RBI not ready to pivot yet There were no surprises from the RBI’s policy announcement this week, with the repo rate being kept on hold at 6.50% once more. We had even suggested that MPC member Jayanth Varma would dissent, and in the event he was the only …
9th February 2024
Weakness underlying headline strength There was the usual seasonal surge in net credit in China in January that took new bank lending to a record high. The underlying story is less positive, with loan demand little changed and broader credit growth slower …
This page has been updated with additional analysis since first publication. Further easing in core inflation sets up Q2 rate cut January’s continued fall in core inflation in Norway, and renewed fall in the headline rate, support our view that price …
RBA’s hawkish bias will be put to the test While the RBA’s decision to leave rates on hold on Tuesday didn’t surprise anyone, the Bank’s Monetary Policy Statement did raise a few eyebrows. In contrast to a number of its developed-market counterparts, the …
Households will pinch pennies for a while yet Consumer spending is likely to remain subdued in the near term, helping to ease demand-side pressures on inflation. Experimental data published by the ABS show that household spending rose by 2.4% y/y in …
US corporate credit spreads have continued to shrink even as bankruptcies have soared but, while they are now fairly narrow, we think there is still some scope for them to tighten further over the remainder of this year. It hasn’t been a great start to …
8th February 2024
Rates on hold, Banxico to stay cautious even once easing cycle begins Mexico’s central bank left interest rates unchanged at 11.25% again today but the accompanying statement further opened the door to the start of an easing cycle, probably at the next …
The recent fall in the homeownership rate revealed by the Housing Vacancy Survey (HVS) is unlikely to reverse given still-high mortgage costs. The survey also provided more evidence in support of our view that the homeowner market will remain tight this …
We expect government bond yields in emerging market (EM) economies to fall over the remainder of the year, helped by a broadening easing cycle and falling Treasury yields. While the big question around monetary policy in developed market (DM) economies is …
Bahrain taps bond market as repayments near This week, Bahrain became the latest emerging market to issue dollar bonds which will help it meet large upcoming debt repayments. But fiscal policy will need to be tightened in the coming years to put the …
After a sweet start to the year, sugar prices should take on a more sour note over the rest of 2024. Prices will fall back as El Niño comes to an end and the supply outlook improves but any relaxation of India’s sugar export curbs will only be modest. …
Although the recent transition to a higher interest rate climate has not caused any lasting or systemic financial flare ups, it is probably too soon to sound the all-clear. And while a higher interest rate climate in the medium-term will reduce …
Another rise in all-property yields in Q4 helped valuations improve slightly. But on our measure all-property still looks substantially overvalued. Looking ahead, a fall in alterative asset yields will help valuations gradually improve this year, but they …
The strength of payroll employment growth over the past two months is likely to be a blip rather than the start of a renewed acceleration and the wider evidence still points to a further slowdown in wage growth. Following the unexpected strength of …
CNB steps up its easing cycle The Czech National Bank (CNB) accelerated the pace of its monetary easing cycle today with a 50bp interest rate cut, to 6.25%, and the post-meeting communications support our view that an even larger interest rate cut is on …
Dragon years have been middling for economy The world’s largest annual migration of people is well underway, with millions of Chinese returning to their hometowns to spend the Lunar New Year holiday with their families. On Saturday, the Year of the Rabbit …
Mexican inflation drops, but Banxico to hold firm later today The jump in Mexico’s headline inflation rate to 4.9% in January means Banxico won’t feel comfortable enough yet to start an easing cycle at the Board meeting later today. Elsewhere, the further …
Inflation continues to slow, but looming devaluation will keep it high Egypt’s headline inflation rate slowed for a fourth consecutive month, easing from 33.6% y/y in December to 29.9% y/y in January. We think inflation will continue to slow this year, …
The euro-zone will remain close to recession in the first half of the year as the effects of higher interest rates continue to weigh on household consumption and investment, and fiscal policy is tightened. Headline inflation will be close to the ECB’s 2% …
External demand strong, domestic demand weak The Q4 GDP data due next week are likely to show that the economy staged a partial rebound after the sharp contraction in Q3. But the details will probably confirm that domestic demand remained weak. Indeed, we …
Governor Karahan committed to tight policy, rate cuts some way off The communications from new Turkish central bank governor Karahan at today’s Inflation Report briefing will have helped to reassure investors that the change at the helm of the central …
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. With the economy holding up well and inflation likely to remain above the 4% target for a few more months yet, we doubt the central bank will loosen …
Demand firming up and activity increasing The strongest set of survey results since the tail end of the 2020-22 house price boom provided further evidence that lower mortgage rates have led to a recovery in demand. We suspect that respondents are right to …
RBI not ready to pivot yet The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. With the economy holding up well and inflation to remain above the 4% target for a few more months yet, we doubt the central …
This page has been updated with additional analysis since first publication . Inflation set to rebound gradually but remain low CPI fell deeper into deflationary territory last month. But this was largely due to the usual volatility in food and tourism …
