ECB likely to accelerate policy easing next year While the ECB’s decision to cut its deposit rate by 25bp was widely expected, the accompanying statement suggests that policymakers are less concerned than previously about upside risks to inflation and …
12th December 2024
Note: When this Update was first published, China's state media had relayed the content of the CEWC readout but the readout itself had not been published. The Update has now been updated to reflect the contents of the readout that was published late on …
The Brazilian central bank’s aggressive interest rate hike yesterday may help ease concerns that fiscal dominance will take hold. But we think that measures to keep government debt servicing costs artificially low will ultimately form part of the solution …
The Office for National Statistics’ (ONS) November house price data release indicates unusually large increases in new build house prices in recent months. We suspect that this reported rise does not reflect genuine trends in the current market. In fact, …
Headline inflation back within target The fall in headline consumer price inflation to back within the RBI's target range in November, along with the change of leadership at the central bank into a seemingly less hawkish direction, mean the stars are …
Overview – Although their recent performance leaves much to be desired, we believe that both Antipodean economies are on the cusp of a cyclical upswing. But while the RBNZ has ample room to support the recovery without stoking inflation risks, the same …
Bumper SNB rate cut, further to come This morning’s 50bp rate cut by the SNB, which brought the policy rate to 0.5%, came as a surprise to most economists. That said, it was balanced by a revised policy statement which implies that policymakers think this …
Housing market resilient to higher mortgage rates November’s RICS survey provides further evidence that housing activity and prices remained resilient to the rise in mortgage rates in November. And our view that mortgage rates will start to fall again …
Muddied communication from BoJ makes December meeting a close call On balance, we’re sticking to our forecast of a 25bp rate hike next week With inflation overshooting BoJ’s forecasts, further tightening next year likely The outcome of the Bank’s upcoming …
This page has been updated with additional analysis since first publication. RBA to stay its hand as labour market tightens With the labour market still firing on all cylinders, there’s little need for the RBA to rush to loosen policy. Accordingly, we …
Fiscal fears and overheating economy trigger a bumper hike Brazil’s central bank stepped up the pace of tightening with a larger-than-expected 100bp hike, to 12.25%, to the Selic rate and made clear that there will be at least two more 100bp increases, to …
11th December 2024
With pressures on public spending continuing to grow, this has raised the chances that the Chancellor, Rachel Reeves, raises spending further in her 2025 Spending Review. If she raises spending and funds it with higher taxes, that would probably add to …
Surging inflation will force another large rate hike The renewed acceleration in Russian inflation to 8.9% y/y in November, and likelihood of further increases in the coming months, argue strongly in favour of another large interest rate hike from the …
Although the Bank of Canada cut interest rates by another 50bp today, its communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and instead saying it “will be evaluating the …
The Treasury market has been quite subdued since the US election, including today d espite a slightly disconcerting CPI report . We don’t expect it to become a whole lot more volatile in 2025 either, even allowing for concerns about the fiscal outlook. We …
50bp cut will not be repeated Although the Bank of Canada cut interest rates by another 50bp today, the accompanying communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and …
Fed to continue with gradual policy normalisation Another 25bp rate cut incoming next week Fed’s projections will ignore potential impact of tariffs and immigration curbs Fed’s independence probably safe Fed to continue steady policy easing We expect …
Core price pressures remain slightly elevated, as housing eases The 0.31% m/m increase in core CPI in November, which left the annual core inflation rate unchanged at 3.3% for a fourth month in a row and pushed the three-month annualised rate up to an …
Overview – GDP growth in the Middle East and North Africa will accelerate in 2025 on the back of higher oil production in the Gulf. The UAE will be the Gulf’s top performing economy and, elsewhere, we expect that growth in Egypt and Morocco will …
Our forecast that commercial real estate is set for a modest recovery is dependent on our view that a decline in gilt yields will help stabilise property yields. But if interest rates don’t fall back the outlook for returns could be a lot more …
Softer-than-expected inflation points to further SARB cuts in 2025 The smaller-than-expected rise in South Africa’s headline inflation rate, to 2.9% y/y, in November, coupled with the surprise contraction in GDP in Q3, means that the monetary policy …
While emerging market (EM) dollar bonds have gained some ground lately, they have underperformed US high-yield corporate bonds in total return terms, and we suspect they will continue to lag next year. The stripped spread of the JP Morgan Global EMBI …
10th December 2024
2025 will be a far quieter year in terms of elections than this year was. But there are some key votes that will, among other things, determine whether Argentina’s President Milei builds support for his radical stabilisation plan and whether the Czech …
