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February 27, 2025 3:53 PM UTC
We expect a 0.3% rise in January’s core PCE price index, slower than the 0.4% seen from core CPI, while we expect a modest 0.3% rise in personal income to outpace an unusual 0.1% decline in personal spending.
February 27, 2025 1:55 PM UTC
As has been the case at most recent Council meetings, the ECB verdict is less important that the rhetoric. A sixth 25 bp discount rate is widely expected, to 2.5%, but how wide the door is left open for further cuts may be gleaned from any clear change in regard to how near(er) neutral policy the Co
February 26, 2025 6:55 PM UTC
While there is still a long way to go before legislation is passed, passage of a budget proposal in the House makes the fiscal policy outlook look clearer, and reduces negative risks such as a government shutdown or a debt default. The package is will probably be a mild negative for economic growth,
February 26, 2025 12:14 PM UTC
It is clear that, especially with another official rate cut due at the looming ECB Council meeting (Mar 6), the existing debate about how restrictive policy will be may only intensify. Indeed, the debate is already quite vocal, led by the hawks who are trying to argue for policy pause at least.
February 26, 2025 8:30 AM UTC
· EZ equities still have further scope to outperform U.S. equities in the remainder of 2025 helped by further ECB easing/hopes of a Ukraine peace deal and U.S. equity market overvaluation restraining the U.S. However, this can be volatile with uncertainty over the scale of U.S. tari
February 25, 2025 1:00 PM UTC
The Country Insights Model is a comprehensive quantitative tool for assessing country and sovereign risk by measuring a country’s risk of external and domestic financial shocks and its ability to grow. The access to our full range of scores across 174 countries corresponding to the fourth quarter
February 25, 2025 11:40 AM UTC
They say that good things often come in threes. For the ECB, Q4 data on negotiated wages just released adds to both INDEED compiled wage indicator and the central bank’s own wage tracker data in suggesting softening if not very muted cost pressures, something we attribute to the rising EZ labor
February 25, 2025 9:30 AM UTC
• China is currently reluctant to see Yuan depreciation as it wants to get the U.S. to the negotiating table for a revised phase 1 trade deal and also over concerns about domestic capital outflows. Cuts to the 7-day reverse repo rate are now likely to be in 10bps steps and we look for the
February 24, 2025 3:34 PM UTC
February HICP inflation numbers may deliver better news and broadly so (Figure 1) and thus contrast with the mixed messages in the higher-than-expected January flash HICP numbers. Indeed, for a third successive month in January, the headline rose but by ‘only’ 0.1ppt, to a six-month high of 2.
February 24, 2025 8:53 AM UTC
The German election delivered few surprises with the electorate swinging even more clearly away from the political middle ground. It clearly means that many difficult decisions lie ahead with questions over the effectiveness of the likely new government. The result is only likely to inflame US c
February 24, 2025 8:27 AM UTC
· Our baseline remains of a Russia-friendly peace deal in Ukraine, but this need not lead to a weaker European security situation. This is our baseline (Figure 1), but does require Europe to make concessions to the Trump administration on defence spending increases and trade. However,
February 24, 2025 1:50 AM UTC
The Reserve Bank of India (RBI) is tilting toward additional interest rate cuts to stimulate economic growth, rather than exclusively focusing on controlling inflation. The Monetary Policy Committee (MPC) lowered the benchmark repo rate by 25 basis points to 6.25%, citing headline inflation convergi
February 21, 2025 9:57 PM UTC
Banxico cut the policy rate by 50 bps to 9.5%, signaling a more dovish stance as inflation trends downward. The board cited weak domestic demand and improved inflation prospects but highlighted risks from U.S. policy uncertainty, tariffs, and immigration effects. While most members supported a 50 bp
