DM Central Banks: Wider-Ranging Conditions More Than Neutral Rates

October 2, 2025 6:55 AM UTC

·        Neutral policy rate estimates and forward guidance provide some help at the start of easing cycles, but less so at mid to mature stages.  For the Fed, ECB and BOE we look at a wider array of economic and financial conditions, alongside our own projections over the next 2 years to m

EZ HICP Review: Headline Inflation Moves Higher as Services Ticks Up From Cycle-low

October 1, 2025 10:28 AM UTC

A second successive upside surprise is unlikely to make inflation any more of an issue for the ECB at present.  Instead, moderate concerns whether the apparent resilience of the real economy may yet falter should remain the order of the day, this possibly a result of a still somewhat unresponsive t

German HICP Review: Headline Higher And Core Rises Due to Fresh Services Push?

September 30, 2025 12:25 PM UTC

Germany’s disinflation process hit a further more-than-expected hurdle in September, as the HICP measure rose 0.3 ppt for a second successive month, thereby even more clearly up from July’s 1.8% y/y, that having been a 10-mth low (Figure 1).  This (again) occurred largely due to energy base eff

Trump Tariffs: China, Mexico and Semiconductors

September 30, 2025 8:00 AM UTC

  ·       Our baseline (60% probability) remains that a U.S./China trade deal will be agreed in Q4/Q1 2026 and it is possible though unlikely that this could be announced at the Trump/Xi meeting at the October 31 APEC summit – China requests that the U.S. changes policy on Taiwan could slo

U.S. Government Shutdown Expected Starting October 1

September 29, 2025 3:54 PM UTC

While a last minute deal is not to be ruled out, the US government looks set to shut down on October 1. Once a shutdown starts, the standoff could last for a few weeks, probably not as far as the next FOMC meeting on October 29, though that cannot be ruled out. As long as the government remains shut

DM Government Bond Saints v U.S.

September 29, 2025 7:35 AM UTC

·       Overall, although the fiscal saints (Australia/Canada/Germany/Sweden) have merits over the U.S. in the scenario where Fed independence is undermined and more Fed rate cuts occur than warranted by the economics, the 10yr area of other government bond markets may not outperform. 10yr go

September Outlook: Into 2026 -- Market Implications

September 26, 2025 9:00 AM UTC

Our September Outlook is now published and please see all our markets chapters below.  

SNB Review: Staying at Zero – For Some Time?

September 25, 2025 8:03 AM UTC

Very much as expected, both in deed and word, the SNB kept the policy rate at zero this month having cut by 25 bp back in June in June. Indeed, markets priced out what was previously seen as a good chance of rates turning negative, even against a backdrop of the punitive tariff scheme the Swiss econ

September Outlook: Into 2026

September 25, 2025 6:20 AM UTC

Our September Outlook is now published and please see all our economic and policy chapters below.  

EZ HICP Preview (Oct 1): Headline Inflation to Edges Higher as Services Slows to Fresh Cycle-low

September 24, 2025 10:54 AM UTC

As we have underlined of late, HICP inflation – at target for the last three months – is very much a side issue for the ECB at present, offset instead by moderate concerns whether the apparent resilience of the real economy may yet falter.  This mindset will not be altered by the flash HICP dat

Outlook Forecasts to download in Excel

September 24, 2025 9:30 AM UTC

Below is an Excel file that contains our headline forecasts for GDP, Inflation, Monetary Policy, and Exchange Rates.

German HICP Preview (Sep 30): Headline Higher But Core to Fall Further?

September 23, 2025 2:21 PM UTC

Germany’s disinflation process hit a slightly more-than-expected hurdle in August, as the HICP measure rose 0.3 ppt from July’s 1.8% y/y, that having been a 10-mth low (Figure 1).  This occurred largely due to energy base effects with food prices also contributing slightly. The result was that

Western Europe Outlook: Policy Divergences

September 23, 2025 9:54 AM UTC

·       In the UK, we have upgraded 2025 growth by 0.2 ppt back to 1.0%, but pared back that for next year by a notch to a sub-par 0.8%. We think this will refresh somewhat stalled disinflation allowing the BoE to ease further into H1 by around 75 bp. 
·       Sweden has seen a clear e

Outlook Overview: Into 2026

September 23, 2025 8:25 AM UTC

·       The critical question is how much the U.S. economy is slowing down with the feedthrough of President Donald Trump’s tariffs to boost inflation and restrain GDP growth, with the effective rate currently around 17% on U.S. imports. Though semiconductor tariffs are likely, the bulk of

Sweden Riksbank Review: Riksbank Delivers Final Rate Cut?

