DM Central Banks
View:
April 02, 2025
Taiwan: Grey Warfare or More?
April 2, 2025 7:05 AM UTC
China grey warfare against Taiwan will continue, but we would only see a 5% probability of China invading Taiwan in 2025 and 2026. The U.S. is pivoting towards Asia and China, while President Trump is not China friendly. A war with the U.S. over Taiwan would be very costly in military and eco
April 01, 2025
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
March 31, 2025
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
U.S. Trade Surplus Countries: No Special Treatment?
March 31, 2025 9:04 AM UTC
Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals. Trade policy uncertainty
March 28, 2025
March 27, 2025
Norges Review (Mar 27): Policy Easing Delayed but Far From Abandoned?
March 27, 2025 10:01 AM UTC
As was perhaps just the more likely case, the Norges Bank did not deliver on the rate cut it had been flagging very clearly until recently. Instead, it kept the policy rate at 4.5% on the back of inflation having been markedly higher than expected and where wage growth in 2024 turned out higher th
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
March 26, 2025
Bank of Canada Minutes from March 12 - Debate over the 25bps easing, agreement to proceed carefully
March 26, 2025 6:19 PM UTC
The Bank of Canada has released minutes from its March 12 meeting, and these show some debate about the meeting’s decision to ease by 25bps to 2.75% and agreement to proceed carefully with further changes to policy. A lot can happen before the BoC next meets on April 16, but these minutes suggest
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
Outlook Overview: Navigating the Turbulence
March 26, 2025 9:30 AM UTC
· More tariffs will arrive from the U.S. from April with product (car, pharma, semiconductors and lumber) and reciprocal tariffs. President Trump has a 3-part approach to tariffs to raise (tax) revenue; bring production back to the U.S. and get fairer trade deals. This means some of t
UK CPI Review: Inflation Slips Even as Services Fail to Soften?
March 26, 2025 7:48 AM UTC
Not surprisingly, February’s CPI data provided mixed signals. They may have undershot expectations, but actually tallied with our and BoE thinking, at least in terms of a 0.2 ppt drop for both the headline to 2.8% and for the core to 3.5%. This came in spite of higher alcohol duties and no dro
March 25, 2025
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
Western Europe Outlook: Price Pressures - Puzzling or Possibly Persistent!
March 25, 2025 10:47 AM UTC
· In the UK, we continue to retain our below-consensus GDP picture for this year, with growth actually downgraded and with downside risks that may actually be both increasing and materializing. The BoE will likely ease further through 2025 by at least 75 bp and maybe faster and into 202
Japan Outlook: Inflation Sustainably Above 2%?
March 25, 2025 10:00 AM UTC
· Private consumption will have a modest growth in 2025 along the gradual change in business price/wage setting behavior before slowing to average in 2026. Wage hike in 2025 looks to be at least on par with 2024 after early result of the spring wage negotiation. SMEs are going to be
DM Rates Outlook: Policy Divergence
March 25, 2025 9:30 AM UTC
• 2yr U.S. Treasury yields can step down with cautious Fed easing on a modest/moderate growth slowdown and also if the Fed keeps an easing bias. 10yr U.S. Treasury yields can be helped by this easing and see a move down through 2025. However, the budget deficit will likely be 6.5-7.0%
DM FX Outlook: USD under pressure as Trump policies disappoint
March 25, 2025 8:51 AM UTC
· Bottom Line: The market had expected the Trump presidency to see further fiscal expansion and consequent tight Fed policy and high US yields. But the combination of less tax cuts than previously expected and more aggressive tariff increases have led to reduced expectations for US grow
March 24, 2025
U.S. Outlook: How Much Damage Will a Trade War Do?
March 24, 2025 3:45 PM UTC
• The U.S. economy, consumer spending in particular, ended 2024 looking healthy, but with inflation still above its 2.0% target if well off its highs. The Trump administration’s more aggressive than expected trade war has made a return to the inflation target more difficult and raised dow
Eurozone Outlook: At A Crossroads?
March 24, 2025 10:45 AM UTC
· For once in a long while, we have upgraded the EZ activity forecast and for 2026 actually to a notch above consensus thinking. However, the current backdrop still suggests that while the economy has been growing afresh it is doing so timidly, with downside risks persisting more clearl
March 21, 2025
Trump Product and Reciprocal Tariffs
March 21, 2025 9:00 AM UTC
It appears that we will get bad news from April 2 on extra tariffs before any good news. Firstly, the announcement effect of tariffs for many countries and extra products will hurt U.S. business and consumer sentiment. Secondly, part of the reason for tariffs is extra tax revenue and to try to s
March 20, 2025
Norges Bank Preview (Mar 27): No Change but a Close Call?
