Brazil Risk Premia and EM Debt

January 20, 2025 8:15 AM UTC

Brazil debt market has two domestic crises rather than a spillover from the U.S. in the form of inflation and fiscal policy. Very restrictive BCB policy can help produce some disinflation and we forecast 4.1% for 2026, which some allow some rate cuts in H2. Brazil risk premium will likely be reduced

BoJ Preview: 50% Hike, 100% Disappointment

January 20, 2025 2:00 AM UTC

Market is currently pricing more than 50% the BoJ will hike in the January 23-24 meeting but it is unlikely to be the hawkish BoJ market participants want.

Preview: Due January 30 - U.S. Q4 GDP - Maintaining Momentum

January 17, 2025 4:55 PM UTC

We expect a 2.6% annualized increase in Q4 GDP, slower than Q3’s 3.1% but still maintaining solid momentum.  

SA Inflation Preview: Inflation Will Likely Slightly Rise in December

January 17, 2025 2:39 PM UTC

Bottom Line: Despite inflation stood at 2.9% YoY in November, we now foresee annual inflation will slightly accelerate to 3.1% - 3.2% in December due to rising fuel pieces, which will be announced on January 22. We feel unpredictable outlook for the global economy, increasing oil prices following th

China: 5% for 2024 but Still Imbalanced into 2025

January 17, 2025 2:15 PM UTC

  Though China hit the 2024 GDP growth target of 5.0%, monthly data shows the economy unbalanced.  Industrial production/exports and state investment support the economy, with residential property investment negative and consumption sluggish. With monetary policy ineffective, we see Yuan3-5trn fis

Norges Bank Preview (Jan 23): A Message to Markets?

January 17, 2025 1:15 PM UTC

In its first meeting of the year, the Norges Bank is expected to keep rates on hold next Thursday.  But it does have the choice of cutting rates, having flagged a move more likely at the meeting due in March, and could do this both to reflect weaker price pressures (especially excluding what are pr

Turkiye MPC Preview: CBRT will Likely Continue its Easing Cycle on January 23

January 16, 2025 3:09 PM UTC

Bottom Line: After Central Bank of Turkiye (CBRT) lowered its key policy rate by 250 bps to 47.5% on December 26, we believe the rate cuts will continue during the MPC meeting scheduled for January 23. CBRT will likely reduce the policy rate by 250 bps to 45% as the deceleration trend in inflation c

Brazil: Fiscal Target will be Fulfilled but Doubts Remains over the Fiscal Sustainability

January 16, 2025 3:08 PM UTC

Brazil achieved significant fiscal consolidation in 2024, with a primary deficit of 0.6% of GDP, or 0.2% excluding flood-related costs, driven by revenue growth and reduced judicial expenditures. However, rising debt servicing costs, now at 8% of GDP, worsen the nominal result. Fiscal discipline wil

India CPI Review: CPI Cools but Target Not in Sight

January 16, 2025 2:27 PM UTC

India’s retail inflation eased to a four-month low of 5.22% in December 2024, driven by a seasonal decline in food prices, particularly vegetables and cereals. With inflation within the RBI’s target range, all eyes are on the upcoming monetary policy review for potential rate cuts.

U.S. December Retail Sales - Trend still solid, Philly Fed surges in January

January 16, 2025 1:58 PM UTC

December retail sales with a 0.4% increase overall and ex auto, 0.3% ex autos and gasoline, are on the weak side of expectations but maintain respectable momentum, particularly in the control group which contributes to GDP, which rose by 0.7%. A strikingly strong January Philly Fed manufacturing ind

ECB December Council Meeting Account Review: The ‘Last Mile’ Appears to Have Shortened Somewhat?

January 16, 2025 1:27 PM UTC

As the account of the December 11-12 Council meeting noted, a fourth 25 bp discount rate cut was agreed but there appeared to be a minority wanting a 50 bp move. But this account also shows some confusion as to just what the advertised change in forward guidance (in which the ECB accepts that on-tar

BOE QT: A Heavier Burden than Fed/ECB QT

January 16, 2025 11:05 AM UTC

BOE QT is 3.4% of GDP and means the 2025 total funding is 8% of GDP, which helps explain part of the current pressure on gilt yields (here).  This pace is unlikely to change before the BOE review in September 2025, but the QT is partial monetary tightening and will offset some of 125bps of BOE rate

UK GDP Review: Continued Weakness Evident – BoE Voicing Concern?

