Fiscal stimulus pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And with pressures from the weakening economy and most of the costs from the government’s energy price support …
21st December 2022
Fiscal stimulus and high inflation pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And the trio of the government’s energy price support, cost of living payments and pressures …
The jump in bond yields and the further strengthening of the yen following the widening of the Bank of Japan’s tolerance band for 10-year JGB yields will lower the value of assets owned by Japanese investors. Insurance firms will be most affected by …
According to RBA estimates, household interest payments jumped from 5.1% of disposable income in Q1 to 6.9% last quarter and we expect them to reach 12.5% by end-2023. (See Chart 1.) With household debt around record highs of 189% of disposable income, …
The surge in government bond yields around the world in response to today’s decision by the Bank of Japan (BoJ) to tweak its policy of Yield Curve Control (YCC) highlights the risks to international markets posed by the country’s huge investment overseas. …
20th December 2022
The EU’s new policy to limit gas prices is unlikely to be activated next year. And with so many caveats built in, it seems the only thing countries agreed on was that a cap was indeed needed to show unity. We are sceptical that the EU’s mechanism to cap …
Headline inflation may have dropped back in Canada in November (13.30 GMT) We expect the Czech central bank to keep interest rates on hold (13.30 GMT) Sign up here for our Drop-In on Wednesday to discuss the BoJ decision Key Market Themes Although …
Click here to read the full report. Table of Key Forecasts Overview – The sharp slowdown in EM GDP growth seen in 2022 is likely to be followed by further weakness across most of the emerging world in 2023. Sluggish growth and falling inflation will …
The Bank of Japan's last policy meeting of 2022 was a big one, with a surprise announcement of changes to its yield curve control policy. In this special episode, Marcel Thieliant, who leads our Japan coverage, speaks to David Wilder about out what the …
The government’s reform agenda struggled for momentum in 2022 as key state elections (notably in Uttar Pradesh in March and Gujarat in December) dominated the calendar, and surging food and fuel prices set a tricky political backdrop. But the results of …
Weak new home demand weighs on starts Single-family housing starts continued to fall in November as weak new home demand weighed on homebuilder confidence. We expect this to push starts down to a trough of 650,000 annualised in the coming months, before a …
Sales volumes struggling for momentum Retail sales volumes are struggling for momentum and, with the services spending indicators also showing some weakness, household consumption may be heading for a second consecutive quarterly contraction. The 1.4% …
The Bank of Japan’s unexpected decision to alter its yield curve control (YCC) policy has led to a surge in the yen today; we now expect the USD/JPY rate to drop further, reaching 125 by end-2023. The yen has jumped by ~3% against other major currencies, …
Aluminium production in decline, despite positive base effects A low base in 2021 is driving an increase in global aluminium output this year, but the bigger picture is that growth in supply is slowing as high power costs and soft demand take their …
MNB staying the course as inflation pressures persist Hungary’s central bank (MNB) left its base rate on hold again at 13.00% and is likely to use its communications later today to reaffirm its commitment to its market stabilisation tools to defend the …
The past few weeks have brought mostly good news on the inflation front, with the headline rate dropping back in most countries in November. (See Chart 4.) Less encouragingly, however, core inflation has continued to rise and is now at multi-year highs …
Following on from our recent background note on the EU’s Carbon Border Adjustment Mechanism (CBAM) and the signing off on the tool by EU Ministers over the weekend, this Update examines which countries may be most affected by the eventual introduction of …
Does the Bank of Japan’s surprise announcement about changes to its yield curve control policy point to a fundamental shift in its monetary stance? Is this new regime defensible? And what will these changes mean for JGBs the yen, and for financial markets …
While we had expected the rise in risk-free rates and upcoming recession to boost yields, the speed at which they have increased has been surprising. All-property equivalent yields rose by a total of 78bps in October and November, reversing all the …
The performance of African economies diverged early this year, but the latest data provide clearer signs that growth across the region is now slowing. Economic weakness seems most pronounced in Ghana, where the impact of the country’s sovereign debt …
Group Chief Economist Neil Shearing held this special 20-minute online briefing with Chief Markets Economist John Higgins and Chief Commodities Economist Caroline Bain on the outlook for financial and commodity markets. The team answered client questions …
Chief Global Economist Jennifer McKeown and colleagues from across our macro services held a special briefing on what to expect from major DMs and EMs in 2023. In this 20-minute session, the team will be answered client questions as they discussed the …
Wider YCC band not start of tightening cycle The Bank of Japan today tweaked its Yield Curve Control (YCC) settings by widening the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s …
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
End of RBA’s tightening cycle is nearing The fact that the RBA discussed keeping the cash rate unchanged for the first time since the start of the current tightening cycle at its December meeting suggests that it won’t hike rates much further, though we …