March 20, 2025 3:56 PM UTC
Norway sees the widely awaited Norges Bank decision later this month where recent inflation data have questioned whether the well flagged rate cut will now be delivered – we think the decision may be more finely balances that many are suggesting not least as economic activity signs are mixed even
BoE Review: Being Careful Amid Data Conflicts
March 20, 2025 12:45 PM UTC
Even amid a BoE rate cut last month that was delivered with a clear(er) degree of action, all MPC members opting for easier policy. Even so, it was clear there were still MPC divisions that probably reflected increased uncertainty enough for the BoE to have altered its rhetoric somewhat to stress
SNB: 25 bp Cut Likely To Last
March 20, 2025 9:26 AM UTC
Bottom Line: With inflation forecasts stable, and given a reasonable economic outlook, it would be a good time to pause or stop the SNB easing cycle. However, if the U.S. trade tariffs have a bigger adverse effect than expected or the CHF surges, then the SNB may want the option to ease again later
Sweden Riksbank Review: Everything Unchanged?
March 20, 2025 9:16 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
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
March 19, 2025
Fed: Cautious Policy Due To Uncertainty
March 19, 2025 7:26 PM UTC
The Fed do not appear to be in a hurry to cut interest rates, both as economic momentum remains reasonable and as the Fed waits to see how Trump administration policy feedthrough – especially tariffs to inflation. This suggests that the Fed will need to see a weaker economy and we pencil in one 25
FOMC leaves rates unchanged, dots unchanged but skew more hawkish
March 19, 2025 6:24 PM UTC
The FOMC has left rates unchanged at 4.25-4.5% as expected. The median dots are unchanged but economic activity forecasts are weaker and the inflation forecast for 2025 is significantly stronger showing concern over the impact of tariffs. The statement notes increased uncertainty and announced a s
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
March 18, 2025
Canada February CPI - Acceleration clearer as sales tax holiday ends
March 18, 2025 12:51 PM UTC
February Canadian CPI at 2.6% yr/yr from 1.9% in January is significantly stronger than expected, with the rise inflated by the mid-February expiry of a sales tax holiday that started in mid-December. This will lift March data further. The Bank of Canada’s core rates are also stronger, suggesting
Uncertainty Over Pace and Scale of Extra European Defense Spending
March 18, 2025 9:05 AM UTC
· The crucial date for more clarity is the June 24-26 NATO summit. Donald Trump might attend but will ask for more spending. NATO head Rutte’s desire is for above 3% of GDP for NATO countries, but the politics and budget suggest that a 2.5% minimum may only be agreed with Germany
March 14, 2025
Germany: Breakthrough in Attempt to Unlock Debt Brake?
March 14, 2025 12:08 PM UTC
It does seem as if effective German Chancellor-elect Merz now has enough parliamentary support to amend the so-called debt brake and unlock more spending and borrowing to be directed toward added defense and infrastructure. Thus, it does seem as if Germany and its economy are undergoing a sea-chan
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
March 13, 2025
Trump’s Policies and U.S. Equities
March 13, 2025 8:35 AM UTC
Models would suggest that the current and prospective direct tariff impact should slow GDP growth to a 1.5% pace, which should see slow Fed easing in 2025 given the boost to inflation. However, the policy uncertainty means that business and consumer behaviour could see a large adverse hit that keeps
March 12, 2025
FOMC Preview for March 19: No change and few clear signals given exceptional uncertainty
March 12, 2025 6:46 PM UTC
In the current exceptionally uncertain environment, the FOMC looks set to keep rates unchanged at 4.25-4.5% at its March 19 meeting, and give little away on future policy. The dots will be closely watched but we expect they will change little from January 29. Powell is likely to stress at the press
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
March 11, 2025
BoE Preview (Mar 20): Being Careful the New Watchword
March 11, 2025 4:37 PM UTC
Having so far cut a modest 75 bp, the BoE rate cut last month was delivered with a clear(er) degree of action, by at least the MPC majority. But those implied MPC divisions probably reflected increased uncertainty enough for the BoE to have altered its rhetoric somewhat to stress the need for poli
SNB Preview (Mar 20): A Final Cut?
March 11, 2025 11:45 AM UTC
Having very much delivered relatively rapid easing worth some 125 bp in the last year, we see a further SNB rate cut of 25 bp at this month’s quarterly assessment taking the policy rate to 0.25%, the lowest since Sep 2022, ie when the Board moved away from negative rates. A return to negative ra
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
March 10, 2025
Trump and Dollar Policies
March 10, 2025 6:04 AM UTC
The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw
March 07, 2025
Canada February Employment - Weather may explain this weak month, but tariff risks ahead
March 7, 2025 2:19 PM UTC
Canada’s February employment with a marginal rise of 1.1k has seen a pause after three straight strong months. With StatsCanada citing snowstorms as an issue not too much should be read into this subdued month, though trend is likely to slow in the months ahead as US tariffs are imposed.
March 06, 2025
ECB Review: Disinflation Still On Track But Policy now ‘Work in Progress’
March 6, 2025 3:01 PM UTC
Unsurprisingly, the ECB verdict was less important that the rhetoric. A sixth 25 bp discount rate was widely expected – and delivered - to 2.5%, but how wide the door is left open for further cuts may be more opaque. This both reflects gauging the extent of any lingering degree of policy restric