'Perspectives Special Edition', January 2019

“The Three Amigos”

'Perspectives', December 2018

Unravelling knotty issues

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Fed meeting review: a strong dovish undertone

The Fed confirmed the end of balance sheet reduction for September 2019. Meanwhile, the dot plot showed an overwhelming majority of members expected no rate hike at all this year (versus two rate increases expected at the December meeting). As expected, Powell took his ‘central banker to the world’ hat, expressed concern about the global […]

Data remains soft in China

The latest economic indicators show that Chinese growth momentum remained soft in January and February, consistent with our expectations. Industrial activity was especially weak, weighed down by the mining and utility sectors. Growth in fixed asset investment improved slightly, mainly driven by the acceleration in property investment, but investment in the manufacturing sector declined. However, […]

Brazil pension reform: Bolsonaro’s moment of truth

The sharp deterioration of Brazil’s public debt in recent years, triggered by a deep recession in 2014-2016, now requires the imminent restoration of fiscal balance in order to bring public finances back on to a more sustainable path. In this regard, pension reform is widely seen as the single largest source of long-term fiscal savings, […]

Jerome Powell, central banker to the world

We believe the Fed will wear its ‘central banker to the world’ hat during the Federal Open Market Committee meeting on March 19-20. Expressions of continued confidence in the US economy may prove secondary to concerns about Europe (including Brexit ) and China, meaning we expect the Fed to send a dovish message. Meanwhile, the […]

Weekly View – Third time lucky?

Last week, “Brextension” was confirmed by the UK Parliament, which voted in favour of a Brexit delay by 413 to 202. However, we are far from out of the woods yet as the EU must next approve the request, for which the UK must offer a satisfactory justification as to why they need it and […]

Brexit update: UK parliament opts for an extension

The British Parliament concluded a series of votes on Brexit this week with an intention to extend the 29 March Brexit deadline. What remains unclear at this point is whether the UK will seek a short (two months) or a longer extension (two years). It is also not clear what this extension would be used for. A longer extension would help to […]

Euro slides against the dollar on ECB dovishness

The euro fell to a 20-month low against the US dollar following the European Central Bank’s (ECB) March policy meeting, given the revised forward guidance that suggests that the interest rate differential is unlikely to provide much upside to the euro in the next few months. That being said, recent euro area PMI surveys tend […]

ECB rates and TLTRO-III: the devil in the details

Last week, the European Central Bank (ECB) announced a new long-term refinancing package for banks (called TLTRO-III) and made clear that interest rates would not be raised this year. While these measures were expected, they have come earlier than we thought. We were also taken aback by the extent of the downside revisions to the […]

German economy set to recover

Germany’s economy weakened significantly in the second half of 2018. External headwinds remain strong and, in an environment where monetary-policy ammunition remains limited, all eyes have shifted towards German fiscal policy, especially as the country has generated significant budget surpluses since 2011. Beyond the already implemented 2019 fiscal stimulus, the country has fiscal space amounting […]

Global indicators: manufacturing sentiment declines

After recent downward revisions to our US and euro area GDP forecasts and against a backdrop of declining global manufacturing sentiment, we have revised our world real GDP growth forecast for 2019 to 3.3% from 3.5% previously. Manufacturing sentiment in all regions deteriorated in February, with the exception of emerging economies, where sentiment recorded a small rebound. Deterioration in […]

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