Recent Blogs

Subscribe to RSS feed

FILTER POSTS

Category

Archive

BoJ & BoE to keep policy unchanged as the Fed cuts

16 December 2024

Chris Scicluna; Emily Nicol
  • The Fed looks set to cut rates by 25bps on Wednesday to take the FFR target range to 4.25-4.50%; but the FOMC’s updated dot-plot of members’ rate projections for coming years, as well as its policy statement and Chair Powell’s commentary, will be scrutinised for further signs that it will be more cautious in easing policy in 2025 and beyond.
  • While this morning’s UK flash PMIs suggested that economic activity continues to flatline, the Bank of England is still widely expected to leave Bank Rate unchanged at 4.75% (Thursday) as the MPC’s concerns about inflation persistence might be maintained by data showing still-elevated wage growth (tomorrow) and a pickup in the headline CPI rate to around 2½%Y/Y (Wednesday) in part due to unfavourable base effects.
  • Although recent Japanese economic data, such as last week’s Tankan survey results, appear consistent with a further rate hike, media reports suggest that the BoJ is in no hurry to tighten, and so it is currently expected to leave its policy rate unchanged at 0.25% (Thursday); nevertheless, inflation data (Friday) will likely report a pickup further above the 2.0% target in the headline and core rates alike, maintaining market expectations that monetary policy will be tightened in the New Year.

Categories : 

ECB to cut rates again; US inflation in focus ahead of next week's FOMC meeting

09 December 2024

Chris Scicluna; Emily Nicol
  • After Japanese GDP growth in Q3 was revised up today to a respectable 1.2%Q/Q annualised, the BoJ and investors alike will closely watch its quarterly Tankan business survey results (Friday) for additional signs that business conditions are ripe for another rate hike, either next week or in January.
  • After a UK labour market survey today reported the steepest decline in job vacancies since 2020, October’s GDP data (Friday) will likely show only a very modest uptick in economic output to suggest no material improvement in the underlying trend in Q4 after growth slowed to just 0.1%Q/Q in Q3; the GfK confidence survey (also Friday) similarly seems likely to suggest that consumers are lacking festive cheer.
  • Data this morning showed that Chinese CPI inflation unexpectedly slowed to just 0.2%Y/Y in November, with producer prices down a marked 2.5%Y/Y, to underscore that deflationary risks remain elevated; in response, in a shift from recent years, China’s Politburo committed to a “moderately loose” monetary policy and “more proactive” fiscal policy in 2025. November goods trade figures (tomorrow) will flag China’s overreliance on exports for driving growth, with soft imports tallying with ongoing domestic demand weakness.

Categories : 

US payrolls due to rebound while Central Bank Governors make appearances

02 December 2024

Emily Nicol
  • Economic data-wise, the US is this week’s main focus, with Friday’s labour market report expected to report a rebound in non-farm payrolls of about 200k in November after slowing to just 12k in the prior month; the US manufacturing ISM survey and euro area unemployment data come today. 
  • French 10Y spreads over Bunds are about 4bps wider this morning close to 85bps, and the euro has weakened to EUR1.05/$, after the far-right National Rally again signalled its willingness to back a vote of no confidence in the Barnier government, perhaps as soon as this week, if its (costly) demands to amend the administration’s Budget plans are not accommodated. 
  • Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey will all speak publicly on Wednesday.

Categories : 

Flash inflation, euro business surveys & Fed minutes due this week

25 November 2024

Emily Nicol
  • A key focus in the major economies this week will be new inflation estimates, including the flash euro area HICP print for November on Friday. Headline inflation is expected to rise again this month to 2.3%Y/Y, the highest since July, due to a further upwards impulse in energy and core components amid unfavourable base effects. In Japan, Tokyo CPI figures (due Friday) are expected to show that headline inflation jumped back above target.
  • After last week’s downbeat flash PMIs, this morning’s German ifo survey results flagged a further deterioration in current business conditions to the worst since the global financial crisis outside of the initial Covid-19 slump. The Commission survey (Thursday) will also likely flag a deterioration in business conditions amid heightened political uncertainties in Germany, France and the US.
  • At the BoE Watchers’ Conference this morning, Deputy Governor Lombardelli suggested that further gradual easing in the UK will likely be appropriate, probably implying that she’ll support one rate cut per quarter next year.

 

Categories : 

Flash October PMIs & Japan's lower house election take centre stage

21 October 2024

Emily Nicol
  • The flash October PMIs from the major economies (Thursday) will provide an update on economic conditions at the start of Q4; while the surveys from the US, Japan and UK will likely point to ongoing expansion, the euro area composite PMI is expected to imply ongoing stagnation amid persisting contraction in Germany
  • In Japan, the main focus will be the Lower House election on Sunday with polls suggesting that the outcome could be the closest since 2009 when the LDP lost power to the DPJ. Indeed, with polls implying a loss of seats for both the LDP and its junior partner Komeito, the ruling coalition might even fail to garner a simple majority
  • Tokyo CPI figures (Friday) are expected to show that headline inflation fell 0.3ppt to a six-month low of 1.8%Y/Y due to lower energy prices. The BoJ’s preferred core measure, excluding fresh food and energy, is expected to move sideways at 1.6%Y/Y for a third consecutive month

Categories :