Aurelia Butler

Despite Beijing’s policy efforts, major investment banks are increasingly skeptical about China hitting its growth targets for the year.Citi revised its full-year GDP growth forecast for China to 4.7%, down from previous estimates, as August data confirmed weakening momentum. “The demand side is getting more concerning,” Citi analysts wrote, highlighting the slowdown in trade and domestic demand, which they fear could spill over into production.While Citi expects some policy support, including a potential 10-20 basis point rate cut, they don’t see a major pivot from Beijing. Looking ahead, they warn that 2025 could be an even tougher year for China’s nominal growth.Goldman Sachs also lowered its 2024 GDP growth forecast to 4.7%, down from 4.9%, citing disappointing economic activity in August. Year-on-year industrial production growth slowed, and infrastructure investment failed to gain momentum despite record government bond issuance. The bank also highlighted weak retail sales and persistent struggles in the property sector. “We believe the risk that China will miss the ‘around 5%’ full-year GDP growth target is on the rise, and thus the urgency for more demand-side easing measures is also increasing,” said Goldman.Meanwhile, Evercore ISI maintained its 5.0% growth target for China but expressed caution, stating they will only consider lowering it if September data disappoints and Beijing doesn’t ramp up support.The firm’s analysts expect September to be a pivotal month due to the impact of a 300 billion yuan subsidy package and increased infrastructure investment. However, they acknowledged that the stimulus measures could pull demand forward, leading to uncertainty in 2025. “Housing remains mired in crisis with no light at the end of the tunnel,” they added, underscoring the challenges facing Beijing’s efforts to stabilize the economy. More

BCA Research argues that while a 50-bp cut could still be in play, it would likely have been telegraphed by Fed officials ahead of the blackout period. New York Fed President John Williams and Governor Christopher Waller did not indicate a jumbo cut, leaving BCA to expect a 25-bp cut. Despite this, futures markets have increased the probability of a 50-bp reduction to 48%, driven by a Wall Street Journal article and comments from former New York Fed President William Dudley hinting at a “strong case” for a larger move.HSBC echoes the sentiment for a 25-bp cut in September, followed by an additional 50 bps of cuts through 2024. HSBC remains bullish on U.S. Treasuries and maintains a strong outlook for the U.S. dollar, despite anticipating some market volatility around the Fed’s policy path.Bank of America highlights the “unusual uncertainty” around the Fed’s next move. The market is pricing in a 36% chance of a 50-bp cut, but BofA leans towards a 25-bp reduction, noting that the Fed did not signal a larger move before the blackout. BofA also expects Fed Chair Jerome Powell to address labor market risks in his press conference and potentially indicate a willingness to speed up rate cuts if necessary .Barclays expects a 25-bp cut but sees potential for larger cuts if labor market conditions worsen. They project a total of 75 bps in cuts for 2024.Barclays stated: “We expect a dovish FOMC statement that notes further progress on inflation, that the upside risks to inflation have diminished and the downside risks to employment have increased, and that the committee is attentive to the risks of unwelcome weakening of labor market conditions. We expect the statement to indicate that future adjustments will depend on the data, the outlook and the balance of risks.”Finally, JPMorgan stands out with a call for a 50-bp cut, arguing that front-loading the cuts would better position the Fed to address future economic risks. However, they acknowledge that internal FOMC dynamics may push the Fed to take a more conservative 25-bp approach.”What the FOMC will do is less clear, but we’re sticking with our call that they will do the “right” thing and cut 50bp,” wrote JPMorgan. “We expect the median dot for this year will be 100bp lower than the current rate setting of 5-3/8%, guiding to two more 25bp cuts at the last two meetings of the year.” More

The central bank has said its monetary policy must balance above-target inflation, exacerbated by a falling currency, with a cooling economy that now sees low overall growth.Last month the central bank said Norway would keep rates on hold for “some time” to combat inflation, and it is expected to say on Thursday whether this means a cut could come by year-end or would wait until next year.Norges Bank’s most recent forecast, released in June, called for three rate reductions in 2025, each by a quarter percentage point to end the year at 3.75%, with the first of those cuts slated for March at the earliest.The forecast will be updated on Thursday, and a majority of analysts in the Sept. 12-16 poll now expect a cut in December this year followed by four more cuts by the end of 2025 to a policy rate of 3.25%.Market pricing meanwhile predicts as much as seven rate cuts by the end of 2025, brokers said, reflecting expectations of steady rate reductions abroad, including by the U.S. Federal Reserve which will give a policy update on Wednesday.HAWKISH SURPRISE?But some analysts cautioned the weak currency could force Norges bank to hold back to avoid a further inflation-inducing drop against the euro and the dollar.”The market is in for a hawkish surprise, in our view,” Handelsbanken said in a Sept. 12 note to clients, adding that the most likely timing of a cut was in March of next year.”The rate path will be lowered somewhat, but not to the extent that the market is anticipating,” it added.Norway’s core inflation, which strips out changing energy prices and taxes, eased to 3.2% year on year in August, down from 3.3% in July, in line with analysts’ expectations but still well above the central bank’s 2.0% target. More

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