September 23, 2025 8:16 AM UTC

Although aware of the possible impact of recent both real activity and adjusted CPI data having delivered upside news and surprises as well as what now looks to be a clear fiscal loosening, the Riksbank delivered the 25 bp final rate cut we expected.  The Board was very clear that no further easing

DM Rates Outlook: Steepening Yield Curve The Old Normal?

September 23, 2025 7:53 AM UTC

•    We continue to forecast further yield curve steepening across the U.S./EZ and UK, driven by cumulative easing.  For the U.S. this can see a modest further decline in 2yr yields, but the prospect is for a move to a premium of 2yr to Fed Funds (unless a hard landing is seen).  10yr yields

Commodities Outlook: Markets in Motion

September 22, 2025 10:30 AM UTC

OPEC+ has entered a new supply cycle, gradually reversing a second layer of voluntary cuts. The latest 1.65 mln b/d tranche is being phased out at 137,000 b/d monthly, likely completed by September 2026, while 2 mln b/d of group-wide cuts remain until the end of 2026. Non-OPEC supply growth will lik

U.S. Outlook: Fed Easing to Prevent Recession, but May Also Keep Inflation Above Target

September 22, 2025 10:15 AM UTC

•    GDP growth, supported in particular by business investment, was resilient in Q2, but growth in employment is now minimal and that will weigh on consumer spending, particularly with tariff-supported inflation set to restrain real wage growth. Recession is a risk if we see a vicious circle

Eurozone Outlook: Resilience or Irrelevance?

September 22, 2025 9:49 AM UTC

··       Yet again, and amid what may still be tightening financial conditions and likely protracted trade uncertainty, we have pared back the EZ activity forecast for 2026. However, the picture this year appears to be slightly better but this is largely a distortion and we think that the ec

Japan Outlook: Ready for Another Step

September 22, 2025 1:30 AM UTC

•    The recovery in private consumption surprised to the upside is Q2 2025 because wage growth regained traction after clarity on the U.S.-Japan trade front. The gradual transition of business price/wage setting behavior will continue to support consumption in 2025/26. Trade balance in 2025 h

BoJ Review: Holding the lines

September 19, 2025 5:20 AM UTC

The BoJ kept rates unchanged at 0.5% in the Sep 19st meeting and announced the selling of their ETF and J-REIT holdings

BoE Review: Guillotine for Gilts?

September 18, 2025 11:53 AM UTC

That the BoE kept Bank Rate at 4% after this month’s MPC meeting was all but certain, as was the two vote dissent in favor of further easing.  But of more note, and amid what have been recent hawkish hints from the MPC majority, was that the MPC adhered to its (conventional) policy guidance, stil

Norges Bank Review: More Caution But Another Cut Flagged for This Year

September 18, 2025 8:58 AM UTC

Despite the stronger than expected data seen of late (real and price-wise), as we expected, the Norges Bank cut is policy rate by a further 25 bp to 4.0%, an outcome markets had dithered over.  But with a small cumulative upgrade to the real economy outlook and an ensuing reduction in the anticipat

Fed: Signals 25bps October and December

September 17, 2025 7:39 PM UTC

The median Fed Funds is a strong hint that the Fed will deliver an extra 50bps most likely with 25bps in October and December.  However, the split in the 2026 Fed Funds dots forecasts from FOMC members suggests that our forecast of just below trend growth and core PCE above target will likely mean

September 17, 2025 9:01 AM UTC

Having the SNB cut the policy rate by 25 bp back to zero in June, as widely expected, we see no further change for the time being, and with little likelihood of any move at the quarterly assessment due later this month (Sep 25). Indeed, despite barely positive inflation,  markets have priced out wh

