While office performance surprised on the upside and we could have been much bolder in our forecast for industrial yield falls, our other forecasts for 2021 proved to be broadly correct. With the arrival of a new year, it is always worth looking back to …
5th January 2022
We expect inflation to remain stubbornly high in 2022, forcing the Fed to tighten monetary policy aggressively even though real economic growth underwhelms. The chances of additional fiscal stimulus have dwindled and will drop off the table entirely if …
With central banks across Central and Eastern Europe (CEE) raising interest rates to tackle inflation, we think the risks of a wage-price spiral are low. Even so, persistently above-target inflation, tight labour market conditions and strong domestic …
2022 will be a year of slower growth in China as the property and export sectors weaken and structural constraints loom larger. A desire to keep a grip on credit risks will inhibit the policy response to the slowdown. Xi Jinping’s decision not to step …
December’s batch of whole economy PMIs showed that activity in non-oil sectors in the Gulf softened due to the uncertainty created by the emergence of the Omicron variant. Restrictions have been tightened in recent weeks, but the experience from other …
Given the huge surge in cases throughout December, the COVID-19 situation is once again set to be the biggest determinant of the performance of the economy over the first few months of 2022. We aren’t factoring in any additional UK-wide restrictions, but …
As long as recurrent large waves of COVID are avoided, we think that Indian GDP growth will accelerate this year. At the same time, inflation is likely to rise more sharply than generally expected. The result is that policy rates will be hiked by more …
We expect GDP to return to its pre-virus path in the second half of the year as services spending finally returns to near-normal. However, the risks to that forecast remain tilted to the downside as consumers may remain cautious for longer. Meanwhile, we …
December’s PMIs suggest that EM manufacturers ended last year on a firm note, with headline indices rising in much of Emerging Europe and Emerging Asia. Encouragingly, input and output price components dropped back in many EMs, suggesting that inflation …
4th January 2022
The National Bank of Poland (NBP) raised its policy rate by another 50bp, to 2.25% today and we expect at least another 75bp of tightening, to 3.00%, in the next few months. But with energy bills set to surge and wage pressures strengthening, the risks …
December’s manufacturing PMIs revealed that global industry rounded off 2021 on a positive note, with output growth picking up and price pressures easing as supply problems improved. But the PMIs gave us little insight into the early effects of Omicron as …
The December PMI data for China point to a healthy pick-up in commodity demand. But this only partially reverses the declines from earlier in 2021, and the big picture remains that commodity demand in China is set to struggle this year as headwinds facing …
Manufacturing PMIs and timely trade data reveal that Asia’s export-focussed industry gained momentum at the turn of the year. While the Omicron variant presents a key threat to the outlook, it is unlikely to cause nearly as much disruption to industry as …
The recent sale of a 25% share of the Bluewater shopping centre has provided further evidence of the slump in retail values. And while there are signs that the worst of the correction may now be over, we don’t think that a turnaround is likely soon. The …
24th December 2021
Despite tight supply and the boost to demand from e-commerce, we think Turkey’s recent currency crisis will further weigh on Istanbul industrial rents and that rental growth will slow sharply after this year. Echoing the trend seen elsewhere in Europe, …
23rd December 2021
This year’s surge in natural gas prices means that HICP inflation may be up to one percentage point higher next year than it would otherwise have been. However, aggregate energy inflation is still likely to come down during 2022, because transport fuel …
22nd December 2021
The Czech National Bank (CNB) hiked rates by 100bp (to 3.75%) today and Governor Rusnok struck an incredibly hawkish tone after the meeting. The tightening cycle clearly has further to run and we now think the CNB will bring interest rates to 4.50% by …
International travel restrictions and domestic containment measures have dealt the hotel sector a massive blow over the last two years. The outlook for the sector is more positive, but a slow relaxation of restrictions, tourist hesitancy and reduced …
The Bank of Thailand (BoT) left interest rates on hold today at 0.5% and hinted in its statement that it was in little rush to tighten monetary policy. The setback to the tourism sector caused by the spread of Omicron means rates are likely to remain at …
We always expected European natural gas prices to remain high over the winter because of low stocks, but heightened uncertainty about supply from Russia has caused prices to skyrocket again. Assuming supply isn’t affected, though, our expectation is that …
21st December 2021
The closure of many high-contact services in Quebec yesterday is likely to soon be matched by tighter coronavirus restrictions elsewhere. That said, if other provinces also allow stores and restaurants to stay open, then the hit to GDP will be smaller …
Exchange stocks of base metals have fallen this year, as supply was interrupted by power rationing in China as well as the ongoing effects of COVID-19. However, now that power restrictions have been lifted, and with Chinese construction activity …
A new scheme announced by Turkey’s President Erdogan last night, which compensates holders of lira deposits for exchange rates losses, has triggered a sharp rally in the lira and will help to mitigate some of the risks that had started to crystalise in …
Four central themes in currency markets this year have been the US dollar’s steady grind higher since June, the underperformance of other safe-haven currencies, the remarkable stability of the USD/CNY exchange rate, and the large falls in several emerging …
20th December 2021
Gabriel Boric’s victory in Chile’s presidential election is another sign that the country is moving towards greater state intervention in the economy. A radical shift in policymaking seems unlikely. But the public debt-to-GDP ratio looks set to rise much …
