UK August CPI Preview (Sep 18): Inflation Slips Back and Services Resilience Diminishes Further?

September 9, 2024 10:49 AM UTC

The July CPI was notable for the clear and larger-than-expected fall in services inflation, one driven by a fall in restaurant/hotel inflation, this often seen as a bellwether indicator of price persistence.  Indeed, services inflation fell 0.5 ppt to 5.2%, a two-year low and well below the BoE pro

Canada August Employment - Detail mostly weak

September 6, 2024 1:43 PM UTC

Canada’s August employment report with a 22.1k increase is in line with expectations on the headline and an improvement from two straight near flat moths, but weak in the detail. The employment gain came fully on a 65.7k rise in part time employment with full time work falling by 43.6k, while unem

Eurozone: Sobering Services and Domestic Demand News is Food for ECB Doves

September 6, 2024 10:53 AM UTC

The fact that EZ growth was revised down a notch to 0.2% in Q2 is of little importance – it partly reflects a small recovery in imports that we have been flagging for some time would be a likely break on recorded activity.  Over and beyond more signs of slowing wage pressures in Q2 data, more not

ECB Preview: Growth Risks Debate Clearer?

September 5, 2024 11:18 AM UTC

That the ECB will cuts official rates again when it gives its next policy verdict on Sep 12 is now almost a given.  Even the hawks on the Council are willing to concede that the discount rate can (and maybe even should) fall another 25 bp (to 3.5%).  This will come alongside larger reductions to t

U.S. Fed Beige Book Summary - Suggests economic momentum is fading

September 4, 2024 6:17 PM UTC

The latest Fed Beige Book suggests fading momentum in the economy, while inflationary pressures seem marginally slower than in the last report.

Eurozone: Labor Market Faltering

September 4, 2024 10:36 AM UTC

There are suggestions that worries about weaker growth are now reverberating within the ECB, albeit with the hawks still more mindful of service price resilience.  But the former worries chime with our long-standing concern of downside risk to what we still see is a below-consensus growth outlook,

UK GDP Preview (Sep 11): More Mixed Messages Ahead as Fiscal Updates Looms

September 3, 2024 9:23 AM UTC

It does seem as if the economy is going to show more positive signs with the July GDP data.  Indeed, we see a 0.2% m/m rise, albeit with the data still showing volatility.  Indeed, GDP growth has been positive in only one of the three months of the last quarter, having been flat in June.  Regardl

Bank of Canada Preview for September 4: A Third Straight 25bps Easing

August 30, 2024 3:19 PM UTC

The Bank of Canada meets on September 4 and a third straight easing, by 25bs to 4.25%, looks likely. This meeting will not see a quarterly Monetary Policy Report so the BoC will not update its forecasts from those made in July. However continued progress in reducing inflation and GDP growth, while i

Fed Faster Than ECB and BOE?

August 29, 2024 2:05 PM UTC

The Fed will likely ease by more than the ECB and BOE by June 2025, both given pro-activeness from the Fed and also the big gap between the current policy rate and Fed’s assessment of neutral rates.  We see a cumulative 175bps of cuts by end June 2025.  ECB hawks however are unlikely to stop a c

FOMC View Change: 75bps of Easing in 2024, 150bps in 2025

August 28, 2024 11:45 AM UTC

The dovish tone from Fed Chairman Jerome Powell’s Jackson Hole speech on Friday and the FOMC minutes from July 31 on Wednesday suggest the Fed is almost certain to start easing in September, though only if August’s non-farm payroll is surprisingly weak would 50bps become likely. We continue to e

ECB: Life in the Not So Fast Lane!

August 27, 2024 9:47 AM UTC

A keynote speech by ECB Chief Economist Lane at Jackson Hole over the week-end suggested that further monetary easing is on the way but in a path that has to steer between the risks of moving too fast against those from moving too slowly.  Very clearly he implied that policy will still have to rema

Powell Jackson Hole Guidance

August 23, 2024 2:38 PM UTC

  Fed Powell clearly signaled a Sep 18 FOMC cut, but his analysis on the economy is softer than harder landing.  Though the option of 50bps was not ruled out, the comments from Powell and other Fed officials are more consistent with 25bps than 50bps.  Nevertheless, the Fed is now more focused on

ECB Policy Clues: July Accounts and Lane

August 22, 2024 12:24 PM UTC

Elements of the July accounts help build confidence in more easing we expect ECB Lane Jackson Hole speech on Saturday to also provide comfort in near-term rate expectations.  However, it is clear that key ECB board members do not want to be as clear as the run-up to the June meeting, but this could

Riksbank Deliver 25bps and More to Come

August 20, 2024 7:58 AM UTC

Riksbank appear more concerned about a weak economy, which is causing forward guidance of a faster pace of easing after today’s 25bps cut to 3.50%.  We look for 25bps cuts at the September and December meeting and a further 25bps is possible at the November meeting if inflation remains under cont

Fed Decision Making/H1 2025 Fiscal Tensions and Yield Curve Steepening

August 19, 2024 8:15 AM UTC

2yr U.S. Treasury yields can fall gradually by end 2025 to 3.25%, as a more neutral Fed Funds era is discounted.  10yr yields ability to decline on a soft landing is more difficult, given high net supply facing the market.  We also remain concerned that the U.S. will see some temporary fiscal stre

U.S. Fed's Musalem seems comfortable with state of economy

August 15, 2024 2:00 PM UTC

Fed's Musalem is pleased with recent inflation data, not alarmed by recent activity data.

