CENTRAL BANKS: JP Morgan Tweak BOE, Riksbank and Norges Bank Forecasts
May-16 15:36
JP Morgan have made adjustments to their BOE, Riksbank and Norges Bank rate profiles following the latest tariff developments and subsequent revisions to their global growth projections. They “continue to judge the direct impact of tariff related changes to be limited in Europe, with sentiment playing a larger role”.
UK / BOE: No Longer Expect September Cut
- “We now remove the 25bp September BoE cut we put in the forecast after Liberation Day, so that the BoE now continues to cut only at a quarterly pace in 2H25. That leaves us with year-end rates at 3.75% and a terminal rate of 3.5% by 1Q26”.
- “We see growth and inflation coming in lower than the BoE’s forecasts. This could yet prompt the Bank to speed up its easing this year. But owing to its hawkish tone last week - with at least five members showing hesitancy about further easing - we expect them to remain in a gradual easing mode”.
Sweden / Riksbank: Now See Final Cut In June To Terminal of 2.00%
- “Despite the somewhat optimistic view on 2H growth, our overall 2025 GDP forecast remains significantly below the Riksbank’s (1.5% vs. 2.2%)”.
- “Recently, despite positive tariff news, our call for a cut in June has received tailwind from soft domestic data as well as the Board’s dovish pivot at last week’s meeting. We therefore keep this forecast intact, but reiterate that we see a high risk of a later start (e.g. August/September)”.
- “We do, however, take out the second cut in our forecast, leaving the terminal rate at 2.0% (our long-held view of the neutral rate)”.
Norway / Norges Bank: Now Expect First Cut In December
- “We change our forecast to “pre-Liberation Day”, ie a start of the easing cycle in December instead of September”
- “This week’s strong GDP data reinforces our view of no need to rush into cuts, and while the April CPI report surprised a bit on the downside, it was mainly driven by food. Core stands at 3.1%oya and by the time of the September meeting we expect an increase to 3.3% . Absent signs of a US/global recession, we do not think the Committee will be comfortable cutting at this level”.
- “ Our terminal rate forecast is unchanged at 3.5%”.
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FED: US TSY 17W BILL AUCTION: HIGH 4.225%(ALLOT 60.26%)
Apr-16 15:32
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BOC: 25bp Cut Considered But Hold "Real Clear Consensus"
Apr-16 15:18
Asked how close the call was to hold vs cut today, Gov Macklem says that the BOC considered a 25bp cut but ultimately decided to hold off until receiving more information. Senior Deputy Gov Rogers says "After some really good deliberation and taking in everybody's views, there was there was a real clear consensus on on a hold being the right decision".
- Rogers says that recent market volatility didn't suggest "dysfunction" in the Canadian financial system, though the BOC will be watching for signs that short-term volatility is starting to affect stability: "I think the initial moves in the in the financial markets were pretty drastic, pretty violent. Things have settled a bit since then. We didn't.... see dysfunction in the market. So the market seemed to absorb what was a pretty big shift without big dislocations. Liquidity was a bit constrained for a while. Spreads widened. We saw what you would expect to see when you see the kind of abrupt policy shift happen, and the markets tried to absorb it in a short amount of time. We are watching closely.... we'll definitely be watching for for signs that that the short term volatility is starting to to affect stability. We've got our financial stability report out in little over a month, so we'll have more to say then."
- On the unusual decision to provide scenarios in the MPR rather than a central forecast, Gov Macklem says that providing precise forecasts would be a disservice to Canadians. "We don't think of either of the scenarios as a projection or forecast. Right when, when we sat down to deliberate, normally, we have a projection. And because we didn't, we didn't. We created these scenarios just to try to illustrate how we thought this was going to play out. But I'd want to just be careful not to use that word, right? They're illustrative scenarios. "
US DATA: Homebuilder Sentiment Remains Subdued
Apr-16 15:18
The NAHB/Wells Fargo Housing Market Index was slightly stronger than expected in April but didn’t materially alter an outlook that suggests the current rebound in residential construction is likely to be subdued.
- The housing market index ticked up to 40 (cons 38) in April after 39 in March, seeing some stabilization for a third month running at the lower end of a 39-51 range seen since early 2024.
- There were mixed drivers for April specifically: the heavily weighted present sales category increased for the first time since Jan (+2 to 45) whilst there was a small increase for prospective buyer traffic after two sizeable deadlines (+1 to 25) but six-month ahead sales expectations dropped further to 43 (-4) for the lowest since Nov 2023.
- Similar pace of home price declines: “The latest HMI survey also revealed that 29% of builders cut home prices in April, unchanged from March. Meanwhile, the average price reduction was 5% in April, the same rate as the previous month. The use of sales incentives was 61% in April, up from 59% in March.”
- Homebuilder sentiment remains more bearish on a relative historical basis than the price to book ratio of S&P 500 homebuilders although the latter has seen a significant correction since the US election.
