Although we think that the Fed is set to end its tightening cycle in July, we aren’t convinced that 10-year Treasuries will outperform 2-year Treasuries in the way that they have after recent Fed tightening cycles. We expect the Fed to wrap up its …
9th June 2023
Turkey embraces orthodoxy, but for how long? Optimism about a shift towards orthodox economic policymaking was at the heart of developments in Turkey this week amid the appointments of a new cabinet and central bank governor and a sharp fall in the lira. …
Inflows into EM financial markets have held up well over the past few weeks, with particularly strong inflows into local equities. That said, if we are right that a renewed period of global risk aversion lies in store, we suspect that these inflows will …
Labour market starting to loosen The increase in the unemployment rate to 5.2% in May will probably not prevent the Bank of Canada from raising interest rates again at its July meeting, as the weakness was partly a statistical effect related to reduced …
Central Bank Drop-In (15th June): We’ll be discussing the Fed and ECB June decisions and previewing the Bank of England’s upcoming meeting in a 20-minute online briefing at 10:00 EDT/15:00 BST on Thursday . Register Now. We learnt this week that the …
Industry struggling to sustain momentum from early 2023 Mexico’s industrial sector expanded by 0.4% m/m in April but this only partially reversed a sharp decline in March and suggests that the economy is struggling to sustain its momentum at the start of …
Central Bank Drop-In (15 th June): We’ll be discussing the Fed and ECB June decisions and previewing the Bank of England’s upcoming meeting in a 20-minute online briefing at 10:00 EDT/15:00 BST on Thursday . Register Now. The OECD joined the ranks of the …
CBR turns its hawkish rhetoric up a notch Russia’s central bank left rates on hold at 7.50% as expected today, but delivered an even more hawkish message as it said that pro-inflation risks have increased further and that it will consider the need to hike …
No more hikes in Thailand Inflation figures published this week for Thailand showed the headline rate fell from 2.7% y/y in April to just 0.5% in May, which puts it well below the central bank’s 1-3% target. A key factor behind the decline was a 11% m/m …
RBI hawkish, but inflation outlook improving The Reserve Bank of India (RBI) didn’t throw up any surprises when it kept the repo rate on hold at 6.50% this week. The move was widely expected and the muted reaction in local financial markets suggests that …
Inflation surprise strengthens case for more Norges Bank tightening Following May’s stronger-than-expected inflation data, a rate hike by the Norges Bank later this month looks nailed on. A 25bp move still seems most likely, but the risks are skewed …
Q1 GDP saw large upward revision The government in its May monthly economic report upgraded its view of the economy, changing its assessment to say that “the economy is recovering moderately”, dropping the previous qualifier that “there was some …
Rate hikes will drive double-dip housing downturn The big news this week was RBA Governor Lowe indicating that the Board’s patience to tolerate high inflation was waning. The Bank’s hawkish turn, coming at a time when unit labour costs are growing at …
Ueda resolutely dovish despite continued strengthening of price pressures Yield Curve Control here to stay at least until conclusion of review next year Inflation set to fall sharply next year which will make it difficult to abandon YCC The Bank of …
This page has been updated with additional analysis and charts since first publication. Inflation remains low as initial reopening effects begin to fade Producer price deflation deepened further last month to a 87-month low. Consumer price inflation …
While we anticipate that the ECB will deliver more rate hikes this year, we don’t think that this would trigger another leg up in long-term euro-zone government bond yields. In fact, we suspect that yields will fall a bit over the rest of 2023, partly …
8th June 2023
Although a lot of bad news now appears to be priced into US equity office REITS, the sector still faces significant challenges. This suggests to us that a material improvement in its fortunes is not likely soon. US equity REITs in aggregate have …
We think Peru’s central bank will leave its policy rate on hold (00.00 BST) Inflation in China was probably very low last month… (02.30 BST) … but we think it remained elevated in Norway (07.00 BST) Key Market Themes After sitting out most of this year’s …
ECB almost certain to raise interest rates by 25bp next week. And likely to have a bias towards further tightening. We expect Lagarde to emphasise that policy will remain tight for a long time. A 25bp interest rate rise next week, taking the deposit …
A handful of EM central banks were quick out of the blocks to tighten monetary policy in 2021 and one of the key lessons of the past year or so is that underlying inflation pressure is still proving incredibly hard to beat. The fight against inflation …
Overview – The region’s strong start to the year is unlikely to be sustained and we expect growth across Latin America to come in weaker than most expect this year and next. Inflation will continue to fall, but core price pressures are likely to remain …
Our updated industrial metros analysis, which now incorporates the current vacancy rate, continues to point to Memphis as having the strongest prospects for rent growth over a three-year horizon. Miami, Orlando, San Diego, LA and Nashville also rank …
Is Saudi Arabia taking its eye off the ball? Outside of the usual economics newsflow this week, Saudi Arabia has been the hot topic in the footballing and golfing world. It was announced control of four Saudi Pro League clubs is being transferred to the …
Dismal economic growth has established the Korean won as one of the worst-performing emerging market (EM) currencies against the dollar this year. We expect Korea’s bleak growth prospects and unfavourable yield gaps to keep the won weak, though its …
