Our research

Global Monthly - Deal or no deal: Does it still matter?

The energy shock is back, but its impact more idiosyncratic than before. A lot of energy is getting through Hormuz ‘dark’, and this lowers the importance of a deal to re-open the Strait. Less important ≠ not important, and a deal would still help restore LNG flows, lower inflation and reduce European energy supply risks. Resurgent energy prices and stubborn inflation are keeping central banks on edge. Markets have probably gone too far pricing hikes…but the risk of more tightening than we currently expect has risen.

Top of Mind - Rising US Treasury yields Q&A

Rising US Treasury yields have been top of mind recently and we have had many client questions on what is driving the market, potential policy interventions and the overall outlook for long-term interest rates. Below, we tackle these issues in a short Q&A format.

Labour market weakness could re-balance Fed concerns

FOMC Watch - FOMC leaves door for September hike wide open

The Fed decided to leave its target for the federal funds rate unchanged at 3.5-3.75%. This was in line with our own expectations and those of the vast majority of economists. However, few would have seen the hold as a done deal. Indeed, financial markets had priced in around a 30% chance of a 25bp hike in the run-up to the decision. In addition, three (Logan, Hammack and Kashkari) of the twelve voting FOMC members dissented, preferring instead to raise interest rates. We had expected to see some votes for hikes, though there was one more dissent than we thought there would be.

ECB Watch – ECB makes way for September hike

The ECB left its key policy rates unchanged at today’s Governing Council meeting, as was widely expected.

Global Monthly - Teflon economy shaking off another shock

The global economy remains resilient in the face of persistent shocks. The AI boom, defence spending and the energy transition ‘capex troika’ are likely to continue supporting growth going forward. Still, AI bubble risk, and sovereign debt dynamics remain a worry.

ECB suggests more hikes to come

The ECB raised interest rates by 25bp at the June Governing Council meeting as was widely expected. Its communication and forecasts suggested that there will likely be more rate hikes to come.

ECB to hike this week and signal more on the cards

The ECB Governing Council meets this week to decide on its monetary policy, where it will also have aid of updated projections on the economy and inflation. We expect the ECB to raise its key policy interest rates by 25bp as well as signalling that further monetary tightening is on the cards going forward.

Global Monthly - The Hormuz clock is ticking

The US and Iran seem close to a deal to reopen the Strait of Hormuz. But even with a full reopening, energy prices are likely to stay well above pre-war levels over the coming quarters. In the absence of a deal, the continued rundown of oil inventories poses the risk of nonlinear price spikes. Still, we expect the growth impact to stay contained thanks to the underlying resilience and flexibility of the global economy.

ECB Watch - Rate hike on the cards as risks intensify

The ECB’s communications following the April meeting made it clear that a rate hike is on the cards in June. Inflation risks were judged to have intensified and were on the upside as the developments were moving away from the ECB’s baseline. The March baseline itself was predicated on rate hikes, while oil prices have moved significantly higher since then . We expect a 25bp hike at each of the next two meetings taking the deposit rate to 2.5%