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Developed central banks in the past week have been falling over themselves to loosen monetary policy and secure the proper functioning of financial and credit markets. The Fed, RBNZ, Bank of Canada, Bank of England and Norges Bank have delivered inter-meeting policy rate cuts of between 50bp and 100bp and our measure of the developed central bank policy rate has
Read moreThe drastic measures which governments across the world have taken so far to mitigate the spread of the coronavirus have few precedents outside of war times and therefore quantifying their economic, financial and social impact remains challenging. However, there is little doubt that economic activity in China, the epicentre of the epidemic, has slowed sharply. Disruptions and delays to international
Read moreIn reaction to the coronavirus epidemic governments across the world have enacted measures unprecedented in recent decades, including closing national borders, setting up quarantine zones, restricting travel and closing factories and schools. Economic activity in China has slowed sharply and disruptions to international supply chains are impacting global trade and production with the slump in tourism heaping further pressure on
Read moreThe pace of central bank policy rate cuts has slowed sharply in the past few months (see Figure 1), in line with our view (see Early Christmas for (still weak) global growth, 11th December 2019). While the emerging market central bank policy rate has fallen a further 20bp since late-October to a multi-decade low of just 4.55%, the developed economy
Read moreFinancial-market post-mortems for 2019 are out and the bottom line is that the trade was to be long pretty much everything – including US and global equities, bonds and commodities (bar natural gas) – but short equity and FX volatility. Trading FX last year was indeed an exercise in both patience and timing with depressed currency volatility going hand-in-hand with
Read moreThere is a growing consensus that global economic growth will slowly recover in 2020, particularly in the second half of the year. We made this prediction nearly four months ago in Central banks to the rescue…with a lag (27 August 2019), pointing to the positive, lagged impact of central bank rate cuts on global GDP growth. Since May, the global
Read moreIn US Consumer – From King to Prince (8 October 2019), we argued that “the recent fall in US consumer confidence, slowdown in income and wage growth and jitters in US equity markets suggest that Personal Consumption Expenditure (PCE) growth remained weak in September and thus slowed materially in Q3” (September data are due on 31st October). Weak September retail
Read moreIt is perhaps obvious that Personal Consumption Expenditure (PCE) – or consumer demand – is critical to US economic growth. PCE growth has accounted for over 80% of US real GDP growth since end-2013 (see Figure 7), thanks to its relative size (nearly 70% of GDP) and the fact that PCE is the only demand sub-component which has positively contributed
Read moreCentral banks across the world have been cutting their policy rates in unison since early May, in line with our forecast back in January that “policy rate cuts, which have all but disappeared since last Spring, may yet resurface in the second half of 2019 (see Forecast Update: Brexit, FX, central banks & GDP growth, 18 January 2019). Our measure
Read moreNot a day passes without the media and US President Trump pointing the finger at “currency wars” and “competitive devaluations”. The thrust of the argument is that central banks across the world, in a “race to the bottom”, are cutting policy rates and in the case of the ECB resuming QE, in order to weaken their currencies and boost export
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