This dashboard tracks medium-term inflation expectations in the US, euro-zone and UK. In a world where the Phillips curve is flat, inflation expectations become the key driver of actual inflation over the medium term. But getting a true handle on …
Commodity prices have tumbled as concern about a banking crisis has grown. The downside risks to our forecasts, which we recently attributed to higher interest rates, now include banking sector stress. There has been a renewed fall in commodity prices …
16th March 2023
The direct impact on real estate of the collapse of two US regional banks over the weekend is likely to be relatively small. But we expect lending criteria to become more cautious in the short-term, which will weigh on the supply of real estate debt. …
Investors have taken today’s 50bp rate hike by the ECB as dovish, and the peak deposit rate now priced into markets is between 3% and 3.25%. We think the risks are skewed towards rates going higher than this and the economy performing much worse than …
We have already outlined some different scenarios of how things might evolve from here and it is still possible that the situation calms down quickly. But in this Update , we think through how the more adverse of our scenarios might evolve. There are …
Close call, but if the situation doesn’t deteriorate further we think there will be a 25bps hike Beyond that, fading of banking worries and stronger data required for more hikes Markets may be underestimating how far interest rates will be cut next year …
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
The newsflow this week has been dominated by the problems at Silicon Valley Bank (SVB) and Credit Suisse which have raised concerns over the health of the global banking system. If concerns continue to mount, this would pose downside risks to currencies …
Tighter credit conditions add to headwinds facing construction Single-family housing starts continued their weak start to the year in February with a marginal month-on-month increase. While forward looking indicators appear to have turned a corner, …
ECB prioritises inflation fight The ECB’s decision to raise interest rates by 50bp today was the riskiest of the available options – we think investors would have understood if the Bank decided to pause. But the Bank has hinted that it could offer new …
How will the Bank of England play its March rate decision following recent turmoil in the US and European banking sectors? Paul Dales, Ruth Gregory and Ashley Webb held an online briefing for clients shortly after the MPC announcement. During this …
Bank Indonesia (BI) today left interest rates unchanged (at 5.75%), and signalled that with inflation falling back more quickly than expected, rates would be left on hold over the coming months. In the event that the rupiah comes under sustained …
Neil Shearing Group Chief Economist While the joint statement issued last night by the Swiss National Bank (SNB) and FINMA (the Swiss regulator) offering to provide Credit Suisse with liquidity “if necessary” appeared a little half-hearted, the statement …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. The rupiah has held up relatively well over the past week despite the turmoil in global …
Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
Rebound doesn’t change recessionary outlook The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, but that still points to a fall in capital …
Economy is tipping into recession With the New Zealand economy in for more pain on the heels of the Q4 GDP decline, we expect the RBNZ to start cutting rates towards the end of the year. The -0.6% q/q drop in production GDP was weaker than most had …
15th March 2023
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
We think Japan’s exports rebounded by 7.0% y/y on February (23.50 GMT) The ECB may not hike rates tomorrow due to fears of a banking crisis (13.15 GMT) Sign-up here for our US Drop-in on our outlook for the US economy (15.00 GMT) Key Market Themes The …
Tentative signs of stabilisation, but risks abound House prices fell at a slower pace in February and the sharp improvement in the sales-to-new listing ratio offers some hope that they will soon stabilise. While the turmoil in the global banking sector …
The Budget has taken a bit of a backseat given the renewed worries about the health of the global banking system, but the Chancellor, Jeremy Hunt, was a bit more generous than we expected and probably plans to splash more cash ahead of the 2024/25 …
Crude stocks rise, but all eyes are on the banks Commercial crude stocks rose this week, but product stocks fell. That said, the bigger picture remains one of subdued domestic demand, which we expect to remain the case for some time yet. After a dip in …
Fed has difficult decision to weigh financial stability needs against inflation target. On balance, we think the Fed will still push ahead with a 25bp hike. But inevitable pull-back in bank lending means Fed should be cutting before year-end. The Fed …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But to the extent that …
