EZ Data Review: Headline Edges Lower Again With Friendlier Services and Labor Market Messages?

April 1, 2025 9:45 AM UTC

Largely as expected, there was more supportive news in the March flash HICP numbers (Figure 1), with the headline down a notch and core down 0.2 ppt (the former to 2.2% and hence the lowest since last autumn).  Perhaps more notably services inflation slowed more clearly, dropping 0.3 ppt to 3.4%, a

German Data Review: Lower Headline Amid Clearer Drop in Services Inflation

March 31, 2025 12:14 PM UTC

Germany’s disinflation process continues, but there had been signs that the downtrend was flattening out but this changed somewhat in February and again in the March preliminary numbers. Indeed, HICP inflation fell back from January’s 2.8% to a 3-mth low of 2.6% last month and then to 2.3% in Ma

Banxico Review: Lowering Rates Amid Tariffs

March 29, 2025 9:29 PM UTC

Mexico’s Central Bank (Banxico) has cut the policy rate by 50 bps to 9%, in line with market expectations. The tone of the communiqué suggests a more dovish stance, with the board moving towards a neutral rate. Inflation has reached its lowest level since 2021, while economic growth has slowed. B

Turkish Economy Remains under Pressure after Mayor of Istanbul Arrest

March 28, 2025 11:06 AM UTC

Bottom Line: After mayor of Istanbul, Ekrem Imamoglu, arrested on March 23 due to fraud allegations, nationwide protests continue in Turkiye and Turkish economy remains under pressure despite a recent recovery after Treasury and Finance Minister Simsek vowed to restore stability, and Central Bank of

Car Tariffs Then Lenient Reciprocal Tariffs?

March 27, 2025 8:59 AM UTC

   The 25% tariffs on cars underlines that tariffs are not just about getting better trade deals, but in Trump’s view raising (tax) revenue and trying to shift production back to the U.S. Combined with other tariffs being implemented, plus policy uncertainty, we see a moderate overall hit from t

UK Spring Fiscal Statement – A Patch-up Not a Repair Job?

March 26, 2025 1:39 PM UTC

Chancellor Reeves never wanted a fiscal event at this juncture.  But market pressure and economic weakness have forced her into a series of government spending cuts designed to shore up her recently revised fiscal goals via this so-call spring statement.  The problem here is twofold. Firstly, the

German & EZ HICP Preview (Mar 31/Apr 1): Headline Edges Lower Again With Friendlier Services Messages?

March 25, 2025 1:43 PM UTC

February HICP inflation numbers did deliver better news and broadly and less marginally so after revisions with the headline dropping 0.2 ppt to an as-expected 2.3%.  This ended a run of three successive rises and came about despite a rise in food inflation.  Regardless, the core also eased 0.1 pp

China Outlook: Construction and Trade Headwinds v Policy Stimulus

March 24, 2025 9:00 AM UTC

   We look for 4.5% GDP growth in 2025.  Though residential property investment will subtract less from GDP growth, net exports will also be a drag on the economy in 2025 due to the trade war with the U.S.  Further fiscal stimulus beyond March’s NPC measures will be required to achieve a 5% GD

As Expected, CBR Kept Key Rate Constant at 21% on March 21

March 21, 2025 3:40 PM UTC

Bottom Line: As we predicted, Central Bank of Russia (CBR) kept the policy rate constant on March 21 for the third consecutive time to combat price pressures. CBR signaled that it is unlikely that further tightening is needed for disinflation, and stated that current inflationary pressures have decr

Canada January Retail Sales - Slipping from strong December

March 21, 2025 12:43 PM UTC

Canada’s January retail sales with a 0.6% decline are slightly weaker than an advance estimate of -0.4% but need to be seen alongside a strong 2.6% increase in December. The advance estimate for February is for another decline, by 0.4%. Tariff concerns may be starting to weigh on Canadian consumer

UK Labor Market – Private Payrolls Stay Soft Amid Cost Pressures?

March 20, 2025 7:57 AM UTC

To suggest that the UK labor market is merely getting less tight misses the point entirely even given more signs of higher participation.  Amid continued reservations about the accuracy of official labor market data produced by the ONS, alternative and very clearly more authoritative data on payrol

UK CPI Preview (Mar 26): Inflation Slips as Services Soften?

March 19, 2025 7:31 AM UTC

January’s CPI numbers showed a marked bounce back up, and with the 0.5 ppt rise taking it to a 10-month high of 3.0%, this being above consensus and BoE thinking.  Notably services jumped from 4.4% to 5.0%, actually below expectations, having been driven higher by a swing in airfares and the rise

BoJ Preview: Placeholder Meeting

March 18, 2025 12:00 AM UTC

The BoJ will not change rate nor forward guidance in the March meeting.

