BoE Preview (Aug 1): Time to Get Less Restrictive

July 25, 2024 3:20 PM UTC

We still think that the BoE will cut Bank Rate by 25 bp at the Aug 1 MPC verdict and that that two further such cuts may arrive by end-year.  We accept that stubborn services inflation may harden the hawks, despite softer wage pressures.  But while the recent Bernanke Report recommended phasing ou

South Africa’s Inflation Slightly Eased to %5.1 YoY in June

July 24, 2024 11:25 AM UTC

Bottom Line: According to the inflation figures announced by Department of Statistics of South Africa (Stats SA) on July 24, CPI marginally decreased to 5.1% YoY in June due to slowdown in costs for food, fuel and transportation coupled with suspended power cuts (load shedding) in June. The inflatio

Short-End Gilts To Discount More Easing?

July 24, 2024 9:15 AM UTC

2yr Gilt yields will likely start declining further after the 1 BOE rate cut (we expect Aug 1), both as BOE communications guide to further cuts in the medium-term and as incoming wage and service inflation provides more comfort to reduce the scale of restrictive policy.  We see 2yr Gilt yields at

CBRT Continued to Keep Key Rate Stable at 50%

July 23, 2024 1:48 PM UTC

Bottom Line: As predictions were centred around no change, Central Bank of Turkiye (CBRT) kept the policy rate stable at 50% on July 23. CBRT said in a statement that tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is ob

UK Household Wealth and the Pension Predicament

July 22, 2024 12:44 PM UTC

Unlike some other parts of the DM world, UK households have seen a serious dent put into their stock of wealth in the last two years.  Indeed, household net worth fell in both 2022 and 2023, both in absolute terms and also as a % GDP (Figure 1).  The 2022 drop was very much a slump in pension fund

UK Labor Market: Far Less Resilient Wage Pressures As Labor Market Loosens Further

July 18, 2024 7:15 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

UK CPI Review: Inflation Stays at Target and Services Stay Resilient?

July 17, 2024 6:35 AM UTC

As has been made clear by policy-makers, labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  In this regard the fact that headline CPI inflation dropped back to the 2% target in May is important but far from de

UK Productivity: Starting to Recover - Maybe?

July 15, 2024 2:12 PM UTC

Amid the new government’s economic priority to boost the trend or potential growth rate, any hint that this could be occurring would be welcome and important.  With this in mind, it is notable that after the mild recession in H2 last year, the ‘recovery’ through this year is much clearer than

Turkiye’s Current Account Deficit: Services Surplus and Decreasing Trade Deficit Succour

July 12, 2024 1:28 PM UTC

Bottom Line: Turkiye’s annualized current account deficit (CAD) stood at $25.2 billion as of May 2024, marking its lowest level since June 2022, down from $31.7 billion a month earlier driven by strong services income and improving foreign trade balance, supported by accelerated capital inflows. W

South Africa: Parliament to Open on July 18

July 11, 2024 9:41 AM UTC

Bottom Line: After African National Congress (ANC) and Democratic Alliance (DA) formed a government of national unity (GNU) along with other smaller parties, and president Ramaphosa announced the cabinet on June 30, South Africa should now quickly turn its attention to economic urgencies. The parlia

Russia’s Inflation Continued Its Rally in June: 8.6% YoY

July 10, 2024 6:51 PM UTC

Bottom Line: According to Russian Federal Statistics Service data released on July 10, inflation jumped to 8.6% YoY in June after hitting 8.3% YoY in May, the highest reading since February 2023, due to strong military spending, tight labour market, and fiscal policy igniting domestic demand. The ne

Russian Economy Expands by 4.5% YoY in May

July 5, 2024 11:56 AM UTC

Bottom Line: According to the figures announced by the Russian Ministry of Economic Development, Russia's GDP grew by 4.5% YoY in May. We foresee Russian economy will expand by 2.5% in 2024 driven in part by a significant increase in military spending due to intensified Russian offensive operation

Turkiye’s Inflation Slowed for the First Time in 8 Months: 71.6% in June

July 3, 2024 5:26 PM UTC

Bottom Line: Turkish Statistical Institute (TUIK) announced on July 3 that Turkish CPI cooled to 71.6% annually and 1.6% monthly in June partly supported by the ease in energy and food prices in June compared to a month earlier. As we predicted, favourable base effects, tightened monetary and fiscal

Webinar Recording June Outlook: Cyclical and Structural Forces

July 2, 2024 7:30 AM UTC

Coalition’s Determination will be Key for Narrowing South Africa’s Current Account Deficit

July 1, 2024 10:32 AM UTC

Bottom Line: Current account deficits (CAD) continue to be a major headwind for South African economy ignited by logistical constraints, power cuts (load shedding), and weaker external demand especially from China and the EU. We think CA will be still bolstered by a trade surplus in H2 2024, support

UK Markets After The Election: Will Labour Push for Growth Slowly or Quickly?