The return of inflation for the first time in the inflation-targeting era has led to the biggest jump in Bank Rate and mortgage rates since the late 1980s. (See Chart 1.) The steady downward trend in mortgage rates from 6.5% in 2008 to 1.5% at the end …
19th December 2022
We expect the PBOC to keep the Loan Prime Rate on hold (01.15 GMT) The BoJ will probably keep its policy settings unchanged… …and we think Hungary’s central bank will do likewise (13:00 GMT) Key Market Themes Investors seem to have priced in a more …
Click here to read the full report. Overview – We think the euro-zone is now at the start of a recession, driven by high inflation, tightening financial conditions and weak external demand, and anticipate two quarters of contraction followed by a gradual …
Click here to read the full report Overview – The sharp rise in interest rates this year has prompted a price correction, which is now coming through in valuation-based indices. Combined with the mild recession we are forecasting for 2023, this will weigh …
Five key reads from 2022 It’s that time of year when economists set out their views of what to expect over the next twelve months. You can find our contribution on a dedicated “ World in 2023 ” page, and listen to our latest podcast , in which I discuss …
Central banks across Central and Eastern Europe (CEE) have left interest rates on hold over the past month or so but their communications have continued to strike a relatively hawkish tone. Hungary’s central bank has suggested that interest rates may be …
Click here to read the full report. Overview – The challenging external backdrop means that growth across Sub-Saharan Africa is likely to slow in 2023, and by much more than most expect. Currencies are likely to weaken and public debt fears will grow, …
Tight labour market suggests that wage growth will stay strong Euro-zone wage growth has accelerated this year and we expect it to stay strong. In turn, this will contribute to core inflation remaining above 2% in 2023. Data released this morning showed …
Click here to read the full report. Table of Key Forecasts Global Overview – We continue to expect the world to slip into recession in 2023 as the effects of high inflation and rising interest rates are felt. Our forecasts are below the consensus across …
Sentiment recovers further, but recession still coming The further increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But …
A mooted adjustment to the joint statement between the Bank of Japan and the government has been widely interpreted as a step towards the withdrawal of ultra-loose policy. However, the policy implications of giving the Bank more flexibility in meeting its …
Sentiment recovers further, but recession still coming The renewed increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But we …
After a choppy few days in financial markets, the US dollar is ending the week a touch stronger against most other major currencies as risk sentiment has worsened sharply in the wake of the latest round of central bank meetings. We suspect this will …
16th December 2022
Ramaphosa still in, De Ruyter out, economy down This week, South Africa’s president dodged impeachment and is likely to be re-elected as leader of the ruling ANC party over the weekend, but the country’s economic challenges have only grown. Early this …
We expect the BoJ to leave its policy settings unchanged next week… (Tue.) …and we think central banks in Hungary, Czechia and Turkey will do likewise Indonesia’s central bank will probably slow its pace of tightening to 25bp (Thu.) Key Market Themes …
CEWC points to further policy support The Central Economic Work Conference (CEWC) ended today with a readout in state media promising further policy support for consumers and property developers in particular. China will “expand domestic demand” and …
The raft of inflation data and central bank policy decisions were key drivers of prices this week, but to some extent China stole the show. We now think that a dismantling of the zero-COVID policy is well underway. On paper, the removal of restrictions …
Chile’s constitutional re-write: Attempt number two After three months of intense negotiations, Chile’s government and opposition parties agreed on a new process to re-write the constitution. This differs from the previous one (which led to a draft …
December’s flash PMIs suggest that the economic downturn in Q4 in Europe might not be as bad as previously feared. But the PMI fell sharply again in the US. And the surveys are still consistent with GDP in advanced economies contracting in Q4. But at …
Say what you want about 2022, but it wasn’t a dull year. After 12 months of geopolitical upheaval, the biggest inflationary spike in decades, central bankers going full Volcker and giant swings in financial markets, what will 2023 bring? In this special …
One third of the rise in household net worth during the pandemic has now been reversed and the further fall in house prices in November points to another deterioration this quarter. Lower net worth, in turn, is a headwind to consumption in 2023. Net …
Despite the Fed’s continued hawkishness, the further softening in core inflation and weakness of the early activity data in November leave us more convinced that the FOMC will be cutting interest rates again by the end of next year. Fed’s new …
Hungary strikes last minute deal, but risks remain The EU’s approval of Hungary’s COVID-19 recovery plan this week is a welcome development for Hungary’s economy and financial markets, but it won’t immediately transform the near-term outlook. On Monday, …
Click here to read the full report. Overview – Property values in Scandinavia and Switzerland have taken a hit as yields jumped in recent quarters. With valuations still stretched, we are forecasting a further 50bps and 30bps of rises at the …