Bank Indonesia Policy Review: Rate Pause As BI Remains Watchful

March 17, 2025 6:45 AM UTC

Bank Indonesia's upcoming monetary policy decisions will hinge on a delicate balance of domestic economic indicators and global financial conditions. With a focus now tilted slightly more towards economic growth than in previous years, BI could surprise markets with its timing and decisions, dependi

UK GDP Review: Previous Resilience Gives Way to Softer Surveys

March 14, 2025 7:39 AM UTC

Despite a fresh downside surprise for January numbers, the odds are increasing that current quarter GDP will be decidedly positive as opposed to the weak(ish) picture we perceive.  The upside surprises in December contrasts with a much softer impression from surveys (Figure 1), the latter now showi

Inflation in Russia Hits Two-Year High in February: 10.1% YoY

March 13, 2025 10:10 AM UTC

Bottom Line: According to Russian Federal Statistics Service (Rosstat) data, inflation ticked up to 10.1% YoY in February after hitting 9.9% in January, remaining well above the Central Bank of Russia’s (CBR) midterm target of 4%, due to surges in services and food prices, huge military spending,

Bank of Canada - With risks on both sides, timing matters

March 12, 2025 3:47 PM UTC

The Bank of Canada eased as expected by 25bps to 2.75%, a level it sees as neutral. Given massive uncertainty clear forward guidance is impossible but they made no attempt to hide the gravity of the problem, Governor Tiff Macklem stating Canada is facing a new crisis from which the economic impact c

Sweden Riksbank Preview (Mar 20): Time to Pause?

March 11, 2025 10:33 AM UTC

Having delivered in January, the widely-expected sixth successive rate cut, the Riksbank adhered to the assessment made in December that the easing cycle has drawn to an end with the policy rate (down to 2.25%) having dropped 1.75 ppt in eight months.  Especially given the recent upside CPI surpris

Country Insights: Fiscal Policy in Emerging Markets

March 10, 2025 11:00 AM UTC

The latest update of our Country Insights model ranks the United Arab Emirates (UAE), Kuwait (KWT), and Taiwan (TWN) as the strongest performers in our Fiscal Policy’s sub-factors among selected emerging markets. Conversely, Egypt (EGY), Brazil (BRA), and China (CHN) rank among the weakest within

Preview: Due March 17 - U.S. February Retail Sales - Only a partial reversal of January's drop

March 7, 2025 2:53 PM UTC

We expect US retail sales to rise by 0.5% in February in what would be only a partial reversal of a 0.9% decline in January. Ex autos we expect a 0.3% increase after a 0.4% January decline while ex autos and gasoline we expect a 0.4% increase after a 0.5% January decline.

China: Only Moderate Fiscal Stimulus

March 6, 2025 7:55 AM UTC

China announced some fiscal stimulus to help meet the expected 5% GDP target for 2025.  Overall, we have not been surprised by the fiscal stimulus measures announced so far from the March NPC, that have been towards the lower end of expectations.  However, officials on Thursday have hinted that mo

Germany Attempts to Unlock Debt Brake

March 5, 2025 7:42 AM UTC

Germany’s likely new Chancellor Friedrich Merz has (and as has been flagged since his election win last week) announced plans to amend the country’s constitutional fiscal restraints, the so-called debt brake and within the confines of the current parliament.  Merz said Tuesday evening the motto

Japan: "Nimble" JGB Intervention, but not now

March 4, 2025 12:00 AM UTC

As JGB yields edged higher on BoJ's further tightening, Japanese officials and BoJ members are voicing their concern over its potential impact. The BoJ has suggested "nimble" response to JGB market volatility after they removed Yield Curve Control last year but we think we will not see any response

EZ HICP Review (Mar 3): Headline Edges Lower With Friendlier Services Messages?

March 3, 2025 4:17 PM UTC

February HICP inflation numbers may did deliver better news and broadly but only marginally so (Figure 1) with the headline dropping 0.1 ppt to a higher-than-expected 2.4%.  This ended a run of three successive rises and came about despite a rise in food inflation.  Instead, the core also eased’

German Data Review: Stable Headline but Belated Drop in Services Inflation

February 28, 2025 1:26 PM UTC

As Germany faces possibly deeper and more prolonged political deadlock, its disinflation process continues, but there are signs that the downtrend is flattening out and this may be the message into the rest of 2025. Indeed, as was the case in January, HICP inflation stayed at 2.8% in February, a not

Country Risk in MENA

February 27, 2025 11:00 AM UTC

Country risk in Middle East and North Africa countries including Egypt, Iran, Qatar, Syria and Turkiye. 

Eurozone: Gauging ECB Neutral Amid a Wandering R-Star

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. 

Negotiations to End Ukraine War Started: What is Next?

