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December 20, 2024
U.S. November Core PCE Prices significantly softer than Core CPI
December 20, 2024 1:59 PM UTC
November PCE prices at 0.1% overall and core has sharply underperformed gains of 0.3% in both overall and core CPI, easing some of the inflationary concerns generated by two straight gains of 0.3% in September and October core PCE prices. Gains of 0.3% in personal income and 0.4% in spending are als
Surprising Move: CBR Held Key Rate at 21% Despite Surging Inflation
December 20, 2024 1:39 PM UTC
Bottom Line: Despite expectations, Central Bank of Russia (CBR) announced on December 20 that it held the key rate constant at 21%. The CBR emphasized in its statement that monetary conditions tightened more significantly than envisaged by the October key rate decision, and it would continue to eval
Bank Indonesia Holds Rate to Support IDR
December 20, 2024 12:06 PM UTC
Bank Indonesia held its key interest rate at 6% in its December meeting. The decision to hold rates steady is primarily influenced by the need to stabilize the Indonesian rupiah. Inflation remains within target, and GDP growth forecasts are steady. Future rate cuts depend on US Federal Reserve actio
EMFX Outlook: Hit From Tariffs, Before Divergence
December 20, 2024 10:00 AM UTC
· EM currencies on a spot basis will remain on the defensive in H1 2025, as we see the U.S. threatening and then introducing tariffs on China imports – 30% against the current average of 20%. China’s response will likely include a Yuan (CNY) depreciation to the 7.65 area on USD/CN
DM FX Outlook: USD to edge lower despite high yields
December 20, 2024 8:28 AM UTC
· Bottom Line: Recent strong US data has bolstered the USD, with the Trump election victory also supportive due to expectations of tax cuts and tariffs which are seen leading to less Fed easing than previously expected. While we still see the USD weakening through 2025 as Fed easing red
Japan Outlook: Lukewarm Japan and BoJ
December 20, 2024 12:00 AM UTC
· Due to the slow recovery in consumption, 2024 GDP has been revised lower to -0.5%. Private consumption will continue to grow throughout 2025/26 gradually as business price/wage setting behavior gently shift and Japanese consumers adapting to higher inflation. Wage growth in 2025 wil
December 19, 2024
Western Europe Outlook: Divergent Policy Thinking
December 19, 2024 2:12 PM UTC
· In the UK, perhaps the main story in our outlook is that we retain our below-consensus GDP picture for next year, with growth of 1.0% and with downside risks. The BoE will likely ease further through 2025 by at least 100 bp and maybe faster and beyond.
· As for Sweden, d
BoE Review: A Dovish Hold?
December 19, 2024 12:54 PM UTC
An expected unchanged decision left Bank Rate at 4.75% but what was not foreseen was three dissents in favor of a cut with a further member advocating a more activist strategy (presumably ahead). Overall, the BoE adhered to a gradual approach to removing monetary policy restraint remains appropria
DM Rates Outlook: Policy and Spread Divergence
December 19, 2024 12:07 PM UTC
• 2yr U.S. Treasury yields can decline initially as the Fed finishes easing (Figure 1), but as the sense grows that the rate cut cycle is stopping, we see the 2yr swinging to a small premium versus the Fed Funds rate – as the market debates the risks of a future tightening cycle. For 10y
Asia/Pacific (ex-China/Japan) Outlook: Trump Tariffs, China +1 and Growth
December 19, 2024 10:57 AM UTC
Emerging Asian economies are projected to lead global growth in 2025, with India and Southeast Asia at the forefront. These regions will anchor resilience in Asia, even as China's economic growth remains moderate.
Inflation trajectories will vary across Asia, with India experiencing sticky prices
Norges Bank Review: Caution Prevails
December 19, 2024 10:21 AM UTC
Surprising no-one, another (ie eighth successive) stable policy decision was forthcoming at this latest Board decision so that the policy rate at 4.5% has been in place for a year. The statement was more open about policy being eased but only after two more meetings, so that the first cut will com
Sweden Riksbank Review: Nearing the End?