Foreign investors have been net sellers of EM assets for much of this year and tighter monetary policy in the US and a stronger dollar suggest that the environment for EMs next year will remain challenging. The good news is that most major EMs should be …
The pandemic-driven boost in scientific research and development will support demand in the European life science sector, at least for the next few years. This bodes well for several markets we forecast, including Warsaw and Copenhagen. The shift to more …
The People’s Bank has taken another modest easing step with a 5bp reduction to the One-Year Loan Prime Rate, although it kept the Five-Year rate on hold. We expect more easing to follow in the coming months. The one-year rate decreased from 3.85% to …
Following yesterday’s interest rate cut in Turkey, the lira has plunged again and is now faring worse than other Emerging Europe currencies have done during recent sudden stops. There are some signs of stress emerging in the banking sector. These aren’t …
17th December 2021
After taking on board the Federal Reserve’s recent hawkish pivot, we now forecast that the central bank will raise its policy rate much more quickly than we had previously anticipated. (See here .) This Update highlights three main consequences for our …
We are revising down our end-2022 and end-2023 forecasts for the 10-year US Treasury yield by 25bp each, to 2.00% and 2.25%, respectively. This compares to its current level of ~1.4%. Admittedly, we now project that the Fed will raise its policy rate far …
Russia’s central bank (CBR) stepped up the pace of its tightening cycle today with a 100bp interest rate hike, to 8.50%, and the hawkish communications reinforce the message that it will not hesitate to raise interest rates further. We now expect a 75bp …
We expect growth in almost every major economy to slow next year, with the US and China in particular falling some way short of current expectations. At the same time, while headline inflation will drop sharply, core inflation will remain higher than most …
Banxico added to this week’s global central banking bonanza with a surprise 50bp hike, to 5.50%, and the widespread hawkish shift on the Board suggests that policymakers will act more aggressively to tame above-target inflation. We now expect a further …
While central banks elsewhere are becoming increasingly hawkish, the Bank of Japan kept policy loose today and is set to remain among the most dovish central banks for the foreseeable future . The Bank left its interest rate targets unchanged as widely …
The Flash PMIs for December suggests that activity is slowing across advanced economies, as new virus waves and the emergence of the Omicron variant have already started to weigh on activity in the services sector. On the other hand, the PMIs also pointed …
16th December 2021
While the hike in Bank Rate from 0.10% to 0.25% came a little earlier than we expected, it does not change our view that the overall rise in interest rates over the next couple of years will be modest. However, the continued strength of both inflation and …
The ECB confirmed today that it will reduce the pace of its monthly asset purchases to €40bn by April next year. It plans to reduce them to €20bn by October and then continue as long as necessary. We have brought forward our forecast of the first rate …
The surprise hike in interest rates by the Bank of England today, from 0.10% to 0.25%, could just be a case of the Bank moving a bit quicker than expected, but the hawkish tone of the commentary suggests to us that it is now also willing to move a bit …
Yesterday’s Fed meeting confirmed a hawkish shift. Turkey aside, we doubt that this is likely to cause major strains in the balance of payments of most EMs. But the Fed’s hawkish turn may cause domestic monetary policy to be tightened slightly more …
Turkey’s central bank shrugged off a currency crisis, rising inflation as well as the recent hawkish turn from the Fed and remained obedient to President Erdogan by cutting its one-week repo rate by another 100bp, to 14.00%, today. The accompanying …
Our estimates show a fall in the risk premium in the oil price since the emergence of the Omicron variant, as concerns over demand resurfaced. But the risk premium is still large, which adds weight to our view that oil prices will fall next year as the …
While the Swiss National Bank maintained the status quo once again this morning (yawn), the Norges Bank continued its tightening cycle, as expected, and opened the door to another rate hike in March. We are sticking to our hawkish forecast that rates will …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125% and despite rising inflation, surging property prices and the strong economy, we don’t think policymakers will be in any rush to tighten policy. Today’s decision was unanimous and …
The continued threat of new virus waves, and therefore fresh rounds of travel restrictions, suggests that global migration flows could remain subdued for a while yet. However, we continue to doubt that the pandemic will have any major lasting impact on …
Bank Indonesia (BI) left interest rates unchanged at 3.5% at its meeting today, and despite the prospect of the US Fed raising interest rates soon, we don’t think BI will be in any rush to tighten. The decision to leave rates unchanged came as no surprise …
The central bank in the Philippines (BSP) today left interest rates unchanged at 2.00%, and with inflation set to ease further over the coming months we think the central bank will keep monetary policy loose for the foreseeable future. Today’s decision …
The government unveiled only modest increases in spending in today’s fiscal update. And while the unemployment rate has now reached levels where the Treasurer has pledged to start repairing the public finances, the government’s priority remains to support …
The Fed delivered an even more hawkish shift at the December meeting than we had anticipated, with the pace of tapering doubled and officials now forecasting three rate hikes next year. Reflecting that new tone, we now expect the Fed to raise rates three …
15th December 2021
Given the fast-moving virus situation in Europe, and mindful of the fact that Omicron won’t be taking a festive break, this Update identifies five key areas of uncertainty to watch over the coming weeks. Europe was labelled the epicentre of the pandemic …
