This page has been updated with additional analysis since first publication. Soft surprise opens the door to more interest rate cuts later this year The smaller-than-expected rise in CPI inflation from 2.0% in June to 2.2% in July (consensus forecast …
14th August 2024
The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank appeared to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are anticipating. We were among the 12 …
RBNZ will loosen policy aggressively The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank seemed to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are …
The further rally in stock markets today leaves both valuations and earnings looking consistent with a “soft landing” in the US. So it would not take much for equities to struggle if the economy were to deteriorate – although that isn’t our base case. The …
13th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
Housing inflation has become an increasingly important driver of core services inflation in Mexico – a key concern of the central bank, Banxico. And we think that robust household income growth and a lack of supply of dwellings will keep housing and, by …
Muted PPI is more good data The muted 0.1% m/m increase in final demand PPI and unchanged core PPI for July is not quite as good as it looks, but it is nevertheless consistent with the Fed’s preferred core PCE prices measure increasing at a below-2% …
Credit growth starts to recover, private demand still weak Broad credit growth ticked up in July, while bank loan growth only slowed a touch. (See Chart 1.) We expect a continued acceleration in government bond issuance to support a further expansion of …
This page has been updated with additional analysis since first publication. Easing in wage growth clears path for more rate cuts later this year The further easing in wage growth will be welcomed by the Bank of England as a sign that labour market …
This page has been updated with additional analysis since first publication. Wage growth will cool in earnest The RBA probably won’t read too much into the fact that annual wage growth stalled last quarter. A gradual loosening of the labour market should …
While a big reduction in speculative positioning against the Japanese currency may mean that future moves in global financial markets will be less extreme than recent ones, it doesn’t preclude more turbulence if, e.g., this week’s US data disappoint. Much …
12th August 2024
We are sceptical that the recent decline in mortgage rates will revive the housing market. Rates are still high compared to recent years, discouraging homeowners from moving, while most potential new buyers remain sidelined due to historically stretched …
Developments in Ukraine have once again emerged as a key driver of EU natural gas prices. But a combination of lower gas use and the sourcing of alternative supplies in Europe means that the situation is very different to that during the energy crisis. …
This page has been updated with additional analysis since first publication. Disinflation back on track The drop in headline consumer price inflation to a one-year low in July should reassure the RBI that June’s surprise jump was a one-off and that the …
Container shipping costs have fallen back slightly in the past few weeks. And while the potential for further shipping disruptions makes the outlook for shipping costs highly uncertain, as things stand the rise in shipping costs this year is unlikely to …
European office occupier surveys reveal that office attendance and utilisation has continued to rise over the past year and that it could still improve a bit further. However, despite the rise in attendance, office vacancy has continued to climb and is …
The economic data have softened, corporate executives are sounding the alarm over slowing sales, and policymakers are signalling that they will provide more support to the economy. This is not the US but China. Yet mounting concerns about the growth …
Economy slows in Q2, but headline inflation rises further The slowdown in Russian GDP growth in Q2, to 4.0% y/y, suggests that the economy has lost a bit of momentum. But overheating pressures remain alive and the increase in inflation to 9.1% y/y in July …
9th August 2024
After a turbulent start to the week, financial markets have stabilised over recent days, with asset prices and risky currencies recovering some of their sharp falls in the wake of the run of poor US economic data that prompted a massive sell-off across …
With the Summary of Deliberations this week confirming that the Bank of Canada is putting more weight on the downside risks, we feel confident that the Bank will continue to cut interest rates at each remaining meeting this year. Still, with wage growth …
At Banxico’s meeting yesterday, worries over the weakness in the Mexican economy outweighed concerns over the sell-off in the Mexican peso and prompted the central bank to restart its easing cycle. Banxico’s disregard for the peso’s depreciation seems …
Economy still nowhere near recession In purely mechanical terms, the limited data released this week did trigger a downward revision to our third-quarter GDP growth forecast to 1.7%, from 2.0%. But only because the June trade data sets up for a slightly …
Our Asia team will be holding a Drop-In on Wednesday 14th August at 0830 ET/1330 BST to discuss the timing of Asian interest rate cuts and the impact of global markets volatility. Register here for the 20-minute online briefing. Weakening against a weak …
After stagnating in the first half of this year, the Halifax house price index jumped by 0.8% m/m in July in response to the fall in mortgage rates from 4.9% to 4.7% in July. (See here .) What’s more, July’s RICS survey suggests that increasing demand …
Concerns about a US recession have led to a sharp reassessment in financial markets; some of the shifts in the wake of the latest US non-farm payrolls report look overdone (and have to some extent reversed). Given that we still think a “soft landing” is …
