- Our updated calendar identifies the top events that should be on your radar this week.
- We also provide an outlook overview region by region for the rest of the year.
Our view in a nutshell
- Despite relatively stable domestic demand, growth will remain muted as drags from real exports continue.
- We expect core CPI inflation to remain around 0.5% y-o-y for a while as it turns into deceleration in 2019.
- We expect the current YCC policy to remain untouched in the longer run, with a series of adjustments enhancing sustainability.
- The risk is renewed yen appreciation caused by our concerns over a global recession and US protectionism.
- The export-led economic downturn is spilling over into capex. We do not expect a recovery until Q4 at the earliest.
- We expect more central bank rate cuts: China, Korea, India, Indonesia, Malaysia, Thailand, the Philippines and Australia.
- India and parts of Southeast Asia are the region’s new stars in terms of rising long-run potential growth.
- China: We expect policy easing to sustain given strong growth headwinds and re-escalating US/China trade tensions.
- Korea: We expect the BOK to deliver a 25bp rate cut in Q3 2019 (most likely July) and another in Q4 (most likely November).
- India: We expect the cumulative effects of monetary policy easing to support a cyclical recovery starting Q3 2019.
- Indonesia: President Jokowi’s re-election bodes well for further reforms, investment spending and potential growth.
- Australia: We see better, but still-sub trend growth, continuing low inflation and two more 25bp rate cuts (Q4, Q1).
- Elevated trade tensions and other factors will likely slow growth over 2019-20 before a modest recovery in 2021.
- Recession risk is elevated, but strong consumer fundamentals will help to sustain the expansion.
- Core inflation should pick up as higher tariffs pass-through to consumer prices and labour markets remain tight.
- After cutting rates in July, we expect two more 25bp rate cuts from the Fed in September and October.
- Fed balance sheet runoff ended in August and we expect expansion starting in Q4 2019.
- Notable risks include aggressive trade policy, unresolved fiscal issues and further deterioration in financial conditions.
- We have revised down our GDP growth forecast. The recession in euro area manufacturing risks spilling over into services.
- We see euro area core inflation rising gradually due to capacity pressures, but remaining well below the ECB inflation aim
- ECB President Draghi’s Sintra speech was significant, setting up the package of easing measures delivered in September.
- We have raised the tail risks of both a no Brexit and no deal, though continue to base our forecasts on a free trade agreement.
- We see the run rate of UK growth returning to around its trend rate in 2020.
- BoE rules of thumb suggest rate hikes of around 75bp are needed to tackle a 0.3% inflation overshoot on the forecast horizon.
- We see the BoE raising rates once a year from May 2020, which is a later and more gradual tightening than previously expected.
For more information read our weekly report here
Chief US Economist
Chief UK Economist
Chief China Economist
Chief Japan Economist
Head of Global Macro Research and Co-head of Global Markets Research
Chief Economist, India and Asia ex Japan