Minutes stress uncertainty over economic outlook Despite the ‘higher for longer’ message from the Fed’s updated rate projections last month, the minutes from the September FOMC meeting suggest that officials’ confidence in those forecasts is limited, with …
11th October 2023
Surveyors reported the most widespread price falls since February 2009 in September as mortgage rates of over 5% took their toll. Looking ahead, a further slide in house prices appears inevitable. The drop in the past prices balance to a fresh 14-year low …
Overview – The outlook for offices is negative across all markets, but we expect substantial differences across the 17 metros we forecast. We now think Seattle, San Francisco and Austin will see vacancy rise by more than 5%-pts over 2023-25, taking the …
Inflation now starting to take off The larger-than-expected rise in Russian inflation to 6.0% y/y in September will concern policymakers at the central bank and suggests that price pressures are now well and truly building in the economy. We think the …
The price of wheat and corn will stay historically high for now, as Russia’s withdrawal from the Black Sea Grain Initiative has re-ignited concerns about supply from Ukraine. We think that prices will drift lower into 2025 as supply from other producers …
The fall in Treasury yields since last Friday has pushed corporate bond yields down and equities up in the US. But while we think that Treasuries will keep rallying, we suspect that corporate bonds and equities will fare quite poorly in the near term. …
Note: We previewed Poland’s election and the economic and financial market issues surrounding it in a Drop-In on Thursday, 12 th October . Watch the 20-minute recording here . The outcome of Poland’s parliamentary election this Sunday will likely have a …
Tightness in Mexico’s labour market continues to fuel wage pressures, with real wages now rising at their fastest pace since the early 2000s. But this isn’t being matched by productivity growth and, in turn, threatens to keep inflation above Banxico’s …
There may be more political support for the creation of a Central Bank Digital Currency (CBDC) in the European Union than in some other economies. However, it is still uncertain whether it will ever see the light of day or whether there would be much …
The recent strength of core inflation compared to that in the US is mainly due to a rebound in durable goods prices. That has little to do with demand, which has weakened to a greater extent in Canada, suggesting that either the earlier depreciation of …
We’ve long argued that EMs were well placed to weather the Fed’s tightening cycle and episodes of rising US Treasury yields – and that has largely been borne out. And, as it happens, the latest sell-off in global bond markets has started to reverse over …
This page has been updated with additional analysis since first publication . Services inflation remains stubbornly strong The further rise in Brazilian inflation to 5.2% y/y probably marks the peak in this mini-inflation cycle and the headline rate …
Headline inflation has jumped across much of Emerging Asia over the past couple of months on the back of rises in food and fuel prices. This won’t prompt central banks to resume tightening (the Philippines is the exception). However, the rise in inflation …
First clear signs of slowdown emerge The m/m falls in Turkish retail sales and industrial production in August provided the first clear signs that economic activity has started to soften following the policy U-turn earlier this year. Policy tightening …
We expect a continued paring back of US interest rate expectations to keep pushing long-dated Treasury yields down in coming quarters. But higher term premia may limit those falls in yields. Moves in long-dated Treasury yields have been mixed so far …
10th October 2023
Labour has made housing a major theme of its conference, and the party’s attitude towards New Towns and social housing means that the next election could prove a turning point in the structure of the UK housing market. Over the past 30 years successive …
Surging Treasury yields have pushed mortgage rates above 7.5%, higher than we had anticipated. If these borrowing rates persist, lending and sales volumes could fall even further in the near term creating a risk that house prices fall rather than stagnate …
The UK manufacturing sector has faltered in recent months, as rising interest rates and slowing economies in many parts of the world have cut global demand. That spells trouble for manufacturing demand and suggests yields in that subsector will see a …
Flows out of EM bonds and equity markets have intensified in recent weeks amid the sell-off in global bond markets, and an escalation of the conflict between Israel and Gaza would exacerbate this further. Nonetheless, the narrowing of current account …
Despite a marked improvement in Egypt’s current account deficit, the pound’s de-facto peg is deterring critical capital inflows and adding to concerns over large external financing needs. A fresh devaluation and a commitment to a flexible exchange rate …
This report has been updated with additional analysis, as well as a chart and table of the key data. Inflation at or close to its peak Egypt’s headline inflation rate picked up from 37.4% y/y in August to a fresh multi-decade high of 38.0% y/y in …
Fall in inflation increases chances of November rate cut The larger-than-expected fall in Czech inflation in September, to 6.9% y/y, increases the chance of policymakers kickstarting a monetary easing cycle at their next meeting in November. We remain …
Lower inflation suggests that Norges Bank is done As a result of September’s weaker-than-expected inflation data from Norway, we now think that Norges Bank’s tightening cycle is over . The decline in CPI inflation from 4.8% in August to 3.3% in September …