January 16, 2025 7:46 AM UTC

The latest set of GDP data add to already-growing 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.  As we envisaged, November saw a bare almost-0.1% m/m rise, this came after October saw a second successi

FOMC Preview for January 29: A Cautious Hold

January 15, 2025 8:10 PM UTC

The FOMC looks set to keep rates on hold at 4.25-4.5% at its January 29 meeting. The statement is unlikely to give much away but the message is likely to be one of cautious optimism on inflation, suggesting further easing is likely but dependent on incoming data. Policy uncertainty under the incomin

Stubborn Inflation Jumped to Record High at Year-End Amid Ruble Woes

January 15, 2025 7:18 PM UTC

Bottom Line: According to Russian Federal Statistics Service (Rosstat) data released on January 15, inflation ticked up to 9.5% YoY in December after hitting 8.9% in November, remaining well above the Central Bank of Russia’s (CBR) midterm target of 4%, due to surges in services and food prices,

U.S. Fed's Barkin - Cautious optimism, downplays long-term yield gains

January 15, 2025 3:41 PM UTC

Fed's Barkin has welcomed both the slower core CPI and lower unemployment rate. 

Preview: Due January 16 - U.S. December Retail Sales - Solid end to Q4

January 15, 2025 2:43 PM UTC

We expect US retail sales to finish Q4 on a solid note with a 0.7% rise overall, matching November’s gain, with a 0.6% rise ex autos and a 0.5% increase ex autos and gasoline, the two core rates picking up after both saw modest 0.2% increases in both October and November. 

U.S. December CPI - A modest comfort to the Fed, but early 2025 data will be crucial

January 15, 2025 2:04 PM UTC

While December’s headline CPI is in line with expectations with a 0.4% increase, the core rate ex food and energy is subdued at 0.2% following four straight gains of 0.3%, and a downside surprise is quite comfortable with the gain before rounding being 0.225%. Price data did however pick up in Jan

Mexico’s Plan: An Eye on Nearshoring and Displacing China in U.S.

January 15, 2025 1:17 PM UTC

President Claudia Sheinbaum’s “Mexico Plan” targets USD 270 billion in investments, aiming to reduce poverty, boost sustainability, and expand Mexico’s economy. Key goals include nearshoring, increasing domestic production, and fostering U.S. trade relations. However, private investment stag

U.S. Yields and an Equity Market Correction

January 15, 2025 8:15 AM UTC

Treasury yields look to have reached a level that the divergence in valuations means that equities are on the defensive. Unless U.S. Treasury yields come down then the S&P500 looks to be heading to 5400-5600 near-term.  This is most likely a correction given that the Fed is likely to still leave th

UK CPI Review: Clearly More Reassuring Inflation Signals

January 15, 2025 7:47 AM UTC

Amid current bond market ructions, which some are suggesting reflects stagflation worries, we think that looming December UK CPI data may help dispel some of the inflation aspect of those concerns.  Indeed, with markets are looking for the headline rate to stay at November’s 2.6% outcome, the act

Preview: Due January 15 - U.S. December CPI - Stronger overall, core rate maintaining trend

January 14, 2025 2:16 PM UTC

We expect December’s CPI to increase by a nine-month high of 0.4% overall with a fifth straight 0.3% increase ex food and energy. We expect the ex-food and energy index to increase by 0.26% before rounding, which would make it the softest of the five straight 0.3% gains in the core rate. PPI is no

U.S. Yields Drag Germany and France Higher

January 14, 2025 8:15 AM UTC

The EUR real exchange rate is well above the 2014 low, while ECB officials are guiding that more rate cuts are coming.  2yr German yields are unlikely to rise much further and will likely come back down in Q2 (here).  A January 30 ECB cut will likely build more easing expectations, though more of

Bank of Canada Preview for January 29: Easing to continue but more cautiously

January 13, 2025 5:23 PM UTC

The Bank of Canada meets on January 29, and will make its decision a few hours before one is made by the FOMC. The BoC decision will be following two straight easings of 50bps, though minutes from the last meeting, on December 11, showed a debate between 25bps and 50bps, and that they expected a mor

Brazil CPI Review: Some Deterioration in December

January 13, 2025 2:28 PM UTC

Brazil’s CPI grew by 0.52% in December, ending 2024 at 4.8%, above the Central Bank’s target range (1.5%–4.5%). Key drivers included food (+1.2% m/m) and household spending (+0.7%). Core inflation rose for the fourth consecutive month, reaching 4.3% Y/Y. Elevated inflation is expected in early

Cyberattacks and AI Misinformation: Market and Economic Fallout

January 13, 2025 8:10 AM UTC

   A major cyberattack is a tail risk, while a huge AI misinformation crisis is a modest crisis in our view.  Russia/China and Iran are less likely to launch a state sponsored cyberattack for geopolitical reasons and also uncertainty over president elect Donald Trump’s response.  A huge AI mis

Unemployment Rate Hits 8.6% in November in Turkiye

January 10, 2025 4:38 PM UTC

Bottom line: According to Turkish Statistical Institute’s (TUIK) figures announced on January 10, the unemployment rate declined to 8.6% in November from 8.7% in October. The number of jobless dropped 84,000 from October to 3.07 million in November, the data showed. As unemployment rate continue

U.S. Fed's Goolsbee - Dovish tone not representative of FOMC majority

January 10, 2025 3:41 PM UTC

Fed's Goolsbee is sounding more dovish than most, but will have a vote in 2025.

UK GDP Preview (Jan 16): Continued Weakness?

