policy cycle. We continue to expect …
13th December 2023
Falls in financial market interest rate expectations mean that mortgage rates will drop to a six-month low in December. That will support a further recovery in housing market activity in the near term. But, if we are right to think the Bank of England …
The front runner in Taiwan’s election, Lai Ching-te, is targeting economic growth of 3.5% if he wins the presidency. We think this will be out of reach. Although productivity growth should hold up well, the rapidly worsening demographic outlook means that …
The economic reform measures announced yesterday by Argentina’s Economy Minister Luis Caputo, including a large devaluation of the peso and fiscal tightening, mark a clear change in policymaking from the previous Peronist administration. But this wasn’t …
The detailed mortgage lending data for Q3 show that the high cost of borrowing has continued to price many out of the market and made new BTL investment unattractive. But while arrears are rising, they are not translating into repossessions so we still …
Today’s budget update showed that the government now expects a balanced budget in 2023/24, as opposed to the modest deficit it had projected a few months ago. With revenue likely to outperform the government’s conservative assumptions, we think an …
Tensions between the Philippines and China have once again flared up in the South China Seas. However, the fact that the Philippines is not closely integrated into China’s economy means the economic fallout from the deterioration in relations with China …
11th December 2023
Hybrid working is gradually allowing firms to cut back on the amount of office space they require, but it also means they need to think more about the attractiveness of their offices to support attendance levels across the week. Moving to a smaller, prime …
The extension of climate-related financing by the IMF to vulnerable emerging market economies (EMs) demonstrates how the Fund is factoring in macroeconomic and financial stability risks stemming from climate change to its policy work. While these packages …
We doubt that the removal of the RBNZ’s employment objective would make much difference to economic outcomes, but forcing the Bank to achieve its inflation target within too short a period of time could cause unnecessary swings in output when inflation is …
Europe’s natural gas price will continue its downward trend in 2024-25 as more LNG supply enters the market . And while there may be some recovery in demand as prices fall, we think there has been a structural shift down in European gas consumption. While …
8th December 2023
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. Against a backdrop of robust economic growth and a renewed rise in food inflation, we doubt the central bank will loosen policy until the second half of …
China’s commodity imports mostly rose in November, but there was a sharp drop in crude oil imports. We think that non-oil commodity import volumes will hold up in the coming months on the back of looser fiscal policy, but current high stocks could …
7th December 2023
Even though we expect the economy to be weaker than the consensus in 2024, we think that lingering constraints on domestic supply will prevent wage growth and services CPI inflation from falling quite as fast as is widely expected. As a result, we think …
SNB Chairman Thomas Jordan recently reiterated the Bank’s line that “we will not hesitate to tighten monetary policy further if necessary” but the actual question is whether policymakers will hesitate to cut rates. We think the answer is yes and that they …
Even though zinc supply growth is likely to remain solid owing to strong growth in China and easing input cost constraints in Europe, we think that those factors will be outstripped by a recovery in demand. As such, our forecast is for the zinc price to …
As the year draws to a close, this note looks back at the recent performance of stock markets across the world and lays out our view of what might happen next year. In short, US equities have largely outperformed in 2023, and we think that they will …
A stand-out feature of the emerging world in 2023 has been the extent to which economic cycles have diverged. Divergence is likely to be the name of the game in 2024 too. We think some countries which have performed surprisingly well this year (e.g. …
Despite the recent paring back of interest rate expectations across Europe, we think Norges Bank is likely to go ahead with one final 25bp hike next week – taking the policy rate to a peak of 4.50% – though it will signal that its tightening cycle is …
We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception. The …
The Bank of Canada is clinging on to the idea that restrictive policy is still needed to get inflation back to 2%. Nonetheless, with core inflation pressures muted, GDP and house prices falling, and labour market conditions loosening rapidly, it won’t be …
6th December 2023
