Brazil: Demand and Imported Prices Lead Inflation Rise

October 17, 2024 6:33 PM UTC

Our updated model shows that stronger-than-expected demand and BRL depreciation are driving Brazil’s inflation higher, while supply remains stable. Despite recent rate hikes, inflation expectations have risen, loosening monetary policy. We expect the BCB to implement two more 50 bps hikes before p

ECB Review: Inflation Outlook Lowered?

October 17, 2024 1:45 PM UTC

The latest 25 bp rate cut from the ECB was obviously not anticipated at the previous meeting, although perhaps the Council was more open to such a move than the press conference then suggested.  But it is clear a reassessment is occurring, not just of the inflation outlook but the real economy too.

U.S. September Industrial Production - Up excluding impact of Boeing strike and hurricanes

October 17, 2024 1:42 PM UTC

September industrial production was a little weaker than expected with a 0.3% decline, with manufacturing down by 0.4%, but the Fed stated that a strike at Boeing which started in mid-September took 0.3% off the total, and the impact of two Hurricanes took off an additional 0.3%, meaning a modestly

Central and Latin America: Country Risk Ratings

October 17, 2024 10:00 AM UTC

We provide country risk reviews for select Central and Latin America countries.  

Indonesia Country Risk

October 17, 2024 6:30 AM UTC

We provide country risk review for Indonesia.  

ECB to Note Better Signs in Bank Lending Survey?

October 16, 2024 2:17 PM UTC

All and sundry wait as much for the what the ECB says tomorrow (Oct 17) than what it does (ie cut by another 25 bp).  The consensus is that the Council will have to sound much more cautious about downside risks to both (its somewhat optimistic) growth outlook and its too pessimistic inflation pictu

UK CPI Review: Inflation Below Target – BoE Hawks Placated?

October 16, 2024 6:49 AM UTC

Helped by a fall in fuel prices and airfares, amplified by base effects, alongside some belated broader softening in services costs, UK inflation dropped to 1.7% in the September CPI (from 2.2%), thus falling below target for the first time since April 2021.  This drop was greater than expected and

Canada September CPI - Subdued, pause in BoC core rates downtrend likely to be temporary

October 15, 2024 12:59 PM UTC

September Canadian CPI is weaker than expected overall at 1.6% from 2.0% yr/yr, and subdued on the month, though there has been a lack of further progress on the Bank of Canada’s core rates, largely because year ago data dropping out was also subdued and below where trend then was. This leaves nex

Russia CPI Review: Moderate Fall in Inflation in September but Still Elevated

October 11, 2024 6:48 PM UTC

Bottom Line: According to Russian Federal Statistics Service data released on October 11, inflation cooled off to 8.6% YoY in September after hitting 9.1% both in August and July, but remained elevated due to surges in food and services prices, weakening Ruble (RUB), and huge military spending. The

U.S. September CPI - Core not led by housing this time, Hurricanes starting to lift Initial Claims

October 10, 2024 1:19 PM UTC

September CPI is on the high side of expectations, up 0.2% overall and 0.3% ex food and energy, with the gains before rounding being 0.18% and 0.31% respectively. While the core rate looks similar to August’s, the details are different with strength not led by housing this time. A spike in initial

FOMC Minutes from September 18 - Agreement on the economy, some debate on the decision

October 9, 2024 7:04 PM UTC

FOMC minutes from September 18 generated little response from the markets. A substantial majority favored the 50bps easing that was delivered though some would have preferred a 25bps move and a few others indicated they could support such a decision, though there was only one dissenting voter, Gover

SARB in 2025: Rate Cuts Will Continue

October 8, 2024 5:25 PM UTC

Bottom line: After South African Reserve Bank (SARB) started cutting the key rate on September 19 and decreased it from 8.25% to 8.0% given fall in inflation below midpoint of target band of 3% - 6%, suspended power cuts (loadshedding) and deceleration in inflation expectation, we now foresee the ra

UK GDP Preview (Oct 11): Moderating Momentum?

October 7, 2024 9:17 AM UTC

Much has been made of the UK’s economy’s apparent solidity, if not strength, so far this year given sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively.  But this may be something of a flash in the pan, not least as GDP growth has been positive in only one of

U.S. September Employment - A strong month and downside risk to October has fallen too

October 4, 2024 1:13 PM UTC

September’s non-farm payroll is well above consensus with a rise of 254k. Unusually net back revisions are positive at 72k, if largely in government. Unemployment unexpectedly fell to 4.1% from 4.2% and average hourly earnings were above trend at 0.4% again with upward back revisions. This is clea

China: Any Lessons from the 1997-98 Asian Crisis?