June 28, 2024 7:14 AM UTC

It is uncertain whether an incoming Labour government in the UK would slowly or quickly take action to boost trend growth and this is the most important question for post-election sentiment towards UK assets.  For the Gilt market, the key is that the BOE actually starts cutting rates and that the 1

As Widely Expected, CBRT Kept Key Rate Stable at 50% on June 27

June 27, 2024 12:32 PM UTC

Bottom Line: As predictions were centred around no change, Central Bank of Turkiye (CBRT) kept the policy rate stable at 50% on June 27 despite galloping inflation edged up to 75.5% in May, up from 69.8% in April. CBRT said in a statement on June 27 that "(…) the tight monetary stance will be main

June Outlook: Cyclical and Structural Forces

June 26, 2024 7:58 AM UTC

The 15 chapters of our June Outlook have now been published.  See the headlines and weblinks enclosed for links to the articles on economic, policy and markets for the 23 countries that we cover

Outlook Overview: Cyclical and Structural Forces

June 25, 2024 10:15 AM UTC

•    The global economy is showing signs of healing, as inflation comes back towards targets and growth recovers momentum in some economies. Nevertheless, the cyclical headwind of lagged monetary tightening remains in DM countries, and will likely be one of the forces slowing the U.S. economy

EMEA Outlook: Stubborn Inflation Dominates

June 24, 2024 1:00 PM UTC

·     In Turkiye, we expect Central Bank of Republic of Turkiye (CBRT) will likely halt the key rate at 50% until the end of 2024, which is our baseline scenario. We expect a fall in inflation likely after July due to favorable base effects, additional macro prudential measures, public savings

BoE Review: MPC Splits Enlarge to Suggest Cut Soon

June 20, 2024 11:48 AM UTC

As widely Bank Rate was kept at 5.25% for the seventh successive MPC meeting this month, with its rhetoric largely unchanged.  But while there were still only two formal dissents, the minutes clearly suggested that for some of the remaining seven members the policy decision at this meeting was fine

Norges Bank Review: Excessive Last Mile Caution?

June 20, 2024 9:04 AM UTC

It was always the very high likelihood that the thrust of recent data and the Board’s clear caution would mean that the Norges Bank would leave its policy rate at 4.5% for a fourth successive meeting and this is what duly occurred.  Perhaps more notable was that the it was more explicit in stress

SNB: 25bps Cut and Next Cut in September

June 20, 2024 8:34 AM UTC

The SNB cut by 25bps to try and stop inflation undershooting.  We look for a further 25bps cut in September, as the new inflation forecasts remains too far below target for SNB comfort. CHF strength will also not ebb quickly given the prospect of prolonged French political uncertainty.  

Sweden Riksbank Preview (Jun 27): Doing It Gradually

June 19, 2024 3:24 PM UTC

As much as the 25 bp rate cut it made last month was the clear hint of two further such cuts in H2 this year, this chiming with its policy outlook in the March (Figure 1) Monetary Policy Report (MPR) as well as our own long-standing view.  By moving at that early juncture, the Board was both reacti

UK CPI Inflation Review: Inflation Back at Target

June 19, 2024 6:39 AM UTC

As labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle, this further drop in inflation is important but uncertain.  Indeed, largely meeting expectations, CPI headline inflation fell from 2.3% to 2.0% (actually ju

South Africa: ANC-DA-IFP-PA Coalition Will Run the Government

June 17, 2024 11:23 AM UTC

Bottom Line: As we predicted, African National Congress (ANC) and Democratic Alliance (DA) formed a government of national unity (GNU) with the ANC-lead on June 14, along with two smaller opposition parties, Inkatha Freedom Party (IFP) and Patriotic Alliance (PA). Lawmakers voted to put former presi

Russia’s Inflation Continued to Surge in May: 8.3% YoY

June 14, 2024 5:40 PM UTC

Bottom Line: According to Russian Federal Statistics Service data released on June 14, inflation surged to 8.3% YoY in May after hitting 7.8% YoY in April, the highest since February 2023, due to high military spending, currency weakening, tight labour market, and fiscal policy igniting domestic dem

Norges Bank Preview (Jun 20): Continued Caution?

June 13, 2024 9:25 AM UTC

Given the thrust of recent data and the Board’s clear caution, the Norges Bank is very likely to leave the policy rate at 4.5% for a fourth successive meeting at its next Board meeting with the decision due on June 20.  It is also likely to retain the thinking first aired at the December meeting,

BoE Preview (Jun 20): Data Dependent Easing Bias Makes BoE Decision Unclear

June 12, 2024 10:42 AM UTC

After Bank Rate was kept at 5.25% for the sixth successive MPC meeting last month, Governor Bailey remarked that then market rate pricing may be too cautious.  He also accepted that a rate cut at the next MPC verdict on June 20 was a distinct possibility, but underscored the importance of the data

UK GDP Review: Flat April - How Resilient is the Economy?

June 12, 2024 6:31 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive, albeit with some continued volatility.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m

UK CPI Inflation Preview (Jun 19): Inflation Falls To Target?

June 11, 2024 9:57 AM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  But perhaps the CPI data is the most crucial especially with April’s signs of resilient services (and particularly in regard to eating out) very mu

CBR Kept the Key Rate Stable at 16% despite Increasing Inflation

June 7, 2024 12:57 PM UTC

Bottom Line: Central Bank of Russia (CBR) announced on June 7 that it decided to keep the policy rate unchanged at 16% for the fourth meeting in a row, but signalled that a rate hike is possible in the near term to tame the stubborn price pressures stemming from high military spending, tight labour

UK GDP Preview (Jun 12): Fresh Correction on the Cards?

June 3, 2024 1:52 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m in March accentuating the upgraded boun

South Africa Elections: A Coalition Government is on the Horizon

May 31, 2024 3:03 PM UTC

Bottom line: As we forecasted in our previous pieces, it seems a coalition government with an ANC-lead will be formed following the presidential elections on May 29, according to the preliminary results. It is very likely that ANC will be losing its majority dipping below 50% as it is currently the

SARB Held the Key Rate Stable at 8.25%

May 30, 2024 3:06 PM UTC

Bottom line: As widely expected, South African Reserve Bank (SARB) kept the key rate constant at a 15-year high of 8.25% on May 30 despite inflation rate fell for a second consecutive month in April due to less severe power cuts (load shedding), a firmer South African rand (ZAR) coupled with lower f