December 19, 2024 9:47 AM UTC
As widely expected, a fifth successive rate cut was seen at this December Riksbank meeting, but back to a 25 bp move rather than the 50 bp cut last time around (to 2.5% vs the 4% peak seen up until last May). But it was the updated projections (Figure 1) that was be the main news, not least given da
Outlook Overview: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics
December 19, 2024 9:25 AM UTC
· The U.S. economy momentum remains reasonable before President elect Trump’s policies impact in 2025 and 2026. While high uncertainty exists on the scale and timing of policies, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats
U.S. Outlook: Healthy Economy Facing Policy Risks
December 19, 2024 8:01 AM UTC
• The U.S. economy, consumer spending in particular, has continued to show surprising resilience, and is growing at a pace probably in excess of long-run potential near 2.0%. Inflation has fallen significantly from its highs, with core PCE inflation now running slightly below 3.0%, but rema
December 18, 2024
Fed: Policy Easing Slowing
December 18, 2024 8:35 PM UTC
The FOMC statement, FOMC medians and Powell during the Q/A left the impression that Fed easing will slow down into H1 2025. We now see two 25bps cuts in March and June 2025 driven by a Fed’s desire to avoid too much labor market slack occurring, but then pausing for the remainder of 2025 at a 3.75
FOMC eases by 25bps, dots and economic forecasts more hawkish
December 18, 2024 7:21 PM UTC
The FOMC has eased by 25bps as expected but the dots look hawkish with only 50bps of easing seen in 2025 rather than 100bps, and there was one dissenting vote, Cleveland Fed President Hammack preferring to keep rates unchanged. Core PCE price forecasts have also been revised significantly higher, 20
LatAm Outlook: Economic Shifts
December 18, 2024 5:21 PM UTC
· Brazil and Mexico economy are likely to decelerate in terms of growth in 2025, although we see this being stronger in Mexico. Mexico legal reforms and its close ties with U.S. increases uncertainty for 2025, especially after Trump elections, although we see tariffs in 2025 as unlikely
Preview: Due January 10 - U.S. December Employment (Non-Farm Payrolls) - Closer to solid underlying trend
December 18, 2024 3:02 PM UTC
We expect 175k increase in December’s non-farm payroll, with 140k in the private sector, a number that should be closer to underlying trend than a strong November and a weak October. We expect unemployment to be unchanged at 4.2% and average hourly earnings to slow to a 0.3% increase after two str
Jan 7 Outlook Webinar: The Trump Effect- Tariffs, Fiscal Shifts and Geopolitics
December 18, 2024 1:23 PM UTC
The U.S. economy’s momentum remains reasonable before the impact of President-elect Trump’s policies in 2025 and 2026. While high uncertainty exists on the scale and timing of policy, the strategic bias is clear – sizeable tax cuts that will boost the budget deficit; tariffs (threats
Commodities Outlook: Strategic Caution
December 18, 2024 11:00 AM UTC
The oil supply outlook depends on OPEC+ policies, with the reversal of the voluntary 2.2 million b/d cuts being officially delayed until April 2025. However, we expect the progressive rollover of these barrels into the market to be further postponed at least until the third quarter of 2025, as the c
Equities Outlook: U.S. Exceptionalism v Valuations
December 18, 2024 10:05 AM UTC
· The glory days of exceptionalism for U.S. equities will likely extend in Q1 2025 to bring the S&P500 to 6200-6300. The problem is that valuations have now become stretched with S&P500 ex magnificent 7 on a forward P/E of 19 and valuations out of line with real bond yields (Figure 1)
UK CPI Review (Dec 18-19): Still Mixed Inflation Signals
December 18, 2024 7:51 AM UTC
While exceeding both our and BoE thinking, November CPI inflation jumped 0.3 ppt to 2.6%, actually an eight month high. Services inflation remain ned at 5.0% while the core rose 0.2 ppt to 3.5%, also exceeding Bank projections (Figure 1). The data comes after more cost pressure worries were fann
December 17, 2024
U.S. November Retail Sales - Mixed detail but trend still strong
December 17, 2024 1:47 PM UTC
November retail sales with a 0.7% increase are stronger than expected overall but the 0.2% gains in the core rates both ex autos and ex autos and gasoline are weaker than expected, though an as expected 0.4% rise in the control group suggests a healthy contribution to GDP. Revisions are marginally
China Outlook: Construction and Trade Headwinds v Policy Stimulus
December 17, 2024 11:00 AM UTC
We do see a package of stimulative fiscal policy measures for 2025 including Yuan1-3trn infrastructure spending; Yuan1trn funds to buy completed homes for affordable housing and Yuan1trn capital injection to the big six state banks. Some modest measures for low-income households and to boost soci
Eurozone Outlook: Trump, Tariffs and the Possible Trade Tremor
December 17, 2024 8:16 AM UTC
· Once again, it does seem as if EZ activity expectations are being pared back in line with our below consensus thinking, most notably for next year. The result is that while the economy has been growing afresh it is doing so timidly, with downside risks persisting more clearly into 2
EMEA Outlook: Rate Cuts in 2025 Despite Global Uncertainties
December 17, 2024 8:00 AM UTC
· In South Africa, our end-year policy rate prediction remains at 7.0% for 2025 and 6.5% for 2026. We foresee headline inflation will fall to 4.2% and 4.6% in 2025 and 2026, respectively, considering power cuts (loadshedding) are relieved and the domestic fiscal outlook is moderately stab
December 16, 2024
Trump Tariff Threats Causing Policy Division in Canada
December 16, 2024 6:19 PM UTC
Trump’s tariff threats are being felt in Canadian politics, with Finance Minister Chrystia Freeland’s resignation, due to disagreements with Prime Minister Justin Trudeau’s plans to give the economy fiscal support, with Freeland preferring to “keep the powder dry” given the risks Canada fa
China Data: Retail Sales Disappoints
December 16, 2024 7:34 AM UTC
China November Retail sales disappointed with a low +3.0% Yr/Yr rise, due to broad based weakness outside of autos and home appliances – the latter boosted by trade in programs, which will likely be extended into 2025. The data underlines the imbalance between demand and supply, which argues for
December 13, 2024
UK GDP Review: Friday the 13th Weakness Confirmed?