October 3, 2024 1:30 PM UTC

Overall, the warning from slow real credit growth on reduced credit supply and demand is the main lesson from the Asia crisis 1997-98.  China High FX reserves; low borrowing overseas and dominance of domestic investors in Yuan markets argues against a currency crisis.  Asia widespread banking cris

Brazil: Moody’s Upgrade Brazil’s Rating

October 2, 2024 2:22 PM UTC

Moody's upgraded Brazil's rating to Baa1, one level below investment grade, citing growth and structural reforms like tax and labor reforms. While Brazil's fiscal framework still faces challenges, adherence to it could stabilize the Debt/GDP ratio. Analysts were surprised by the upgrade, but maintai

Brazil: Quarterly Inflation Report Shows BCB Worries

October 1, 2024 2:10 PM UTC

The Brazilian Central Bank's latest report highlights stronger-than-expected economic growth of 1.4% in Q2 and a positive output gap, raising inflation risks. While non-core inflation decreased, core measures like services inflation remain sticky. Credit growth continues to be robust, but fiscal pol

Israel/Hezbollah Scenarios

September 30, 2024 9:26 AM UTC

The most likely scenarios between Israel and Hezbollah are Israel/Hezbollah intermittent attacks/counterattacks (40%) or significant ground invasion Southern Lebanon (45%).  Both would be difficult in human terms and raise geopolitical tensions, but are unlikely to cause a lasting impact on global

Banxico Review: 25bps Cut as Expected, But Not Unanimous

September 27, 2024 12:58 PM UTC

Banxico cut the policy rate by 25 bps to 10.5%, but the decision was not unanimous, with one dissenter favoring a higher rate. Weak domestic growth and softening core CPI suggest further cuts are likely, though caution is needed due to market volatility. Banxico’s minutes will provide more clarity

SNB Review: More Cuts on the Way

September 26, 2024 8:24 AM UTC

Very much as expected, the SNB today repeated the 25 bp policy rate cut that it had made twice since March.  This took the policy rate to 1.0% and reflected an even clearer below-target inflation picture in both recent actual numbers and the updated outlook (Figure 1).  This flagged further easing

BCB Minutes: Adding Some Hawkishness to the Communique

September 25, 2024 1:44 PM UTC

The Brazilian Central Bank raised the policy rate by 25 bps to 10.75%, citing stronger-than-expected economic activity and deteriorating inflation expectations. The committee highlighted rising inflationary pressures, especially in wages and credit growth. While future rate hikes are likely, no forw

China Outlook: Unbalanced Growth and Slowing

September 24, 2024 8:54 AM UTC

      Growth is benefitting from momentum in public investment/exports and high tech production.  However, domestic demand is slower and this is a drag on H2 2024 and 2025 growth prospects.  Aside from the ongoing negative drag from the residential construction crisis, consumption is also softe

BoE Review: Explicit Gradualism

September 19, 2024 12:05 PM UTC

The expected unchanged MPC decision came with what some may regard was a lack of any major dissent beyond that from arch-dove, Swati Dhingra.  But that 8:1 vote is very much a reaction to the closeness of the MPC vote last month to cut Bank Rate by 25 bp to 5.0%.  It is also preference from the MP

China Banking Stress Tests: The Good, The Bad and the Ugly

September 18, 2024 8:05 AM UTC

The good news is that China’s 19 major domestic systemically important banks (D-SIB’s and 72% of loans) hold up well under most solvency and liquidity tests, though some capital shortfalls start to appear with a moderate or severe NPL sensitivity shock scenario.  The safety net would likely be

U.S. August Industrial Production - Autos lead bounce, though revisions negattive

September 17, 2024 1:38 PM UTC

August industrial production with gains of 0.8% overall and 0.9% in manufacturing has surprised clearly on the upside. The gain was led by a rebound in autos from a weak July but manufacturing ex autos saw a 0.3% increase to erase two straight preceding declines.

China: Weak August Data

September 16, 2024 6:58 AM UTC

China August data was worse than expected and confirms the weak trend in H2, with retail sales a real worry. The government risks missing the 5% growth target for 2024 and targeted fiscal policy moves are likely, but need to be implemented quickly.  10bps cut in the 7 day reverse repo rate is also

U.S. September Michigan CSI - Higher, including long-term inflation expectation

September 13, 2024 2:16 PM UTC

September’s preliminary Michigan CSI at 69.0 from 67.9 is slightly firmer, with both current conditions and expectations contributing. Inflation expectations are mixed, but a rise in the 5-10 year view outweighs a fall in the 1-year view.

ECB Review: Under-Estimating Downside Risks?

September 12, 2024 2:16 PM UTC

That the ECB cut the discount rate again by another 25 bp (to 3.5%) was no surprise.  Neither was an unchanged tone at the press conference, with no clearer acknowledgment of downside risks even given ECB GDP projections (Figure 1) which moved down more toward our long-standing below-consensus thin

U.S. August CPI - Core at a four month high led by shelter and air fares

September 11, 2024 12:59 PM UTC

August core CPI has disappointed to the upside with a 0.3% rise ex food and energy with the rise being 0.28% before rounding, a four month high. Overall CPI rose by 0.2% as expected, and by 0.19% before rounding. The data is likely to ensure that the FOMC eases by only 25bps in September. Shelter an

Mexico CPI Review: 0% Inflation in August as Expected

September 10, 2024 1:53 PM UTC

Mexico's CPI remained flat in August, causing year-over-year CPI to drop from 5.6% to 5.0%. This stability was driven by a 0.7% decline in non-core CPI, while core CPI rose 0.2%. The Food and Beverages CPI fell 0.6%, reflecting easing pressure on agricultural goods. With the economy cooling, inflati