The Bank of Korea today cut interest rates by 25bps (to 3.25%), but tried to dampen speculation that it would cut rates at its final meeting of the year in November. With growth struggling and inflation low, we think it is too early to rule out another …
11th October 2024
This page has been updated with additional analysis since first publication. Modest economic growth more likely than another recession this year The 0.2% m/m rise in GDP in August (consensus and Capital Economics 0.2%), which came on the back of the …
A further decoupling of trade ties between the US and China or a sharp rise in Cross-Strait tensions, even if a full-blown conflict is avoided, are two big geopolitical events that we think present a big risk to the health of the “AI bubble” in the US …
Consumer support and a larger deficit Tomorrow’s press conference will provide a platform for the Ministry of Finance (MoF) to reveal its fiscal plans. The stakes are high - most observers agree that recent stimulus announcements won’t amount to much …
Easing monetary restraint is the need of the hour As was widely anticipated, the Reserve Bank of New Zealand cut its Official Cash Rate by 50bp at its meeting on Wednesday. But it’s worth noting that the Committee sounded rather dovish. In contrast to …
Record growth in household incomes The Q2 household income data released this week were much stronger than we had anticipated. Indeed, both nominal and real disposable income have risen the most on record over the past year, leaving aside the temporary …
Interest rates cut, further easing ahead The Bank of Korea kickstarted its easing cycle today with a 25bps cut. With growth struggling and inflation below target, we expect more easing over the coming months. The decision to lower the policy rate from …
The initial market reaction to today’s release of US inflation for September and jobless claims data suggests to us that investors may be more concerned about the latter than about the former. We think both support our view that the 10-year Treasury yield …
10th October 2024
Saied’s second term could prove a messy one In a no shock result, Kais Saied secured a second term as Tunisia’s president by a landslide. His first five years in power were typified by a shift back to autocracy and shunning necessary reforms. The next …
Overview – We expect mortgage rates to continue falling, dropping below 6% in 2026. Lower borrowing costs will breathe some life into the market, but stretched affordability and tight supply due to mortgage rate 'lock-in' will continue to hold back …
The latest data are consistent with our view that the world economy is in a soft patch. There are signs that global manufacturing is headed for recession and trade will soften. Consumers in DMs outside the US seem reluctant to spend, and banks in major …
ECB is certain to cut interest rates by 25bp next week. And we think it will cut at each meeting until the deposit rate hits 2.5%. Inflation likely to be below 2% next year, so risks are skewed towards more cuts. A 25bp interest rate cut looks nailed on …
The bond market sell-off over recent weeks has taken the 10-year Treasury yield to around our long-held end-2024 forecast of 4.00%. (See Chart 1.) Although significant economic, political, and geopolitical risks loom large over the coming months, we …
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
Core CPI consistent with another muted gain in core PCE Although core CPI prices increased by 0.3% m/m for a second consecutive month in September, our calculations suggest that core PCE prices increased by 0.20% m/m which, at an annualised pace, is only …
The Bank of England’s Q3 Credit Conditions Survey suggests house prices will rise further in Q4 and supports our view that a mild slowdown in GDP growth this year is more likely than another recession. Despite the fall in the average quoted mortgage …
The valuations of “risky” assets continued to rise in the third quarter, both in absolute terms and relative to “safe” asset yields. We think that reflects the start of the Fed’s easing cycle and renewed optimism about the US economy after initial worries …
Prime high street rental growth in Barcelona has outpaced Madrid since late 2022. However, we think rental growth will converge in the coming years as tourism numbers fall back to pre-pandemic levels in Barcelona and stronger domestic spending prospects …
In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in …
Surge in supply ahead of Budget may temporarily dampen prices A leap in the number of homes being put up for sale in September, perhaps due to fears of second-homes and rented properties being subject to higher capital gains tax after the Budget, may …
This page has been updated with additional analysis since first publication. Core inflation below Norges Bank forecast once again Core inflation in Norway was again below Norges Bank’s forecast in September, strengthening the case for it to start cutting …
Fed split on whether to kick off with 50bp or 25bp rate cut last month The minutes of the mid-September FOMC meeting reveal that support among Fed officials for kicking off the loosening cycle with a bigger 50bp rate cut was a little weaker than the lone …
9th October 2024
China’s economy has some cyclical spare capacity that could be filled with fiscal stimulus. But its troubles are mostly structural. The finance ministry won’t solve them on Saturday. China’s finance minister is a long way down the pecking order of Party …
Market participants have largely shrugged off the news that the US Department of Justice (DoJ) may seek a court-ordered break up of Google. Given the snail’s pace at which the US antitrust process moves at, that probably makes sense. Even so, it’s worth …