Any fall in bond prices resulting from higher bond yields won’t affect the BoJ’s balance sheet unless the Bank decides to sell its holdings. By contrast, rising interest payments on commercial banks’ reserve holdings could create losses, though those …
Central banks in both Australia and New Zealand are likely to retain their hawkish bias in the near term, given that inflation is far from tamed in either country. While we think the RBNZ's tightening cycle is over, we expect RBA to hand down one final …
The recent shift towards looser fiscal policy in Italy and increase in sovereign bond yields once again have raised concerns that investors may lose confidence in Italy’s ability to sustain its debt burden. We don’t think this will morph into an acute …
9th October 2023
The latest war between Hamas and Israel comes at a tricky juncture for global markets, and could easily increase volatility further. At this point, we think there are three key considerations around the potential market fallout. First, major financial …
Welcome to a world of higher interest rates. This in-depth analysis shows you how the structural forces that have weighed on equilibrium real interest rates over the past two decades have faded, and the powerful new drivers that are likely to push them …
The scale of the rise in bond yields over recent weeks has provoked worries about the impact on real estate. The sell-off presents an upside risk to our yield outlook, but we think falling inflation will help bond yields across the region to soon fall …
Note: We discussed the outlook for oil prices and the geo-economics around the conflict between Israel and Hamas in a Drop-In on 9th October. Click here to watch the recording. First and foremost, the renewed fighting between Hamas and Israel since the …
Fresh rise in services inflation to harden Banxico’s hawkish stance Mexico’s headline inflation rate continued to edge lower, to 4.5% y/y, in September on the back of softer core price pressures. Even so, the fresh rise in services inflation will …
The Asian Tiger economies of Korea, Singapore, Hong Kong and Taiwan are likely to be among the biggest beneficiaries of the emergence of new AI technologies. But the boost will not be enough to offset the drag from worsening demographics, and we still …
The attack by Hamas militants on Israel, and the Netanyahu government’s declaration of war, brings renewed turmoil to the Middle East, threatening regional political and economic stability. In this special online briefing, economists from our Macro and …
The attack by Hamas on Israel on Saturday has led to widespread casualties and deaths, and the declaration of war by Israel’s prime minister. From an economic perspective, the experience from the 2014 Gaza war suggests that the effects on Israel’s economy …
A strong September headline payrolls number whipsawed global bond markets on Friday but the net result was that yields ended the week at post-GFC highs. According to the financial commentariat, this is all part of the pain of adjusting to a “higher for …
This page has been updated with additional analysis since first publication. Weakness in German industry to continue The further drop in German industrial production in August was better than it looked as it was driven by volatile components. However, it …
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
That September US payrolls report has triggered renewed selling in global bond markets. With yields threatening to hit fresh multi-year highs and investors scrambling for reasons behind the sell-off, Group Chief Economist Neil Shearing and Deputy Chief …
7th October 2023
Bond Market Sell-Off …
6th October 2023
The US stock market has rallied so far today and is on track to bring to an end a spell of weekly losses. Although we think that the proximate cause of this recent weakness – rising bond yields – has largely run its course, we don’t expect the fortunes of …
Remarkably, the dollar may be about the lose its record streak of weekly gains despite a strong US payrolls report . (See Chart 1.) While the initial reaction to today’s data was another jump in the greenback, it has since given back that gain, and those …
The further rise in home listings in September and likelihood that mortgage rates will increase amid the global bond market sell-off suggests that house prices will soon fall again. While employment rose strongly in September, the fall in hours worked …
Nigeria: labour strike averted at a cost Nigeria avoided a potentially disruptive workers’ strike this week after the government made a late offer of short term relief measures, but these risk adding to fiscal and inflationary pressures. Unions had called …
Feeling the spillovers… Latin America has been far from immune from spillovers from the sell-off in global bond markets. (For more on the impact on the global economy, see here .) Like in DMs, local currency bond yields in the region have risen sharply, …
Rising long rates a fiscal rather than monetary problem Surge in long yields not all due to higher for longer The conventional wisdom is that the recent surge in Treasury yields is a reaction to the Fed’s “higher for longer” message. But that surge has …
It has been a week of declines for most commodity prices, as commodities were caught up in the more widespread selling of financial assets. (See Chart 1.) Chart 1: S&P GSCI and US 10Y Treasury Yield Sources: Refinitiv, Capital Economics Crude oil prices …
Turkey: rebalancing now underway Data releases this week finally provided some signs that Turkey’s inflation and current account problems are starting to ease. Admittedly, inflation continued to rise in September, to 61.5% y/y, from 58.9% in August. But …