February 21, 2025 10:21 AM UTC
The February composite PMI data may have not fallen (stable at 50.2) and the weaker-than-expected outcome was dominated by sharp addition weakness in France, but the data will be uncomfortable reading for the ECB. The data very much suggest that the better news regarding EZ consumer spending see
February 20, 2025 8:03 AM UTC
It is highly likely in April that the U.S. will announce a 25% tariff on EU cars and pharmaceuticals (here) and also reciprocal tariffs against the EU. The majority could be implemented given Trump’s desire to raise revenue/dislike of the EU as well as negotiate trade deals. This
February 20, 2025 1:25 AM UTC
In line with our view Bank Indonesia kept its policy rate steady at 5.75% in its February 18-19 meeting after last month’s surprise cut. The weakening rupiah and external uncertainties reman critical factors influencing the rate decision. The central bank is likely to assess the impact of its Janu
February 19, 2025 10:20 PM UTC
Mexico aims for fiscal consolidation in 2025, relying on revenue growth while freezing most expenditures. However, weak growth could undermine this strategy. Authorities expect 2–3% GDP growth, but our forecast is 1.6%, with a recession risk. A less integrated U.S.-Mexico trade relationship, parti
February 19, 2025 1:40 PM UTC
· Tariff reality in the spring and summer will likely be both tariff threats to negotiate trade deals and permanently higher tariffs in certain products and reciprocally to raise revenue for the U.S. government – along Peter Navarro guidance to Trump. The macro effects of this cou
February 18, 2025 3:29 PM UTC
As Europe is forced to consider a massive and rapid ramp up to its relatively mediocre defence spending (Figure 1) as it contemplates a reduction in military support from the US, key questions emerge as the economic effect(s). Will it boost or inhibit growth, add to inflation, and how will/should
February 18, 2025 1:20 PM UTC
If the Fed convince the market that it is leaving the door open to easing and sees Fed Funds reduction multi-year, then 2yr could hold onto a small discount in the next two quarters and then swing to a small premium of 2yr to Fed Funds (Figure 1). 10yr yields will likely maintain a small to modest
February 17, 2025 10:28 AM UTC
· President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.
February 14, 2025 4:33 PM UTC
We expect a 0.3% rise in January’s core PCE price index, slower than the 0.4% seen from core CPI, while we expect a modest 0.3% rise in personal income to outpace an unusual 0.1% decline in personal spending.
February 14, 2025 1:57 PM UTC
January retail sales at -0.9% saw a significant downside surprise, though we believe the main reason for weakness was bad weather, with a correction from strength in Q4 also likely to be a factor. The core rates were also weak, ex auto at -0.4%, ex auto and gas at -0.5%, and the control group that c
February 14, 2025 10:45 AM UTC
Overall, we maintain the view that parts of China’s household sector are showing signs of a balance sheet debt consolidation, due to the excess buildup of debt in the past 20 years relative to disposable income. The non-financial corporate sector is more difficult to interpret, due to strengt
February 13, 2025 12:33 PM UTC
European politicians are surprised and angry at the U.S. stance on a peace deal for Ukraine and less military support for Europe, but eventually they will have to accept the new reality. Europe is too divided to provide security guarantees to Ukraine on its own. A further increase and acceleration
February 13, 2025 4:55 AM UTC
Bank Indonesia is expected to keep rates steady at 5.75% in its February 18-19 meeting after last month’s surprise cut. While inflation remains low and growth is steady, the weakening rupiah and external uncertainties may delay further easing. The central bank is likely to assess the impact of its
February 13, 2025 4:12 AM UTC
India’s inflation cooled to 4.31% in January, clearing the way for more rate cuts as food prices dipped. The RBI is shifting focus to growth. But risks remain—rupee weakness and global commodity prices could still stir inflationary trouble.