Inflation drops, but rate cuts still some time away Headline inflation in Mexico dropped to a 21-month low of 5.8% y/y in May and will continue to decline over the coming months. That said, the strong labour market and rapid wage growth mean that …
Preventing large-scale leaks of methane from Turkmenistan’s creaking infrastructure would be a welcome sign of emissions-cutting efforts broadening out from carbon dioxide to include other harmful greenhouse gases too. But while Turkmenistan has become …
Euro-zone in recession, outlook poor News that GDP contracted in Q1 after all means that the euro-zone has already fallen into a technical recession. Given that the impact of policy tightening is yet to fully feed through, we suspect that the economy will …
Refinancing risks increase The recent upward revision to our mortgage rate forecast and the fact that the majority of those that need to refinance this year are on two-year fixes means that we are now more worried about the risk posed by refinancing. …
Recent economic difficulties have forced online retail to tighten their returns policies. At face value, this seems good news for retail property as it may shift demand back to stores for certain categories. However the change is unlikely to be a big …
EZ already in recession, outlook still poor News that GDP contracted in Q1 after all means that the euro-zone has already fallen into a technical recession. We suspect that the economy will contract further over the rest of this year. Data released today …
The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as no surprise given the recent sharp drop in inflation. The central bank continues to strike a hawkish tone and the door remains ajar for further hikes. But with headline inflation …
Normalising supply could make future drop in demand more damaging The significant improvement in the RICS survey in May echoed the pause in house price falls in the past few months. But the survey also showed an increase in supply, which could …
RBI could be laying groundwork for cuts before long The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as no surprise given the recent sharp drop in inflation. The door remains ajar for further hikes but with headline inflation set to …
Net trade to boost GDP in Q2 The narrowing of the trade surplus in April was driven in large part by a deterioration in the terms of trade. We think net exports will actually provide a modest boost to GDP growth this quarter. The decline in the trade …
Japan’s carmakers face an existential threat from the emergence of cheap EV exports from China. Even in a benign scenario where carmakers eventually jump on the EV bandwagon, we suspect that they would have to rely on battery technology from China and …
Net trade to boost GDP in Q2 The rise in the import bill in April likely overstates the strength of domestic demand in Australia. The decline in the trade surplus to $11.2bn in April, from a downwards-revised $14.8bn in March, was sharper than most had …
We expect the RBI to keep interest rates on hold on Thursday (05.30 BST) A revision to euro-zone Q1 GDP could show the bloc in a technical recession (10.00 BST) Sign up for our Drop-In to unpack the major June central bank meetings here Key Market …
7th June 2023
Overview – Most commodity prices have moved lower over the past month as concerns about demand loomed large and the US dollar strengthened. We think that prices will continue to struggle over the next few months, but energy and metals prices should rise …
June pause to be followed by July hike, taking rates to a peak of 5.25%-5.50% Labour market resilience means we now don’t expect rates to be cut until Q1 next year Fed funds target range to fall to 2.75%-3.00% by end-2024 There appears to be enough …
The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for at least one more hike in July, to take the policy rate to …
According to our proprietary interest rate-sensitive indicators, activity in advanced economies has so far proven remarkably resilient to higher interest rates. A lot of this has been due to a rebound in auto sales related to pandemic distortions, whereas …
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
Exports still benefitting from easing support shortages Easing supply shortages supported strong export growth in April but, with the surveys of export orders still very weak, that strength is likely to fade soon. Canada’s goods trade surplus widened from …
What will major advanced economy central banks decide at their June meetings, and how will those decisions be messaged? In this special briefing, Paul Ashworth , Andrew Kenningham and Paul Dales , our Chief Economists for the US, Europe and UK, …
Slump in exports to weigh on Q2 GDP growth The widening in the trade deficit to a six-month high of $74.6bn in April, from $60.6bn, means that net external trade is on track to be a big drag on second-quarter GDP growth, with the latter still tracking …
More than €1trn of TLTROs will be redeemed over the next eighteen months, significantly reducing euro-zone banks’ liquidity and pushing up their funding costs as they adjust their balance sheets. Banks may also increase their holdings of government bonds …
This webpage has been updated with a table and chart of key data Inflation hits multi-year low, but rate cuts still some way off The fall in Brazilian inflation to 3.9% y/y in May, alongside the government’s new fiscal framework, has strengthened the …
Growth in China’s commodity imports generally was strong in May, with a notable rise in crude oil imports. While the data are consistent with our above-consensus outlook for China’s growth this year, a note of caution needs to be applied. Export demand …
Exports still benefitting from easing supply shortages Easing supply shortages continued to support export growth in April but, with export orders still very weak, that resilience is likely to fade soon. Canada’s goods trade surplus widened from a …