December 13, 2024 7:41 AM UTC
The latest GDP data add to questions about the UK’s economy’s apparent solidity, if not strength, as seen in sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively. As we envisaged, October saw a second successive m/m drop of 0.1%, well below expectations, this
December 12, 2024
Elevated Inflation Remains Sticky in Russia Amid Ruble Woes
December 12, 2024 3:33 PM UTC
Bottom Line: According to Russian Federal Statistics Service (Rosstat) data released on December 11, inflation ticked up to 8.9% YoY in November after hitting 8.5% in October, remaining well above the Central Bank of Russia’s (CBR) midterm target of 4%, due to surges in services and food prices,
ECB Review: Clearly Flagging An End to Policy Restriction
December 12, 2024 3:02 PM UTC
A fourth 25 bp discount rate cut at this latest Council meeting, to 3%, was also the third in a row. But this meeting was important for the (as we expected) change in forward guidance in which the ECB accepts that on-target inflation is likely to be durable enough so that it no longer has to pursue
BCB Review: Shock 100bps Hike
December 12, 2024 10:12 AM UTC
The Brazilian Central Bank raised the policy rate by 100bps to 12.25%, with plans for two more 100bps hikes, reaching 14.25% by early 2025—the highest in 18 years. The decision reflects fiscal concerns, inflation risks, and a 10% depreciation of the Real. The BCB aims to curb inflation and protect
SNB Review: Easing Bias Toned Down?
December 12, 2024 9:21 AM UTC
In what seems to be ever-clearer policy front-loading, the SNB cut its policy rate by 50 bp (to 0.5%), thereby accentuating an easing cycle that had delivered three 25 bp moves since March. Possibly, this larger, but far from unexpected, reduction was driven by a fresh assessment that the inflatio
December 11, 2024
FOMC Preview for December 18: A Cautious 25bps Easing
December 11, 2024 7:47 PM UTC
The FOMC meets on December 18 and we expect a 25bps easing to a 4.25-4.5% range. Fed commentary has generally suggested that rates are moving lower while cautioning against assuming easing at any meeting is a done deal. Absence of major surprises in recent employment and CPI data probably clears the
SA Inflation Slightly Rose to 2.9% YoY in November, Still Leaving Room for a Rate Cut in January
December 11, 2024 4:47 PM UTC
Bottom Line: Despite inflation eased to more than a 4-year low in October with 2.8% YoY, it slightly increased to 2.9% YoY in November. Taking into account that the inflation remains below the South African Reserve Bank’s (SARB) target range of 3% and 6%, we think November print backs rate cut be
Bank of Canada delivers a second straight 50bps easing but sees a more gradual approach in 2025
December 11, 2024 4:29 PM UTC
The Bank of Canada has delivered a second straight 50bps easing, taking the rate to 3.25%, as largely expected. This puts the rate at the upper end of the 2.25-3.25% range the BoC sees as neutral, and Governor Tiff Macklem stated he now anticipates a more gradual approach to policy. We expect three
U.S. November CPI - A little higher than the Fed would like, but a cautious December easing still expected
December 11, 2024 1:56 PM UTC
November CPI is in line with expectations at +0.3% both overall and ex food and energy, with both up by 0.31% before rounding. Core CPI with four straight 0.3% gains is still a little high for comfort but the data is probably subdued enough to allow the FOMC to deliver a 25bps easing next week, thou
UK CPI & BoE Preview (Dec 18-19): Benign Inflation Signals But BoE Still Cautious
December 11, 2024 12:27 PM UTC
While they may not affect the overall BoE verdict on Dec 19, which looks very likely to be a pause after last month’s 25 bp cut (to 4.75%), forthcoming data may very well influence the MPC vote and the message in the updated Monetary Policy Summary. In particular, CPI data (Dec 18) may have some