More policy support ahead after mixed 3Q
China's economic slowdown continues. The world's second largest economy grew 6.0% y/y in 3Q, after expanding 6.2% y/y in 2Q. This drop was expected given the trade headwinds pulling down certain segments, and in our view justifies the use of further policy support in the quarters ahead.
CEEMEA: Well positioned to overcome upcoming challenges
The credit fundamentals of key economies in Central and Eastern Europe (CEE), the Middle East, and Africa (collectively CEEMEA) have remained fairly stable this year. The region's GDP growth will likely slow to an average of 2.7%, down from 3.2% last year. The impact of trade tensions on investment, the ongoing slowdown in the Eurozone, and a more challenging backdrop for the energy market have served as impediments and remain major risks particularly for CEE and oil-driven economies in the region.
Filtering out the Brexit noise
We can say with reasonable certainty that at some point in the next few months the UK will leave the EU with an agreement. Moreover, the UK's departure will likely be on the basis of the recently renegotiated Withdrawal Agreement. But this doesn’t mean that Brexit will cease to influence markets and, crucially, the outlook for the European and UK economies. Far from it. This current stage is just the divorce—deciding who gets the house, the wedding china, and the collection of old DVDs. Agreeing on the long-term economic, regulatory, and security relationship between the two parties—divvying up access to the kids—is still yet to start, and it is likely to take longer than many currently anticipate.
The Monetary Policy Committee (MPC) at the Bank of England (BoE) met last week for is regular interest rate setting meeting. Something changed, and it wasn’t just the rebranding of the Quarterly Inflation Report, which now goes under the moniker "Monetary Policy Report" (MPR – another acronym for the collection). The big change was that the MPC were not unanimous in their decision to keep interest rates on hold. Two members of the MPC voted to cut interest rates by 25 basis points this month, a move that surprised both us and the markets in general.