Pre-election tax cuts in prospect, but risks to the fiscal outlook growing The news on the public finances may have raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year. But the big risk is that a further …
21st March 2023
With bond yields now dropping back again, the drag from unrealised losses on banks’ capital ratios should start to reverse. However, a sharp increase in losses on banks’ foreign loan portfolio has yet to materialise. While our view that major advanced …
RBA not done hiking yet The minutes of the RBA’s latest meeting confirm that the RBA is close to ending its tightening cycle, but we suspect that the strength of the latest labour force data will prompt it to deliver two more 25bp rate hikes. Contrary to …
Clients can access all our latest research on the banking sector crisis here … … and catch-up on today’s Drop-in on the topic here Canada’s CPI inflation probably fell to 5.4% in February, from 5.9% in January (12.30 GMT) Key Market Themes Financial …
20th March 2023
Overview – The RBI’s tightening cycle is in its final throes and, as the economy softens and inflation drops back to within the central bank’s 2-6% target range, we think rates cuts will materialise in early 2024. Over the longer term, India’s growth …
Stripping away calendar effects, global aluminium production increased slightly last month. We expect output to continue to grow steadily this year, mostly in response to rising demand in China. According to the International Aluminium Institute (IAI), …
In ordinary times, today’s launch of the Intergovernmental Panel on Climate Change’s (IPCC) sixth synthesis report in Interlaken would have been the most high-profile news event to emerge from Switzerland. As it happens, amid the drama of the Credit …
As the dust began settling on a hastily arranged takeover of Credit Suisse by UBS, our economists briefed clients on what’s next in this recent surge in turmoil in the banking sector. In these excerpts from the briefing, you’ll hear them discuss key …
EMs, in general, don’t appear to have suffered large capital outflows over the past 10 days or so amid the turmoil in the global banking sector. But some countries with large current account deficits (Chile, Colombia, Hungary) have seen their currencies …
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
From Latin America’s growth star to weakest link The weaker-than-expected 0.1% q/q expansion in Chile in Q4 of last year confirms that high inflation and tight monetary policy are taking a heavy toll on the economy. We think the economy will contract by …
Click here to read the full report Overview – Both the RBA and the RBNZ have more work to do to rein in the recent surge in inflation. That aggressive monetary tightening is starting to take its toll on economic activity and we expect GDP growth to slow …
Markets remain in a febrile state despite the weekend deal for UBS to buy Credit Suisse and a joint central bank statement pledge to beef up dollar liquidity support. What will it take to restore confidence and end this crisis? Economists from across our …
Credit Suisse solution raises new questions The uncertainty over the long-term viability of Credit Suisse ended over the weekend when it was acquired by UBS – the solution which at face value offers the best chance of re-establishing stability in the …
Neil Shearing Group Chief Economist When things move as rapidly as they have done over the past week, it’s often difficult to see the wood for the trees. Although the situation is still in flux, whether the relative calm of the end of last week marks the …
A rushed deal for UBS to take over embattled rival Credit Suisse ahead of the start of the Monday open is the latest effort by authorities to restore market confidence and staunch a crisis in the banking sector that is now threatening to run into its …
19th March 2023
In a week dominated by headlines about bank failures and the risk of another financial crisis, resulting in extraordinary volatility in government bond markets as interest rate expectations have plunged, the foreign exchange market has been a haven of …
17th March 2023
Commodity markets were not spared the effects of widespread turmoil in the global banking system. Most prices ended the week lower as investors fled risky assets. The gold and silver prices bucked this trend and surged higher; unsurprising in a week …
We expect the Fed to press ahead with a 25bp hike next week (Wed.) The Bank of England and Norges Bank will probably also hike by 25bp (Thu.) But we think the SNB may raise rates by 50bp (Thu.) Key Market Themes Despite a better day for financial …
The fixed payment structure of most variable rate mortgages has cushioned households from the impact of high interest rates so far, with the data this week confirming that debt service costs remained low last quarter. But that only delays the pain in …
After concerns over US regional banks progressed to panic over the health of a Global Systemically Important Bank in Credit Suisse, a sense of calm was returning by the end of this week. No new banks have followed SVB and Signature to the wall, the ECB …
Strong payrolls did not make it into the office January was an especially strong month for payrolls data, and this translated into positive employment growth across all 30 of the biggest metros. However, this was not the case for office-based jobs, as a …
While commodity prices have also been caught up in the chaos stemming from the banking sector turmoil, so far the impact hasn’t been too alarming as price falls for most commodities haven’t been overly large. Where those falls have been greatest, such as …
Worries about the health of the global banking system dominated headlines this week after the collapse of Silicon Valley Bank (SVB) and concerns about the viability of Credit Suisse. Our coverage of ongoing developments can be found here . In terms of the …