Just when financial markets appeared to be calming down after the SVB saga, the sell-off in European bank shares has resumed this morning due to concerns about the viability of Credit Suisse. At this stage, a huge amount is unclear, but a few points are …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But there is a risk …
Economy likely to remain weak despite some encouraging signs GDP figures released today for Sri Lanka highlight the scale of the economic damage caused by last year’s political crisis and debt default. While there are some tentative signs that the worst …
Chancellor a bit more generous, but may fall short on long-term growth Today’s Budget has taken a bit of a backseat given the renewed worries about the global banking system, but the Chancellor was a bit more generous than we expected and we suspect he …
A preferential rate to facilitate wine exports is the latest addition to Argentina’s myriad exchange rates, but it doesn’t address the fundamental problem that the peso is overvalued. We estimate that the currency needs to fall by around 30% to restore …
SA economy in less dire straits; Inflation in Nigeria at new 17-year high January’s hard activity figures out of South Africa came in stronger than expected, reducing the chances of a technical recession. But momentum remains extremely weak. Elsewhere, …
Resilience in January unlikely to last The rise in industrial production in January was entirely due to strong growth in Germany and Ireland, with all other major euro-zone economies recording a fall in output. We expect industry to struggle this year as …
Even as the economy has slowed nominal all-property rental growth has held up relatively well. But that largely reflects the impact of high inflation, which is now falling. In any event, underlying supply and demand conditions are ultimately the more …
Investment outlook still gloomy despite upside machinery orders surprise The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, pointing to a …
The fracturing of strategic supply chains into US and China trade blocs threatens Australia’s existing significant trade with China but also presents Australia with an opportunity to align its trade relationships with its existing security …
This report has been updated with additional analysis and a table and chart of key data. Inflation past its peak Saudi Arabia’s headline inflation rate slowed to 3.0% y/y in February on the back of an easing of both food and non-food inflation. We think …
Soaring core inflation adds to pressure on the Riksbank Although it was partly due to higher food prices, the jump in the “core” measure of inflation in Sweden to 9.3% will reinforce policymakers’ determination to raise rates further. We expect another …
Vietnam’s central bank unexpectedly lowered interest rates late yesterday as it aims to support the struggling economy which has been hit hard by the downturn in global demand and problems in the property sector. We think the central bank will tread …
This year’s Shunto should result in the strongest negotiated pay hikes in decades. But the average Japanese employee will have little to rejoice in. Weaker corporate profits as well as a likely loosening of labour market conditions on account of a …
A stronger start to 2023 Activity data for the first two months were broadly as expected, showing a jump in consumer spending coupled with modest gains in investment and industrial output. High-frequency data suggest that this recovery has continued in …
The Canadian banking sector is heavily concentrated, reducing the risk that deposit runs at small lenders might trigger a broader crisis of confidence for the entire sector. As things stand, the chance of the Bank of Canada soon cutting interest rates – …
14th March 2023
OPEC sticks together and will keep output constrained OPEC’s monthly report for March noted that the group has stuck to the production targets agreed in October last year. Accordingly, we have revised down our forecasts for the group’s output in 2023. The …
Stronger-than-expected economic data in January led to a rebound in market interest rate expectations and a jump in mortgage rates from 6.2% at the start of February to 6.8% in March. That drove mortgage applications for home purchase lower and means …
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
Euro-zone industrial production probably edged up in January (10.00 GMT) The UK’s Spring Budget may contain limited short-term fiscal loosening (12.30 GMT) We think that US retail sales fell by 0.8% in February (12.30 GMT) Key Market Themes How the …
Given the large amount of uncertainty about how the fallout from SVB’s collapse will evolve, we have grouped possible outcomes into three broadbrush scenarios. Only in the worst scenario of financial problems spreading overseas will the global effects …
Starting with the ECB today, some major central bank decisions are due in the shadow of recent banking sector turmoil. Will policymakers press ahead with their fight to rein in inflation, or will the risk of financial instability inject caution into their …
Strong start to the year but risks on the horizon The manufacturing sector made a stellar start to 2023, but the surveys suggest growth will soon slow and the banking sector problems in the US could weigh on manufacturing demand over the rest of the year. …