Cocoa prices neared a 45-year high in November on the back of concerns about supply from Côte d’Ivoire and Ghana. Constrained supply alongside high seasonal demand will, in our view, continue to support high cocoa prices through 2024, until new supply …
We held two online Drop-In sessions today to discuss the outlook for 2024 and the risks to our forecasts. (See a recording here .) This Update summarises the answers to several of the questions that we received. Are there recessions coming in advanced …
5th December 2023
November JOLTS data suggest that labour market slack is growing, even as payroll growth remains relatively resilient. With signs pointing to a sharper fall in wage growth ahead, the Fed can be reassured ahead of its meeting next week that that …
Hotel demand has suffered recently from the impact of high inflation and interest rates weighing on discretionary spending. But thanks to the soaring cost of foreign holidays and a revival in international tourism, we think that hotel rental growth will …
First-time buyer (FTB) loan originations have been weak for over a year now. That’s mainly down to higher mortgage rates which have made buying too expensive for many younger adults. And as we think mortgage rates are unlikely to drop much below 6.0% …
Inflows into EM bond and equity markets have picked up over the past month, particularly in Turkey where optimism around the policy U-turn seems to be building. Capital flows into EMs may be bumpy in the very near term as global growth disappoints, but …
Given the high bar for further rate hikes, we’re more confident than ever that the Reserve Bank of Australia is done tightening policy. That said, there is a good chance that the cash rate will remain at its cyclical peak for longer than we currently …
Rising OPEC+ output in Q2 2024 should leave global crude supply less constrained than we had previously expected. This, together with only modest growth in global oil demand, should push the crude market into a small surplus in Q4. Accordingly, we have …
4th December 2023
Although we expect US equity office REITs to benefit further from falling long-dated Treasury yields, we continue to think that their long-run prospects are blighted by a structural reduction in demand. Real estate was the best-performing sector of the …
We expect the Treasury yield curve to “disinvert” in 2024, as we think the Fed will cut rates by more than investors expect and term premia will remain at least as high as they are now. The spread between the yields of 10-year and 2-year Treasuries has …
Brazil’s first sovereign ESG bond arrived last month amid much fanfare, but the reality is that any “ESG premium” looked fairly limited to us. And we think ESG bond premia, in general, will likely remain low. Brazil’s government issued its 7-year US …
Our view about relative economic and interest rate prospects in Sweden and the euro-zone suggests that the Swedish krona’s recent rebound may prove durable. In fact, given how far below “fair value” it appears to us, we think that the krona will rise …
The latest batch of state election results suggests that support for Prime Minister Modi’s BJP remains firmly intact and that it is clearly in the driving seat to secure another victory in next year’s general election. That reduces the risk of big fiscal …
While there have been growing concerns about public finances in some euro-zone countries recently, prospects for Greece’s debt are quite bright. Steady economic growth, large primary surpluses and low interest expenditure should keep the debt ratio on a …
The manufacturing PMI surveys have overstated the weakness in industrial production over the past couple years. But, even taking this into account, November’s PMIs suggest that while global industry might be past the worst, it looks set to end 2023 and …
1st December 2023
The emerging market manufacturing PMIs for November were a mixed bag – although most headline indices edged up, they remained below 50 in over half the countries that we track, largely due to weak external demand. But price pressures did ease across the …
China PMI surveys suggest that the economy flatlined in November, but there was good news for commodity demand with the relative strength in the construction PMI. We suspect that underlying activity is stronger than the PMIs and that this will support …
With hindsight, part of the boom in the industrial sector seen during and after the pandemic now looks like a bubble. That raises the risk that the overhang of assets started during that period of irrational exuberance will now weigh on rents. However, …
The November PMIs for Emerging Asia generally nudged up a touch but remained weak overall. The outlook for manufacturing sector in the region remains bleak in the near term as elevated inventory levels, high interest rates and subdued foreign demand weigh …
Our AI work has identified data centres as a clear winner from these innovations. That the sector is already in rude health is borne out by the latest real estate data. But it remains to be seen if it can ever reach the scale to displace more traditional …
30th November 2023