SVB, Credit Suisse and Latin America Concerns about the health of the global banking system following the collapse of Silicon Valley Bank (SVB) and problems at Credit Suisse have triggered a sharp-sell off in Latin American financial markets this week …
Strains in the global banking system have roiled financial markets. (For our full coverage and latest insights, visit our dedicated webpage .) While affected banks may be far away from Sub-Saharan Africa and direct exposures seem limited, the global …
Surveys point to renewed weakness soon The February industrial production data were marginally stronger than we had expected, with manufacturing output rising by a further 0.1% m/m following the 1.3% surge in January. But with the regional surveys going …
The past week has provided a worrying reminder of the fragility of banking systems to rising interest rates. All our analysis on this can be found on our key themes page . Many metrics of financial market functioning have deteriorated worryingly fast and …
China’s financial system has limited direct exposure to foreign banks. But recent global banking strains still pose some downside risk to the country’s economy. While there are signs that the situation is stabilising, it’s too early to rule out a wider …
As we commented here , Credit Suisse’s problems are in principle a bigger threat to the global economy than those of the regional US banks that failed last week. Its balance sheet is more than twice as large as that of Silicon Valley Bank, for example, …
Confidence declining even before banking turmoil Some of the hit to confidence from turmoil in the banking sector will have been captured in the University of Michigan’s consumer sentiment provisional reading, which fell to 63.4 in March, from 67.0, but …
US banks’ problems may have only just begun, but we doubt a Global Financial Crisis 2.0 is on the cards. As is well known by now, last year’s surge in bond yields, stemming from a dramatic increase in interest rates, caused US commercial banks to rack …
Surveys point to renewed weakness soon The February industrial production data were marginally stronger than we had expected, with manufacturing output rising by a further 0.1% following the earlier 1.3% m/m surge in January. But with the surveys going …
Limited impact so far All of our coverage of the turmoil in the global banking system can be found on our dedicated webpage . There are also some webinars on the crisis you can listen to on demand. (See here .) For Emerging Asia, the impact has so …
Even before SVB’s collapse prompted a reassessment of the health of the global banking system, bank credit conditions were already tightening in response to higher interest rates. (See Chart 1.) We have written many notes to help navigate the …
Euro-zone bank equities have come under severe pressure this week after troubles at some US regional banks and at Credit Suisse raised concerns about the health of banking systems more generally. At the time of writing, the Eurostoxx bank index is down …
While the backdrop has shifted dramatically, we still think there’s a strong case for our existing forecasts of a further rally in long-dated bonds by the end of the year, and some near-term strength in the US dollar and weakness in equities. The Swiss …
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates slightly. But given the wider signs of …
CBR keeps Q2 rate hike on the table The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the …
Core inflation and wage growth strong The strength of wage growth and core inflation will reinforce ECB policymakers’ conviction that, provided the region’s banks don’t come under further sustained pressure, their tightening cycle is not over. It came as …
RRR cut not a major easing move The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates …
We don’t think the collapse of SVB, problems at Credit Suisse and volatility in markets will deter the Norges Bank from raising its policy rate by 25bp next week, to 3.0%. If anything, the risks are skewed towards a 50bp hike. And we think the policy rate …
Limited contagion, but Indian banks a worry Our coverage of the collapse of SVB and the turmoil at Credit Suisse and their implications for the global economy and financial markets can be found on our dedicated webpage . For India, the fallout so far has …
Amid growing concerns about the global economic backdrop , financial markets not only believe that the RBA is done tightening, but that rate cuts are on the horizon. (See Chart 1.) However, we’re not convinced. The latest data don’t yet show domestic …
Global financial risks creeping up The troubles at Silicon Valley Bank and Credit Suisse have dominated the headlines this week and have further weakened the case for the Bank of Japan ending Yield Curve Control (YCC). Market expectations for the Fed …
Fed’s discount window lending hits record high The Fed’s weekly balance sheet publication (H.4.1) shows the scale of the stresses in the financial system, with outstanding emergency loans standing at $318bn yesterday, up from $15bn a week earlier. To put …
16th March 2023
We think the SNB will push ahead with rate hikes despite the Credit Suisse crisis, and raise the policy rate by 50bp to 1.5% next Thursday. By its own exacting standards, inflationary pressures in Switzerland are acute with core inflation reaching its …
The ghosts of 2008 have made a sudden reappearance. Many metrics of core market functioning have worsened worryingly fast, but the overall situation is still long way short of the type of strains seen during the worst parts of the Global Financial …
We expect Russia’s central bank to leave its policy rate on hold (10.30 GMT) US industrial production probably fell back in February (13.15 GMT) Clients can watch today’s Drop-In on banking sector turmoil and central banks here Key Market Themes The ECB …
