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Key views Global Monthly 26 March 2025
US tariff threats have surprised even our pessimistic expectations, with the most important announcement still to come on 2 April. China, the EU and the US’s neighbours are expected to bear the brunt. For the eurozone, a new upside risk comes from likely significant increases in defence spending, and in Germany new infrastructure spending. This will blunt the impact of tariff rises. Global trade and growth are also initially benefiting from a frontloading ahead of tariff rises, but a sharp slowdown is expected later in 2025. Domestic demand is in the meantime recovering in the eurozone and China, helped by falling interest rates, and in China, targeted fiscal measures. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. This is likely to drive a divergence in Fed & ECB policy, with Fed policy staying on hold from here, and the ECB continuing to cut rates.
Key views Global Monthly 26 February 2025
President Trump’s tariff threats have surprised even our pessimistic expectations. Our base case sees a significant rise in US import tariffs in 2025, but recent threats raise the risk of a more negative scenario. China and the US’s neighbours may bear the brunt, but Europe will also be hit. Global trade and growth will initially benefit from a frontloading ahead of the tariff rises, before slowing sharply later in 2025. Against this backdrop, domestic demand is recovering in the eurozone and China, helped by falling interest rates and targeted fiscal measures in China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with Fed policy staying on hold from here, and the ECB deposit rate ultimately falling to 1%. This is expected to push the euro below parity against the dollar in the course of 2025.
Global manufacturing picks up before tariffs may hit
Global manufacturing PMI picks up in January, led by developed markets. Improvements in DMs led by the US, eurozone shows improvement but still lags behind. Improvements both at the supply and the demand side. Input and output price components stay well below ‘pandemic peaks’.
Bank of England – Less dovish than meets the eye
The Bank of England lowered interest rates yesterday by 25bp, taking Bank Rate to 4.5%, as was widely expected. Much more surprising was the vote split, with a seeming about-turn from long-time hawk Catherine Mann, who joined long-time dove Swati Dhingra in voting for a 50bp cut (the vote was 7-2 in favour of 25bp). We expect the BoE to continue cutting at a quarterly pace for the time being, but for Bank Rate to settle at an elevated 3.5% in 2026.
The Week Ahead - 3 - 7 February 2025
These are the Key Macro Events for the upcoming week.
Key views Global Monthly 22 January 2025
The return of president Trump to the White House is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit. Global trade and growth will initially benefit from a frontloading ahead of the tariff rises, before slowing sharply later in 2025. Against this backdrop, domestic demand is recovering in the eurozone and China, helped by falling interest rates and targeted fiscal measures in China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate ultimately falling to 1%. This is expected to push the euro below parity against the dollar in the course of 2025.
Global industry: Europe still the weakest link
Global manufacturing PMI drops back below neutral mark. Weakness broad-based; France and Germany weak spots in eurozone manufacturing. Supply weakened more than demand in December. Input price component up again, but still well below previous peaks. Rising spot container tariffs between China and US signal trade frontloading.
The Week Ahead - 16 - 20 December 2024
These are the Key Macro Events for the upcoming week.
Global manufacturing shows further improvement
Global manufacturing PMI rises back to ‘neutral’. EM outperformance continues, Demand picks up (also driven by EMs), and global excess supply continues. Subcomponents for input and output prices up, but remain far below 2021/22 peaks.
Key views Global Outlook 2025
The return of president Trump to the White House is likely to mean a significant rise in US import tariffs in 2025. China will bear the brunt, but Europe will also be hit. Global trade and growth will initially benefit from a frontloading ahead of the tariff rises, before slowing sharply later in 2025. Against this backdrop, domestic demand is recovering in the eurozone and China, helped by falling interest rates and targeted fiscal measures in China, while in the US, deregulation and tax cuts will help blunt the real income shock from tariff rises. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. All of this is likely to drive a divergence in Fed & ECB policy, with slower and fewer Fed rate cuts, and the ECB deposit rate ultimately falling to 1%. This is expected to push the euro towards parity against the dollar in the course of 2025.