Banxico looks through peso volatility and cuts The Mexican peso was on a rollercoaster ride this week. It was one of the hardest hit EM currencies in the market rout, briefly breaching 20/$ (the weakest level in over a year) in early hour trading on …
Global markets appear to have stabilised at the end of a week which began with a nasty bout of volatility. But is the selling in equities over or will fears about the US economy and an unwinding carry trade trigger more pain for investors? Deputy Chief …
Not as bad as it looks The second consecutive small fall in employment might seem to suggest that the labour market has taken a further turn for the worse, but it mainly reflected soft part-time employment among younger and older people. The jump in …
Rise in inflation will add to Copom’s hawkishness, but rate hike unlikely The rise in Brazil’s headline inflation rate to 4.5% y/y in July was mainly driven by a pick-up in underlying core services inflation which will do little to quell the hawkishness …
Domestic factors outweigh global turmoil Idiosyncratic factors seemed to play a bigger role than the recent global financial market turmoil in driving African markets this week. But while the fall in oil prices may be overdone, African producers should …
Heightened US recession worries have helped unwound some of the stretched positions in high-carry EM currencies, resulting in their exchange rates moving closer to their “fair values” (judging by our models). While our base case is still for a US soft …
The brief turmoil in global financial markets following the release of weaker-than-expected US payrolls data and a resurgence of concerns about a hard landing there has been the main event of the past week. We think three points are worth making about the …
It was no surprise to see the global commodity price index fall and rise alongside the contortions in equity markets this week. But commodity prices have not all been in the same boat ; whereas some have remained buoyant throughout, others were already …
US recession fears grip global markets ... The turmoil in global financial markets late last week and early this week has been followed by some stabilisation over the past few days, but the situation remains fluid and you can find all our analysis on the …
Food prices drive up inflation but domestic demand remains weak Consumer price inflation ticked up in July, but this was entirely due to a weather-related rise in food price inflation. Producer price deflation was unchanged. While a ramp-up in fiscal …
Our Asia team will be holding a Drop-In on Wednesday 14th August at 0830 ET/1330 BST to discuss the timing of Asian interest rate cuts and the impact of global markets volatility. Register here for the 20-minute online briefing. US growth …
Inflation in Norway has continued to fall more quickly than policymakers expected. But with the krone coming under renewed pressure recently, we think they will maintain a hawkish tone next week. At the last meeting, in June, Norges Bank left its policy …
Equity markets in East Asia suffered very sharp declines earlier this week, but have generally recovered partially since. We think the rebound has scope to go a lot further as recession fears in the US prove overblown and an AI-related bubble reflates, …
Easing cycle continues despite peso weakness Mexico’s central bank opted to reduce its policy rate by 25bp, to 10.75%, at today’s meeting and the statement generally retained the moderately dovish tone from the last one. We think further rate cuts are …
8th August 2024
Financial markets have generally now unwound about half of the big moves from late last week and early this week, helped by jobless claims data today soothing concerns over a US economic recession. In some cases, we expect these recoveries to continue; …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
US recession risks yet to derail export outlook The recent batch of weaker-than-expected US data rattled global markets this week. But it hasn’t significantly altered China’s economic outlook. Admittedly, the risk of a US recession, which would hurt …
After an already-tough H1 for information sector jobs, we expect the second half of the year to see further cuts, which will be bad news for tech-heavy metros in the West. But a more diverse occupier base and much more pronounced return to the office in …
Even as most EM central banks outside of Asia started lowering interest rates a year ago, those within the region have kept their powder dry. That could be about to change. As growth slows, inflation returns to targets and currencies recover, the …
Sell-off’s hit to oil likely to be reversed Fears of a US recession have rattled global financial markets earlier in the week, and those in the Middle East weren’t spared. We think the spillover into the oil market has gone too far, though, and it raises …
Several organisations have estimated that a universal 10% tariff on US imports, as proposed by Donald Trump, would reduce euro-zone GDP by at least 1%. We think the hit would be much less than 0.5%. We commented previously on the impact that Donald …
Rise in inflation leaves Banxico decision on a knife edge The rise in Mexico’s headline inflation rate, to 5.6% y/y in July, alongside the weakness in the peso means that Banxico’s interest rate decision later today will be a very close call between a cut …
No rush to loosen policy Although the Reserve Bank of Australia left rates on hold at its meeting this Tuesday, its messaging was unequivocally hawkish. In her post-meeting press conference Governor Michele Bullock stated that the Board had seriously …
This report has been updated with additional analysis and a chart and table of key figures. Inflation falls despite subsidy cuts Egypt’s headline inflation slowed from 27.5% y/y in June to 25.7% y/y in July, its lowest rate since December 2022. And this …
