Filtered by Region: G10 Use setting G10
With the Reserve Bank of Australia still striking a hawkish tone at its meeting today, we’re pushing back our forecast for the Bank’s first rate cut from May. But we still think that incoming data will show enough of a drop in inflation alongside …
6th February 2024
RBA pours cold water on the prospect of early rate cuts Although we're sticking with our view that the RBA is done tightening policy, rate cuts may not be in play until the second half of this year. The RBA’s decision to leave its cash rate on hold at …
This page has been updated with additional analysis since first publication. Further regular wage increases incoming While winter bonus payments increments disappointed in December, regular wage growth accelerated substantially. Looking ahead, we think …
5th February 2024
Credit conditions normalising The Fed’s latest Senior Loan Officer Opinion Survey suggests that banks have put last year’s SVB regional bank crisis firmly behind them and, with long-term interest rates markedly lower than the peaks reached last October, …
Recent headlines have drawn attention to the immediate risks facing multifamily investors and lenders. While we think this concern is appropriate, we think the biggest risks face assets financed at historically low fixed rates in 2020-21. Problems are …
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
Given the rise in rents and the recent decline in mortgage rates, the financial benefit of buying over renting is increasing. This will boost buyer demand and cause tenant demand to soften this year. As housing is a necessity, households must either rent …
Services activity apparently gaining momentum Following on the heels of the strong labour market data, the rebound in the ISM services index to a four-month high of 53.4 in January, from 50.5, is another signal that the US economy remains impervious to …
If Jerome Powell dampened talk of a March rate cut on Wednesday then the January payrolls report on Friday stamped it out for good. In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing dives into the …
2nd February 2024
First rate cut delayed until May Based on the steer provided by Fed Chair Jerome Powell halfway through this week’s press conference, we now expect the first Fed rate cut to come at the early-May FOMC meeting rather than in mid-March, with the Fed cutting …
The upside surprise to fourth-quarter GDP should, somewhat counterintuitively, make the Bank of Canada more confident that inflation is heading back to 2% because it implies that productivity has rebounded. Nonetheless, with the Federal Reserve pushing …
The Bank of England caused a lot of waves in the media and some ripples in the markets this week. But it hasn’t altered our thinking that lower inflation than the Bank of England expects will mean rates are cut from 5.25% to 5.00% in June and all the way …
Surging employment may explain Fed’s hawkishness The 353,000 surge in non-farm payrolls in January illustrates why the Fed is apparently in no rush to start cutting interest rates and kills off any remaining chance of a cut as soon as March. Even if that …
We expect big tech to drive the S&P 500 higher still in 2024, despite a mixed performance from the shares of most of the so-called ‘Magnificent 7’ over the last ten days in the wake of a flurry of earnings reports. To re-cap, six of the Magnificent 7 have …
Kishida pushing for wage increases PM Kishida pledged on Tuesday that the government will “take all possible steps” to raise real incomes this year. While he mentioned no new measures, his government recently rolled out tax breaks for firms that offer …
RBA will soon be gearing up for rate cuts… CPI data released this week bolstered our conviction that the Reserve Bank of Australia will loosen policy in Q2, rather than in Q4 as the analyst consensus is predicting. For one thing, both headline and trimmed …
The big picture from January’s manufacturing PMIs was the growing outperformance of industry in major EMs compared to their advanced economy peers. The surveys also highlighted that Red Sea disruptions are causing delivery times to lengthen. For now, …
1st February 2024
Despite the Bank of England (BoE) following the Fed in pushing back against imminent rate cuts, Gilt and Treasury yields are on track to post big falls today. That partly reflects renewed concerns over US regional banks, and offers a reminder that for …
Manufacturing sector turning a corner The rebound in the ISM manufacturing index to 49.1 in January, from 47.1, indicates that the downturn in the sector is fading and appears to justify the Fed’s view that it can wait a little longer before cutting …
The recent acceleration in the Labour Force Survey measure of wage growth seems to be overstating wage pressures. The other wage indicators, which are normally more reliable, show far lower rates of growth. With labour market slack increasing, it is …
While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent a signal that the next move will be a cut, but it pushed back strongly against the idea that rates will be cut soon or far. Our forecast that inflation …
Cuts may come earlier than the BoE implies While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent some soft signals that the next move will be a cut, but it pushed back more strongly against the idea that …
World goods trade looks to have had one of its weakest years in over 40 years in 2023. While shipping diversions may weigh on trade in the very near term, we think that they are unlikely to dent trade activity over a longer period. The bigger headwind is …
Leading indicators still point to weaker house price growth Although house price gains remained firm in January, we still expect them to soften in the months ahead. While rate cuts are on the horizon, they will do little to improve homebuying capacity. In …
Powell suggests first rate cut more likely to be May Based on the surprisingly explicit steer provided by Fed Chair Jerome Powell halfway through today’s press conference, we now expect the first Fed rate cut to come at the early-May FOMC meeting rather …