September 17, 2025 6:29 AM UTC

After the upside (and broad) June CPI surprise, CPI inflation rose further, up another 0.2 ppt to 3.8% in July, higher than the consensus but matching BoE thinking. Despite adverse rounding and fuel (and food) costs, the headline stayed there in the August figure, this foreshadowing a likely rise th

September 16, 2025 10:53 AM UTC

In the unexpected scenario of an early death, Putin and Xi have no clear successors, and any new Russia or China leader would have to spend time building domestic strength and compromising on external goals. Erdogan also has no clear successors, which could create political uncertainty. For Trump su

Sweden Riksbank Preview (Sep 23): Riksbank To Deliver Final Rate Cut?

September 15, 2025 1:09 PM UTC

Although noting the possible impact of recent both real activity and adjusted CPI data having delivered upside news and surprises, we adhere to our view that a further but final rate cut is looming and probably at the Sep 23 verdict.  Indeed, we were disappointed that the Riksbank did not deliver a

Taiwan: Grey Warfare or Naval Quarantine?

September 12, 2025 11:15 AM UTC

  ·       The most likely option for China is to continue the air and naval grey warfare around Taiwan, combined with support for pro-China factions in Taiwan parliament to build pressure for reunification at some stage. With invasion being too high risk for President Xi (with the U.S. main

UK GDP Review: Conflicting Signs

September 12, 2025 6:52 AM UTC

Although we are pointed to a flat m/m GDP outcome for the July data, thereby matching the official outcome, the actual outcome was a small m/m fall (before rounding).  The three-month rate slowed a notch to 0.2% but we think this overstates what is very feeble momentum, which may actually be nearer

September 11, 2025 2:08 PM UTC

A second successive stable policy decision was the almost inevitable outcome of this month’s ECB Council meeting resulting in the first consecutive pause in the current easing cycle, with the discount rate left at 2.0%.  Also as expected, the ECB offered little in terms of policy guidance; after

Norges Bank Preview (Sep 18): Taking Foot Further of the Brake?

September 11, 2025 8:41 AM UTC

Recognizing the stronger than expected data seen of late (real and price-wise), we still see the Norges Bank cutting a further 25 bp at next week’s policy meeting.  While still high, targeted (CPI-ATE) inflation is being boosted by stubborn services inflation, this partly offsetting ever softer g

September 10, 2025 10:55 AM UTC

Steeper yield curves are a function of monetary easing cycles, budget deficits, lower central bank holdings of government bonds, a move towards pre GFC real rates and shifting demand from pensions funds and life insurance companies.  Scope exists for further steepening in the U.S., EZ and UK with m

UK CPI Preview (Sep 17): Goods Inflation the Recent Problem, Not Services?

September 10, 2025 9:05 AM UTC

After the upside (and broad) June CPI surprise, CPI inflation rose further, up another 0.2 ppt to 3.8% in July, higher than the consensus but matching BoE thinking. Partly due to rounding and fuel (and possibly food) costs, we see the headline rising a notch to 3.9% in the August figure, this foresh

BoE Preview (Sep 18): Guilty on Gilts?

September 9, 2025 3:54 PM UTC

That the BoE will keep Bank Rate at 4% after this month’s MPC meeting is all but certain.  Indeed, the MPC majority has hinted that the recent regular quarterly pace of easing seen so far in the cycle may be slowed or paused amid price persistence concerns.  This reflects the MPC majority’s co

France: Kicking the Fiscal Can (Again)

September 9, 2025 8:41 AM UTC

That France has seen the departure of yet another prime minister is no surprise, hence why financial markets took the confidence vote in its stride.  Admittedly, French sovereign spreads and yields have risen in the last month, but even so the actual level of bond yields remains well below that of

Japan: Political, Trade and Policy Uncertainty

September 8, 2025 4:35 AM UTC

Political, Trade and Policy Uncertainty for Japan as PM Ishiba resigns

ECB Council Meeting Preview (Sep 11): No Change and Little Guidance

September 3, 2025 9:20 AM UTC

A second successive stable policy decision is very likely at next week’s ECB Council meeting resulting in the first consecutive pause in the current easing cycle, with the discount rate left at 2.0%.  We see the ECB offering little in terms of policy guidance; after all, in July the Council sugge