Economy rebounds strongly following war and sanctions shock Russia’s economy expanded by 3.6% over 2023 as a whole, marking a sharp rebound from a contraction of just 1.2% in 2022 (revised from 2.1%). The activity data for December suggest that the …
7th February 2024
Policy support for Chinese equities may facilitate a near-term rebound, but investors probably need to be convinced that the government's attitude towards the private sector has shifted if there is to be a more sustainable rally. Chinese equities have …
The resurgence in productivity growth is mainly a cyclical response to the tightness of the labour market rather than a sign that the AI revolution is already bearing fruit. Nevertheless, that still implies scope for productivity growth to remain …
While not our base case, continued strength in the US economy would probably be a tailwind for the US dollar over the coming months. But even in that event, we think the dollar would eventually weaken as bond yields fell in the US relative to elsewhere as …
Saudi Arabia’s economy contracted by 0.9% over the course of 2023 on the back of the Kingdom’s oil output cuts. But the recession ended in Q4 and we think that a gradual recovery will ensue over 2024 as fiscal policy is kept loose, interest rates are …
Are European and UK commercial real estate markets facing the same level of distress as the US? We held a Property Drop-In on Wednesday, 14th February , A recording of the session can be viewed here . Falling interest rates will not prevent a rise in …
The large rise in the Brazilian government’s budget deficit, to 8.9% of GDP, over 2023 as a whole should partially reverse this year. But the key point is that the underlying sovereign debt dynamics are worsening. And unless the government pulls out all …
We have argued that most of the inflation battle is already won and fears that “ the last mile will be the hardest ” are overdone. But during our online Drop-In session last week, clients asked whether inflation in the major advanced economies might …
Trade balance back in deficit Net trade appears to have contributed to the likely rebound in GDP last quarter but, with exports falling in December and the survey indicators of external demand still weak, that boost will probably go into reverse this …
Support to growth from surging exports set to fade A sharp rebound in real exports in December helps explain why net external trade supported GDP growth in the fourth quarter but, with the surveys indicating that external demand is weakening fairly …
Rates on hold, March rate cut is in the balance The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and we think that an interest rate cut at the next meeting in March looks finely balanced. Our current assumption is that …
The faster-than-expected fall in wage growth in November suggests the unexpected rebound in CPI inflation in December will be fleeting. We still think that by April CPI inflation will have fallen below the 2.0% target, and further declines in utility …
Indonesia has some of the best long-term growth prospects of any economy. Key to whether it realises them is whether Indonesia maintains the progress President Joko Widodo (better known as Jokowi) has made on productivity-boosting structural reform. …
Mortgage demand continues to recover The average mortgage rate in January was unchanged from the month before, but that didn’t prevent mortgage applications for home purchase rising for a third consecutive month. And with interest rates set to resume …
While the overall incidence of sovereign debt distress in the emerging world has fallen back since last year, sovereign debt distress in frontier markets hasn’t. And, if anything, things have taken a turn for the worse in recent weeks in some of the more …
Remittances are often an underappreciated source of foreign currency for India. While growth in remittances will slow in the next few years, they should remain an important source of external funding for the economy and help to keep the current account …
Large monthly increase confirms bumper start to 2024 The large 1.3% m/m gain in Halifax’s measure of house prices in January was the largest since June 2022, and suggests we are already almost halfway towards our forecast that house prices will rise by 3% …
On hold, cuts likely around mid-2024 The Bank of Thailand (BoT) today resisted pressure from the government to cut interest rates to support the struggling economy. But with growth set to remain weak and inflationary pressures very subdued, we think the …
This page has been updated with additional analysis since first publication. Industrial recession continues The seventh consecutive monthly fall in German industrial output in December confirms that industry remains a significant drag on growth. We expect …
This page has been updated with additional analysis since first publication. Rise in unemployment has further to run Although the unemployment rate last quarter came in below the RBNZ’s expectations, leading indicators continue to point to a rapid …
6th February 2024
What does the recent data flow and Jerome Powell’s pushback mean for the timing of the first Fed rate cut? How quickly and easily will core inflation get back to target? How far will the Fed go to cut rates this year? Chief US Economist Paul Ashworth and …
Although last week’s renewed underperformance of US regional banks and equity office REITs sparked fears of another mini banking crisis, a fairly steady decline in the option-adjusted spreads (OAS) of private label commercial mortgage backed securities …
Surprise hike, tightening cycle may not be finished yet The Central Bank of Kenya delivered a surprise 50bp interest rate hike today, to 13.0%, suggesting that the MPC’s inflation fears are outweighing signs that exchange rate pressures are easing. With …
Chile is frequently identified as one of the main beneficiaries of global efforts to put economies on a greener footing, but we doubt that the country will reap the full benefits of this trend. Chile is likely to struggle to substantially raise copper and …