Given the amount of signalling by Governing Council officials, it would be surprising if the ECB didn’t cut rates at its October meeting. But how far will the Bank go to ease monetary policy from here, and how quickly will it get there? Our Europe team …
Sweden’s economy is likely to see a strong rebound next year as consumption will benefit from fiscal stimulus and lower household interest expenditure. We think that the recovery will encourage the Riksbank to only cut its policy rate from 3.25% to 2.5% …
While electric vehicle (EV) rollouts in Europe and the US have stalled and are set to remain sluggish over the next few years, the uptake of EVs in China has surged beyond expectations. So, for all the focus on the near-term supply risks to oil, the …
War concerns drive further hawkish tilt at the BoI The communications alongside the decision by the Bank of Israel (BoI) to leave its policy rate on hold again today, at 4.50%, underline that policymakers have grown more concerned about the escalation of …
We think the Chancellor will raise taxes in line with the planned £16bn (0.6% of GDP) a year increase in public spending at the Budget on 30th October. The main influence of this will just be a rotation in the shape of GDP growth away from consumer …
Brazil inflation rises, more Selic hikes incoming The rise in Brazil’s headline inflation rate to 4.4% y/y in September was mainly due to drought-related effects on food and electricity prices but, even so, it will reinforce the hawkishness of Copom and …
Inflation ticks up again, CBE to wait until Q1 ’25 before first rate cut The second consecutive rise in Egypt’s headline inflation rate, to 26.4% y/y in September, on the back of electricity and fuel price hikes further reduces the chances of a first …
The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance to more neutral language. This …
RBI lays groundwork for December rate cut The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance …
Despite the surge in foreign visitors, Japan’s tourism industry is still struggling as domestic tourists have slashed holiday spending in the face of plunging real incomes. One of the sectors where the pandemic is still having a visible impact on Japan’s …
RBNZ hands down a dovish 50bp cut The RBNZ is likely to hand down a couple more 50bp rate cuts over the next few months . And we think it will end up cutting rates more aggressively than most are predicting. The RBNZ’s decision to cut its Official Cash …
With the inflation battle seemingly won, the Bank of Canada has indicated that it is prepared to cut interest rates more quickly if warranted, with that decision hinging on developments in business hiring, investment and consumption. While the focus on …
8th October 2024
China’s offshore equity market plunged today as the latest policy announcement from Beijing disappointed expectations. With much of the low hanging fruit (as far as valuations are concerned) now plucked, we think the bar is quite high now for further …
Boost from net trade to be offset by weaker domestic demand Despite the trade deficit widening in August, developments earlier in the quarter means that net trade looks set to support GDP growth in the third quarter. With most of that positive …
Rise in exports suggest stronger GDP growth The trade deficit narrowed to $70.4bn in August, from $78.9bn, as exports grew by 2% m/m and imports declined by 0.9% m/m. Exports, especially in real terms, were stronger than the advance goods data had implied …
Saudi Arabia’s 2025 Pre-Budget statement provided the first clear signs that officials are accepting that they need to pare back on some of their ambitious spending goals, which supports our view that non-oil GDP growth is likely to slow over the next few …
This page has been updated with additional analysis since first publication. August recovery but prospects for German industry still bleak The big increase in German industrial production in August isn’t much reason to celebrate as it was only enough to …
Inflation down again September’s drop in inflation in Sweden will reinforce the Riksbank’s inclination to keep cutting interest rates at the next few meetings. Statistics Sweden’s first ever “flash” estimate of inflation revealed that headline CPI …
With the price of crude oil continuing to climb higher, we could soon see a resurgence in fuel inflation in both Australia and New Zealand. However, if we’re right that any pickup in oil prices will prove short-lived and that second-round effects will be …
Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. While the Bank of Japan has become more concerned about a global economic slowdown, the domestic conditions would warrant …
RBA softens its tightening bias Although the RBA is becoming more attuned to downside risks to its outlook, we still think it will wait until early next year to cut rates. The minutes of the RBA’s September meeting confirmed that the RBA has in fact …
Regular earnings growth will remain close to 3% Base pay rose the most since 1992 in August and we think it will continue to surge in the coming months. According to today’s preliminary estimate, labour cash earnings rose by 3.0 y/y in August. That result …
The unexpectedly strong 254,000 gain in payroll employment in September was a welcome surprise, but the deterioration in most other labour market indicators suggests this was a one-off rather than the start of a genuine renaissance. Survey-based hiring …
7th October 2024
The optimism across US equity and corporate bond markets as the labour market proves resilient makes sense to us. We think it will continue, providing a tailwind for those assets. The blockbuster US employment report for September released on Friday …
Wage growth remains strong across much of Latin America and Central Europe (CEE), and that has stalled the disinflation process in services in particular. This supports our view that, in general, central banks in these regions will keep policy tighter …