EZ HICP Review: Headline Inflation Edges Higher as Services Fall to Fresh Cycle-low

September 2, 2025 9:34 AM UTC

As we repeated again, HICP inflation – even now a notch above target – is very much a side issue for the ECB at present, offset instead by moderate concerns whether the apparent resilience of the real economy may yet falter.  This mindset will not have been altered by the flash HICP data for Au

Aging: Slow Growth for Some in 2020’s

September 1, 2025 8:35 AM UTC

   Population aging always seems to be beyond the market horizon, but the 2020’s are already seeing population aging in some countries.  What is the economic impact? Aging is already causing a peak in labor force in China and the EU. Meanwhile, the population pyramid also means less consumptio

German HICP Review: Headline Back Higher But EZ Price Picture Still Reassuring?

August 29, 2025 12:12 PM UTC

Germany’s disinflation process hit a slightly more-than-expected hurdle in August, as the HICP measure rose 0.3 ppt from July’s 1.8% y/y, that having been a 10-mth low (Figure 1).  This occurred largely due to energy base effects with food prices also contributing slightly. The result was that

ECB July Account: Policy ‘On Hold’ Leaves Easing Door Open But Less Widely So

August 28, 2025 12:37 PM UTC

The account of the July 23-24 ECB Council meeting saw some discussion about cutting at that juncture but with no immediate pressure to change policy rates what was then exceptional uncertainty added to arguments for keeping interest rates unchanged. In particular, it was seen that maintaining policy

U.S. Lagged Interest Rates: Only Hurting a Bit

August 28, 2025 12:08 PM UTC

 A big shock from lagged higher interest rates is not being seen in the data looking at financial conditions; the household savings ratio and interest rate sensitive sectors.  The impact of the Trump tariffs is still uncertainty, but our alternative scenario of a hard landing remains at 25% and ou

US 10yr: Fed Independence V Economy and Budget

August 26, 2025 12:14 PM UTC

10yr yields face upward pressure from Fed independence questions, but downward pressure from a slowing economy and a better supply picture with CBO estimates of USD4trn of tariff revenue over 10 years. One way to continue playing these themes is for yield curve steepening, where we see scope for the

EZ HICP and Jobs Review: Headline at Target as Services Inflation at Fresh Cycle-low

August 26, 2025 11:51 AM UTC

HICP, inflation – still at target – is very much a side issue for the ECB at present, albeit with the likes of oil prices and tariff retaliation and a low but far from authoritative jobless rate (Figure 3) possibly accentuating existing and looming Council divides.  Regardless, despite adverse

France and Italy: Deficit, ECB QT and Foreign Debt Holders Stories

August 26, 2025 7:35 AM UTC

A large budget deficit in France, looking persistent given the current political impasse, combined with ECB QT means that the market has to absorb a very large 8.5% of GDP of extra bonds. Our central scenario is that persistent French supply causes a further rise in 5yr plus French government yields

Jackson Hole: Fed/ECB/BOJ and BOE on Labor Markets

August 25, 2025 9:02 AM UTC

Fed Powell focused on the cyclical softening of employment to back a more dovish undertone.  In contrast other central bank heads focused on structural labor market issues.  While ECB Lagarde was pleased with the post COVID EZ picture, current economic softness still leaves us forecasting two furt

Fed Powell: Signals September Cut

August 22, 2025 2:35 PM UTC

Fed Chair Powell spent the first 10 minutes at Jackson hole reviewing current data and discussing the policy stance.  Powell clearly signaled a September cut, given downside risks to employment after the July employment report revisions.  However, Powell did not signal whether the move will be 25b

Eurozone: ECB Feels it Has More Reason to ‘Wait and See’?

August 21, 2025 10:02 AM UTC

To suggest that recent EZ real economy indicators, such as today’s August PMI flashes, have been positive would be an exaggeration.  But, at the same time, the data (while mixed and showing conflicts - Figure 1) have not been poor enough to alter a probable current ECB Council mindset that the ec