February 25, 2025 2:33 PM UTC

Bottom Line: Russia and the U.S. have started negotiations to end the war in Ukraine. We continue to foresee a Russia-friendly peace deal in Ukraine sealed in 6-12 months following a cease-fire. We envisage Russia will continue to annex areas in and around four Ukrainian oblasts that it occupied,

Germany: A New but Hampered Government

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

Canada December Retail Sales - Strong end to 2024

February 21, 2025 1:45 PM UTC

Canada’s December retail sales with a 2.5% rise are significantly stronger than expected, and well above a 1.6% estimate made with November data, with a sales tax holiday which ran from mid-December through mid-February enticing consumers to spend. The preliminary estimate for January is for a mod

Eurozone: More Sobering Economic News

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

Bank Indonesia Policy Review: Rate Pause As BI Steadies IDR

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

UK CPI Review: Inflation Jumps and Broadly So But Still Some Promising Wage Signs?

February 19, 2025 7:44 AM UTC

January’s CPI numbers showed a marked bounce back up, and with the 0.5 ppt rise taking it to a 10-month high of 3.0%, this being above consensus and BoE thinking.  Notably services jumped from 4.4% to 5.0%, actually below expectations, having been driven higher by a swing in airfares and the rise

Europe: Economic Consequences of Likely Defence Build-Up

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

RBA Preview: Signaling Earlier Cut

February 17, 2025 2:53 AM UTC

The RBA meeting on February 18th will keep rates on hold at 4.35% and signal a cut in April

BJP Ends 27-Year Drought in Delhi with Decisive Win

February 14, 2025 7:06 AM UTC

The BJP ended its 27-year drought in Delhi, winning 47 seats and breaking AAP’s dominance. The victory was driven by a united party front, strong RSS ground support, success in key voter blocs, including Sikh, Punjabi, and Dalit communities and the promise of freebies. AAP’s vote share fell to 4

Europe’s Ukraine Political Fallout and Market Hopes

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

UK CPI Preview (Feb 19): Inflation Drop to Target Deferred

February 12, 2025 10:27 AM UTC

After the surprisingly soft December data, we think January’s CPI numbers will show some bounce back up, albeit the 0.2 ppt rise we envisage to 2.7% being notch below BoE thinking.  This will largely reflect more ‘noise’ in volatile services and higher energy inflation both due to fuel price

Europe’s Gas Problem Again?

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

CBRT Increased Its End-Year Inflation Forecast from 21% to 24%

February 10, 2025 3:08 PM UTC

Bottom Line: Central Bank of Turkiye (CBRT) released its first quarterly inflation report of the year on February 7, and revised its inflation forecast for 2025. CBRT now projects that inflation will stand at 24% at the end of 2025, 12% next year and 8% in 2027. CBRT governor Karahan said the revisi

Banxico Review: 50 bps Cut as Expected

February 8, 2025 9:39 PM UTC

Banxico cut the policy rate by 50bps to 10.5%, with a cautious stance and a split vote. Inflation has fallen but remains above target, expected to converge to 3.0% by Q3 2026. Global risks, including Trump’s tariff threats, add uncertainty. Despite economic weakness, some monetary tightening may s

Eurozone: The Neutral Rate – Probably Little Changed Recently Unlike Central Banks

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

Argentina: Lower Rates, Conditions to Lift the Controls

February 6, 2025 6:16 PM UTC

The Argentine Central Bank cut rates to 29%, citing improved inflation expectations. Rather than using a contractionary policy, it aims to curb monetary base growth through fiscal consolidation. Inflation is below 3%, with a 2% target feasible by mid-year. However, the 1% crawling peg risks eroding

BoE Review: Uncertain MPC Signals It Needs to be Careful

February 6, 2025 1:57 PM UTC

The latest set of BoE forecasts are notable for one major thing – an assumption that underlying growth has fallen, possible to under 1%.  This does not explain all of the higher inflation profile (Figure 1) which now only delivers a below target outcome into 2028 – the higher rates projected th

Eurozone: Trump Taking Aim at the EU?

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

UK GDP Preview (Feb 13): Weakness Continues, if not Deepens?

February 4, 2025 4:26 PM UTC

Recent 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.  And those questions may be accentuated by the looming December GDP data where we see a flat m/m reading but, combined w

The Aussie Chapter 5.2: Another tale of two cities

February 3, 2025 5:25 AM UTC

In Chapter 5.2, we will continue to look into the dynamic between the Aussie and Kiwi after central bank policy part ways and what to expect when RBA tilts towards easing.

India Budget Preview: Balancing Growth and Fiscal Prudence: What to Expect from Budget 2025

January 31, 2025 2:28 PM UTC

The FY26 Budget comes at a crucial time for India’s economy, requiring a delicate balance between fiscal prudence and economic stimulus. As GDP growth moderates, inflation continues to impact disposable incomes, and global uncertainties persist, the government is expected to focus on targeted meas

BCB Review: Maintaining the Course

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