31st January 2024
Fed drops its tightening bias The Fed left its key policy rate unchanged at 5.25% to 5.50% today, but dropped its tightening bias, keeping open the possibility of a rate cut at the next FOMC meeting in mid-March. Admittedly, the new policy statement warns …
High interest rates are still feeding through and we expect both GDP and employment to be flat over the next two quarters. As excess supply builds, a fall in inflation to the 2% target will leave scope for the Bank of Canada to cut interest rates sharply, …
If he wins this year’s presidential election, Donald Trump’s plans for a universal 10% tariff on all imports and tariffs of up to 60% on imports from China specifically would subtract up to 1.5% from US GDP and trigger a rebound in inflation that could …
We think the recent divergence between the BLS measure of apartment rents and other sources is due to reliability issues with the former, which we expect will be revised higher in future releases. Therefore, while it currently points to a downside risk to …
Slower wage growth reinforcing disinflationary trend The further slowdown in wage growth evident in the fourth-quarter employment cost index illustrates that easing labour market conditions are helping to push inflation down. With the moderation in job …
GDP growth set to remain well below potential The monthly GDP data imply that the economy returned to growth in the fourth quarter and the strong handover from December reduces the risk of the economy contracting this quarter, despite the weakness of the …
The RBA will hold its fire at its meeting next week With inflation falling rapidly, the Bank is likely to dial back its hawkish bias Rate cuts will be on the agenda sooner than most anticipate We expect the Reserve Bank of Australia to leave rates on hold …
Larger-than-expected increase supports our above-consensus forecast The larger than expected +0.7% m/m gain in house prices in January (consensus: +0.1%, Capital Economics: +0.4%) reflected improving public sentiment about the economy and the housing …
This page has been updated with additional analysis since first publication. With disinflation gathering pace, rate cuts are now in sight The weaker-than-expected Q4 inflation reading paves the way for the RBA to cut interest rates sooner than most are …
This page has been updated with additional analysis since first publication. GDP growth will be positive in Q4 Though retail sales was very weak in December, strong industrial production data to close out the quarter reinforces our view that Q4 GDP growth …
Typically, US REIT price indices have been a good indicator of the growth path for capital values in the direct market. That said, even though REIT prices rebounded in Q4 2023, we don’t expect the direct market to follow any time soon as the property …
30th January 2024
The December JOLTS data show a continued painless normalisation in the labour market – with job openings on a downward trend, layoffs unusually low and wage growth set for a sharp slowdown. Job openings have rebounded over the past couple of months …
Our forecast that CPI inflation will fall below 1.0% later this year suggests that Bank Rate will be cut from 5.25% now to 3.00% rather than the low of 3.50-3.75% priced into the market, 10-year gilt yields will decline from 3.90% now to around 3.25% by …
Surprise slowdown in house prices in November The marked slowdown in house price growth in November was the first sign of a response in prices to the spike in mortgage rates a month earlier. The 0.2% m/m rise in the seasonally adjusted national …
This page has been updated with additional analysis since first publication. A turning point in credit December’s money and credit figures suggest the transition from interest rates being a drag on activity to being a boost is beginning. This lends some …
Resilient lending in December, but anaemic investment volumes Net lending to commercial property increased for the tenth consecutive month in December, but investment sentiment remained downbeat. Looking ahead, we expect investment to slowly recover over …
The Reserve Bank of New Zealand launched a consultation on changes to its macroprudential framework last week. In our view, the proposed tweaks are unlikely to have a meaningful impact on the housing market one way or the other. The big picture continues …
This page has been updated with additional analysis since first publication. RBA’s concerns about weak household spending will rise The sharp fall in retail sales in December adds to the case for the Reserve Bank of Australia to loosen policy settings …
We think the best days for US investment-grade (IG) corporate bonds will soon be over. One reason is that credit spreads are now already very low. The option-adjusted spread (OAS) of ICE BofA’s index of US IG corporate bonds, for example, dipped below …
29th January 2024
The worsening in total returns to -3.0% q/q in Q4 was consistent with our expectations of bigger-than-average year-end markdowns. But the major takeaway was that the data and NCREIF’s release notes support our view that there will be growing distress and …
Do maritime disruptions threaten a repeat of pandemic-era supply shocks? Should investors brace for an inflationary resurgence? Amid Houthi attacks on shipping and fears of escalating conflict in the Middle East, a team of senior economists from our …
Inflation: Mission accomplished? We maintain a high conviction that core PCE inflation will be back to the 2% target by mid-2024. Despite claims that “the last mile will be the hardest”, core PCE prices have already been running at a 2% annualised pace or …
Post-ECB and pre-Fed and Bank of England, Group Chief Economist Neil Shearing explains what data dependency means for central banks as they try to gauge when to begin rate cuts – and manage the market’s expectations about when those cuts will start. …
26th January 2024