The price of natural gas in Europe was thrust into the spotlight during Europe’s energy crisis and remains a key political and industrial pressure point. In short, we expect natural gas prices in the EU to halve over the coming years as global LNG …
The peak in new apartment supply has passed, with completions set to drop back sharply over the next few years. If demand continues to hold up well as we expect, this should put downward pressure on the vacancy rate and support a modest pick-up in rent …
Investors’ enthusiasm for AI appears to have supported an increasingly broad set of equities of late, even if much of the associated rise in market capitalisation remains concentrated in a few of the largest firms. In August we noted that investors had …
While mortgage interest cost (MIC) inflation has historically turned negative during, or after, loosening cycles, we expect it to remain positive this time and rebound from 2026. This is because, in contrast to previous monetary policy cycles, the …
Our new Bank of England Caseometer helps track whether the Bank is becoming more inclined to cut interest rates faster and further or slower and not as far. Our forecast is that rates will continue to be cut gradually, but that they will fall to 3.50% in …
Commodities Chart Pack (Dec. 24) …
Rising inflation points to Copom stepping up tightening tomorrow The further rise in Brazil’s inflation rate, to 4.9% y/y, in November alongside the weakness in the real and strong economic growth mean that Copom is nailed on to step up the pace of …
This publication has been updated to reflect changes to our forecasts after the October GDP release on 13th December 2024. Overview – Despite the deterioration in the outlook for the UK's key trading partners, we remain optimistic that UK GDP growth will …
Overview – After a stellar run, India’s economy has entered a softer patch that will continue for a few more quarters. We think that will portend an underperformance in local equities relative to other major benchmarks. Headline CPI inflation is likely …
Disinflation taking hold before sharp easing of price pressures in Q1 This report has been updated with additional analysis since first published. Egypt’s headline inflation rate slowed from 26.5% y/y in October to 25.5% y/y in November and, with falls in …
The RBA sounded more dovish today and it’s looking increasingly likely that it will lower interest rates sooner rather than later. While a downside surprise in Q4 inflation could trigger a February rate cut, we think the continued tightness of the labour …
Export volumes have further to rise, despite tariff threat Export growth slowed sharply last month but we doubt this signals the end of China’s recent export boom. We expect exports to accelerate again in the coming months, supported by gains in …
RBA will only ease policy in Q2 next year The Reserve Bank of Australia today signaled greater confidence that inflation will return towards target over the next couple of years, but we still expect the first rate cut to happen only in Q2 next year. As …
The Hang Seng index enjoyed another stimulus-related boost today but we’ve seen similar spikes before. For now, we’d caution against interpreting the latest developments as confirmation large-scale stimulus is on the way, and we still think Chinese stocks …
9th December 2024
A vast share of our clients highlighted geopolitics and/or Trump as their biggest blind spots going into 2025 when polled at our recent London roundtables. Meanwhile, a large majority thought that interest rates will be the key driver of returns next …
New governor may set a new direction for RBI India’s government has just appointed Revenue Secretary Sanjay Malhotra as the new governor of the Reserve Bank of India (RBI). He will replace the Shaktikanta Das following six years at the helm. The …
Fall in inflation gives Banxico room to deliver another 25bp cut The fall in Mexico’s headline inflation rate, to 4.6% y/y in November, combined with the relative resilience in the peso since the US election means that Banxico is likely to press ahead …
When Europe features prominently in client questions it is not normally a good sign. The past few days have been no exception. The immediate concern is France, where the government of Michel Barnier was toppled last week after failed efforts to push …
The fall of Syria’s President Bashar al-Assad has been warmly received by many, at least outside Russia and Iran, but a key lesson from the other Arab Spring countries is that hopes for a shift towards a liberal, Western-style democracy are likely to be …
Leadership alters formal characterisation of monetary policy The Politburo has just concluded its December meeting, which focuses foremost on economic affairs. After 14 years of monetary policy being officially characterised as “prudent”, the meeting …
This page has been updated with additional analysis since first publication. Stimulus is propping up inflation Headline CPI inflation fell but this was mainly driven by easing upward pressure on food prices. Core inflation edged up and PPI deflation …
We think the rally in 10-year Treasuries over recent weeks reflects both the incoming US economic data and changing perceptions towards Trump’s policy agenda. But we don’t expect this rally to continue. The November employment report, released today , was …
6th December 2024
Despite a small rebound in the wake of another solid non-farm payrolls release , the US dollar is broadly unchanged on the week as the recent consolidation phase in currency markets continues. Neither another tariff threat from president-elect Trump (this …