January 10, 2025 3:20 PM UTC

The last set of 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,

Mexico CPI Review: Downtrend Continues

January 10, 2025 2:11 PM UTC

December’s CPI grew 0.4%, with Y/Y inflation dropping to 4.2%, above Banxico’s 2%-4% target. Core CPI rose 0.5%, driven by services, while non-core inflation was stable. MXN depreciation’s pass-through impact remains limited. Tight monetary policy supports convergence, but Banxico faces a deci

U.S. December Employment - Case for a January FOMC pause looks stronger still

January 10, 2025 2:00 PM UTC

December’s non-farm payroll with a 256k increase, 223k in the private sector, is significantly higher than expected and suggests the economy has significant momentum entering 2025, adding to an already strong case for a Fed pause in January. The unemployment rate slipped to 4.1% from 4.2% but a 0.

UK CPI Preview (Jan 15): More Mixed Inflation Signals

January 10, 2025 11:55 AM UTC

Amid current bond market ructions, which some are suggesting reflects stagflation worries, we think that looming December UK CPI data may help dispel some of the inflation aspect of those concerns.  Admittedly, markets are looking for the headline rate to nudge up a notch, although we look for a st

India CPI Preview: A Cautiously Optimistic Outlook

January 10, 2025 10:36 AM UTC

Bottom line: India's inflation rate for October is projected to ease to 5.2% y/y due to base effects and domestic food prices. Moderating food pressures and global commodity prices will see inflationary pressures ease in the coming months. 

U.S. Treasuries versus Bunds and Gilts

January 10, 2025 8:10 AM UTC

·        UK Gilts have been dragged higher by rising Treasuries and market concerns that BOE rate cuts will be limited (here), while 10yr Bund yields have also been dragged higher by Treasuries concerns on Fed rate cuts/budget deficit and tariffs.  Multi quarter we see this as overdone. We

Reserves, Rates, and Reform: BI’s 2025 Strategy to Stabilise the Rupiah

January 10, 2025 8:06 AM UTC

Currency pressures and policy pivots define BI’s entry into 2025, with the rupiah breaching 16,000 per dollar. Strong reserves and strategic moves signal resilience, but sustaining investor confidence in the face of fiscal and structural vulnerabilities remains a tough challenge.

U.S. Fed's Bowman - Suggests December easing should be the last, others still expect cautious easing

January 9, 2025 6:48 PM UTC

While most of today's Fed speakers expect further easing, if at a cautious pace, Governor Bowman sees the December move as a final step.

SARB to Continue Rate Cuts in 2025, but the Pace Will Depend on Inflation Trajectory and Global Developments

January 9, 2025 11:23 AM UTC

Bottom line: After South African Reserve Bank (SARB) started cutting the key rate on September 19 and decreased the rate from 8.25% to 7.75% in 2024 given fall in inflation below midpoint of target band of 3% - 6%, suspended power cuts (loadshedding) and deceleration in inflation expectation, we for

Gilt Yields Rise on U.S. and Fiscal Slippage Concerns

January 9, 2025 9:40 AM UTC

·       10yr Gilts yields are rising on concerns of UK fiscal slippage, but also higher U.S. yields and funding pressures as GBP100bln of BOE QT adds to the budget deficit targeted at 4.5% of GDP in 2024/25.  Chancellor Reeves will likely recommit to the fiscal rules (ie further small correc

The Growth-Inflation Tug of War: RBI’s 2025 Policy Outlook with a New Governor

January 9, 2025 8:14 AM UTC

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is currently navigating a complex economic landscape marked by rising inflation and sluggish growth. The recent appointment of Sanjay Malhotra as the new RBI Governor adds another layer of intrigue to the central bank's policy directi

FOMC Minutes from December 18 - Moving towards a more careful approach

January 8, 2025 7:58 PM UTC

Minutes from the December 17-18 meeting show the FOMC moving to a more cautious stance, which appears largely a response to recent disappointment on inflation data but uncertainty over policy following the election also seems to be playing a part.

2025 will be Key for CBRT

January 8, 2025 3:06 PM UTC

Bottom Line: After Central Bank of Turkiye (CBRT) lowered its key policy rate by 250 bps to 47.5% on December 26, which was the first rate cut in around two years, we believe the rate cuts will continue in 2025 following inflation fighting drive in 2024 while our end year key rate prediction remains

Preview: Due January 10 - U.S. December Employment (Non-Farm Payrolls) - Closer to solid underlying trend

January 8, 2025 2:23 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

U.S. Fed's Waller - Expects further easing, downplays tariff risks

January 8, 2025 1:15 PM UTC

Fed's Waller's latest remarks are on the dovish side, notably downplaying inflationary risks from tariffs.

Trump Policies Awaited

January 8, 2025 8:30 AM UTC

We see a transactional approach on trade, with tariff threats translating into actual tariffs on China initially and Trump rather than Congress having control on tariffs.   On the budget, we see scope for more tax cuts than expanding the lapsing parts of the 2017 tax cuts and expenditure cuts bein