February 12, 2025 2:05 PM UTC
January CPI is a clear disappointment rising by 0.5% overall and 0.4% ex food and energy (0.446% before rounding). While there is a problem of residual seasonality bringing strength in Q1 data, that yr/yr rates accelerated, overall to 3.0% from 2.9%, and ex food and energy to 3.3% from 3.2%, will be
February 12, 2025 6:11 AM UTC
As Donald Trump pressure other countries with his tariff tactics, every country, even U.S. allies, are trying to figure out whether they should retaliate or comply. Japan, as a long term U.S. ally, is of no exception but they seem to have taken a different path than Canada when dealing with Trump. I
February 11, 2025 1:23 PM UTC
The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but the prospect of reciprocal and more product and country tariffs create trade policy uncertainty/supply chain disruption and paperwork problems. This could amplify the impact of
February 11, 2025 8:30 AM UTC
The ECB staff forecasts on March 6 will be revised upwards for 2025 and 2026, due to the surge in wholesale gas prices. However, the ECB will likely take the view that 2 round effects from higher gas prices on balance are unlikely to boost core inflation (especially given wage tracker softness) an
February 10, 2025 7:55 AM UTC
The early days of the new Trump administration has seen lots of volatility around the on-off tariffs with Canada and Mexico, but the more stable U.S. Treasury market has helped provide an anchor. U.S. Treasuries have shift towards the view that the 10yr budget bill will be delayed until H2 and
February 7, 2025 4:57 PM UTC
The RBI has cut the repo rate by 25 basis points to 6.25%, marking its first reduction in five years. While aimed at supporting growth, the central bank maintains a neutral stance, signaling caution amid global uncertainties. Inflation is projected to ease, but risks from trade disruptions and finan
February 7, 2025 2:09 PM UTC
January’s non-farm payroll with a 143k increase is on the low side of expectations, though we suspect January data was restrained by bad weather. A dip in the workweek is also probably weather-induced and may be behind an above trend 0.5% rise in earnings per hour. Unemployment slipped to 4.0% fro
February 7, 2025 1:14 PM UTC
A well-advertised research paper from the ECB suggests that the real neutral rate of interest for the EZ has not changed very much in the last few years but with a likely range of between -0.5% and +0.5%, but still well below estimates for what is so-called r* prior to the pandemic (Figure 1). The
February 6, 2025 2:30 PM UTC
New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces. While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued and as long as tariffs are
February 6, 2025 7:50 AM UTC
With the RBI’s policy review around the corner, all eyes are on how the central bank will tackle India’s slowing growth momentum and the increased currency volatility. The RBI is likely to cut rate by 25bps to 6.25% on February 8. Imported inflation will remain a key concern.
February 5, 2025 3:15 PM UTC
January’s ISM services index at 52.8 from 54.0 is weaker than market expectations though consistent with the S and P services PMI released earlier. It is possible bad weather, with very cold weather in much of the country probably more significant than the localized Los Angeles fires, restrained t
February 5, 2025 2:48 PM UTC
The House is struggling to reach consensus on the beautiful huge 10yr budget bill, as GOP budget hawks want to see multi trillion expenditure cuts, though eventually the 10yr expenditure cuts will likely compromise around USD 0.5-1.0trn. Tax cuts are also unlikely to match President Trump campaign
February 5, 2025 9:06 AM UTC
President Trump has made it clear that the EU is going to face US tariffs in the not too distant future. Admittedly, tariff threats have been used as the basis for negotiation elsewhere, this may be the case for the EU too – as was the case during Trump’s first term. As for the EU, it does h
February 4, 2025 6:29 PM UTC
The BCB raised rates by 100bps to 13.25%, signaling another hike in March. External uncertainty remains, but domestic risks worsened, with inflation expectations rising. The BCB stressed fiscal-monetary coordination and warned about policy distortions. Despite markets pricing a 15% rate, we expect s
February 4, 2025 10:02 AM UTC
China’s targeted and measured counter tariffs against the U.S. are designed to push the U.S. towards the negotiating table on the wider issue of the U.S./China trade deficit. Negotiating will likely start into the spring, but negotiating will be tough as the U.S. wants a phase 2 deal with new ob
February 3, 2025 3:45 PM UTC
While innovation from China’s technology initiatives can provide help to cross over productivity, the benefit will likely only be modest due to the downgrading of the private sector in China and the lack of openness to inward trade. The structural slowdown in capital productivity will dominate
February 3, 2025 10:38 AM UTC
There were mixed messages in the higher-than-expected January flash HICP numbers. For a third successive month, the headline but this time by ‘only’ 0.1ppt, to a six-month high of 2.5%, but where the core (again) stayed at 2.7%, partly due to what is seemingly relatively stable services inflat
January 31, 2025 1:56 PM UTC
December’s personal income and spending data is largely old news with Q4 totals having been seen in the GDP report. Gains of 0.2% in core PCE prices and 0.4% in personal income are in line with expectations, but spending with a 0.7% increase with positive back month revisions reflects the strong c
January 30, 2025 6:09 PM UTC
The Brazilian Central Bank (BCB) raised the policy rate by 100bps to 13.25%, signaling another hike in March while monitoring economic data. The statement had a neutral-to-dovish tone, with inflation risks stemming from services CPI, unanchored expectations, and fiscal policy. Market projections see
January 30, 2025 2:44 PM UTC
December’s personal income and spending report will be largely old news, with Q4 totals seen with the GDP report on January 30. Our pre-GDP forecasts for a 0.2% rise in core PCE prices and a 0.4% rise in personal income still look valid, though the GDP data is consistent with a 1.3% rise in person