UK GDP Review: Mixed Messages with Little to Sway the BoE

August 15, 2024 7:00 AM UTC

After the mild recession in H2 last year, the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive but in only one of the three months of the last quarter.  Indeed, amid weaker retail sales, property transactions and car production data, GDP failed to grow i

FOMC Minutes Preview: Considering Increasingly Balanced Risks

August 14, 2024 5:54 PM UTC

FOMC minutes from the July 31 meeting are due on August 21. We expect the minutes will show a cautious tone on inflation, needing to see more data before easing, but increasing signs of concern over rising unemployment, which July non-farm payroll data will have increased. Still, the tone on inflati

German Data Preview (Aug 29): Inflation Edges Back Down?

August 14, 2024 1:30 PM UTC

Base effects have caused the German disinflation process not to be smooth and this was even more clearly the case in the July data.  This saw the headline HICP rate rise and unexpected 0.1 ppt to 2.6%, unwinding a third of fall seen in June.  Details show stable services and core inflation but wit

UK CPI Review: Inflation Up on Energy But Services Resilience Diminishes

August 14, 2024 6:47 AM UTC

The July CPI is notable for a clear fall in services inflation, one driven by a fall in restaurant/hotel inflation, this often seen as a bellwether indicator of price persistence.  Indeed, services inflation fell 0.5 ppt to 5.2%, a two-year low and well below the BoE projection.  Even so, due to e

RBNZ Review: Begin Cutting

August 14, 2024 4:32 AM UTC

RBNZ cut its cash rate by 25bp to 5.25%

U.S. Fed's Bostic - Rate cut is coming, waiting for data

August 13, 2024 7:36 PM UTC

Market Turbulence and What has Changed?

August 13, 2024 12:22 PM UTC

 •   We see the recent market turbulence as being partially a reduction in risky positions.  However, the U.S. economy is slowing and triggering a debate about a soft or harder landing (we see slowing rather than recession in our baseline), while EZ data shows the recovery is not gaining moment

EZ Growth Risks Increasing?

August 12, 2024 9:52 AM UTC

The EZ economy has been seeing downside risks but ones that may now be materializing.  The fact that growth rates among the EZ main economies have diverged of late (Spain robust, Germany contracting afresh) actually reflects a marked disparity in growth rates between strong services and persisting

Canada July Employment - Anther subdued headline, mixed detail

August 9, 2024 12:56 PM UTC

Canada’s July employment data is weak on the headline with a 2.8k decline but mixed in the detail with strong job growth from full time and public sector work, and unemployment unchanged at 6.4%. Wage growth slowed from an above trend June but remains quite strong. The data does not appear to be a

Bank of Canada Minutes expect further easing, if with no fixed timetable

August 7, 2024 6:19 PM UTC

The Bank of Canada has released minutes from its July 24 meeting that delivered a second straight 25bps easing. While risks on both sides are discussed, the tone is on balance dovish, with the BoC increasingly confident that ingredients for price stability were in place. There was a clear consensus

UK CPI Preview (Aug 14): Inflation to Rise on Energy But Services Less Resilient?

August 6, 2024 12:31 PM UTC

CPI inflation’s flirt with the 2% target is likely to be short-lived.  We see the rate rising back up to 2.3% in July from 2.0%, this projection being a notch below BoE thinking, but with the core edging down to 3.4% (Figure 1).  The rise is solely due to energy base effects related to the Ofgem

Fed SLOOS on Bank Lending mostly less negative

August 5, 2024 6:22 PM UTC

The Fed’s Q3 Senior Loan Officer Opinion Survey of bank lending practices has a less negative tone in terms of both supply and demand, suggesting limited downside risk to business investment.  The year to date showed a less negative tone in Q1 relative to 2023, and while Q2’s findings were simi

ECB: Between a Rock and a Hard Place?

August 5, 2024 11:57 AM UTC

Amid waning momentum in business surveys of late, most notably in services, the ECB was starting to see some of the downside growth risks it has flagged actually start to materialise.  But the equity market slump now unfolding provides an added and significant downside risk.  It has direct adverse

U.S. Fed's Goolsbee - Dovish, but won't over-react to one number

August 2, 2024 4:44 PM UTC

BoE Review: Getting Less Restrictive

August 1, 2024 12:44 PM UTC

Despite market thinking being split on the matter, but as we flagged, the BoE cut Bank Rate by 25 bp to 5.0% this month taking the rate from a 16-year high and ending an above-average policy pause of 11 months. We are a little surprised that the vote (5:4) was so close as the dissent of Chief Econom