200 Datasets Tell Nomura That Key Economies Need Rate Cuts
Nomura strategists Jordan Rochester and David Wagner predicted around 75 basis points of monetary easing is forthcoming.
(Bloomberg) -- The world’s main industrial economies are in mounting need of lower interest rates as growth slows and slack opens up, according to a report from Nomura Holdings Inc., which relies on more than 200 series of data.
Focusing on the Group of 10 economies, Nomura strategists Jordan Rochester and David Wagner predicted around 75 basis points of monetary easing is in the pipeline given demand in all of the economies is weakening.
“Slower growth has started to feed through leading to a decline in the labor and product slack measures,” Rochester and Wagner said in the report published this week. “This means lower inflation expectations that warrant new dovish central bank action.”
While the Federal Reserve and European Central Bank have already indicated a willingness to ease monetary policy, the Nomura study found the Bank of England, Norges Bank and Riksbank are sounding more hawkish than their growth scores would suggest is appropriate.
The analysis is based on an attempt to measure slack, which the strategists define as the amount of resources in an economy that aren’t being used, such as idle machines or unemployed people who want a job. Among the measures they aggregated for their study were data capturing industrial production, retail sales, delivery times and inflation expectations.
The Nomura report said their growth scores help explain both markets and central bank decisions. “The growth scores will be useful for investors with a multi-quarter horizon,” Rochester and Wagner said.
--With assistance from Mark Cudmore.
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