INVITE: MNI Connect Livestream VC w/ CBO Phillip Swagel Oct 22

You are invited to listen to a livestreamed MNI Connect Video Conference with the Congressional Budget Office, Phillip Swagel.

Details below:

• Speaker: Phillip Swagel, Director of the Congressional Budget Office.
• Topic of discussion: ‘The U.S. Budget and Economic Outlook’
• Date: Thursday, 22nd October 2026, 10 am to 11:30 am ET / 3 pm to 4:30 pm London time.
• This event will be run as a Zoom Webinar and is a public, on-the-record event.

To register please go to: MNI Webcast Registration

MNI: China Eyes More Property Support Amid Uneven Recovery

Chinese authorities are likely to cut a key preferential mortgage rate in their bid to support property sales further, as recent stimulus measures remain insufficient to deliver broad-based recovery, advisors and analysts told MNI, warning 2026’s decline in real-estate investment could deepen beyond the near 20% drop recorded in the first eight months.

“There is room for a 0.5 percentage point reduction in housing provident fund loan rates, with the timing dependent on the sustained impact of recent policies,” said Xie Yifeng, dean of the China Urban Real Estate Research Institute, who expects the cut by year-end or in the first half of 2027.

China's property market staged a modest recovery during October’s week-long National Day holiday, but the rebound remains uneven, with transactions concentrated in core districts of major cities and the established housing market, Xie added.

However, a further cut to provident fund loan rates would provide broader support for housing demand, Xie continued, noting most homes in major cities failed to qualify for the interest subsidy introduced in late September. The programme only covers eligible first-time buyers purchasing homes valued below CNY1.5 million, up to 120 square metres, with the maximum loan amount capped at CNY1 million per borrower. 

The central bank lowered housing provident fund loan rates by 25 basis points in May 2025, bringing interest for first-time homebuyers to 2.1% for terms of five years or less and 2.6% for longer maturities. Commercial mortgage rates stand at about 3%, although the 1 pp interest subsidy has effectively lowered borrowing costs for eligible buyers to around the risk-free rate.

SALES REBOUND

New home sales across 25 major cities totaled 551,000 square metres during the National Day holiday, with average daily sales rising 33.8% y/y, according to data from the China Index Academy (CIA). Average daily second-hand home transactions across 11 major cities jumped 42.8% y/y.

Xie said cities with remaining home purchase restrictions could ease them further, while local authorities may introduce tax cuts, targeted homebuying subsidies for skilled workers and home upgrades, and additional financing to support urban renewal and accelerate purchases of unsold homes.

Beyond a potential rate cut, local governments are likely to broaden eligible uses of housing provident fund withdrawals and raise loan limits, said CIA Analyst Guo Xinyu. 

However, Yan Yuejin, vice president of the E-House China Research and Development Institute, urged caution over cutting housing provident fund loan rates, particularly against the backdrop of U.S. interest rate hikes. Increased use of provident fund loans could crowd out commercial bank lending and undermine the effectiveness of mortgage interest subsidies, said Yan, who sees limited prospects for a near-term cut.

END OF PRE-SALES

China's property investment could fall by more than 20% y/y this year as developers adjust land purchases and capital allocation following a late-August policy overhaul requiring them to complete homes before selling them, rather than relying on pre-sales to finance construction, Xie predicted, noting investment had already fallen 19.9% in the first eight months of the year. (See MNI: China's Investment Likely To Decline In 2026 - Advisors)

Despite transitional arrangements, tighter pre-sale requirements will begin to weigh on new housing supply in the fourth quarter and into next year, while increasing pressure on developers to recover capital, Yan said, calling for greater financing support, particularly development loans.

“Only when home sale proceeds truly stabilise will developers be willing to acquire land and commence construction under the new model,” said Lu Donghong, associate research fellow at the Chongyang Institute for Financial Studies, who expects the market to reach an inflection point no earlier than the second half of 2027, or possibly in 2028.

MNI POLICY: BOJ Nearing Target To Forgo Victory Declaration

The Bank of Japan is expected to state underlying CPI inflation has nearly reached 2% at the Oct 29-30 policy meeting, but will fall short of declaring the target met, MNI understands. 

While the Bank wants to anchor or stabilise underlying CPI inflation at around 2%, it will take sometime for officials to confirm the achievement and policymakers will likely present forecasts showing the rate moving around 2% after rising above the target in the second half of this fiscal year. The Bank rarely declares the achievement of its goals, preferring to focus on the outlook and to clarify economic, and price conditions. 

MNI reported earlier this month that Governor Kazuo Ueda also wants to avoid any acknowledgement that inflation is above target to avert potential criticism from Prime Minister Sanae Takaichi ahead of key appointments to the BOJ board. (See MNI POLICY: BOJ's Ueda Coy On Inflation To Keep PM On Side)

ELEVATED PRICES

High prices continue to impact Japanese consumers, which will also make a declaration of victory by the Bank problematic despite some market players speculating an acknowledgement could occur as early as October

High import prices led by the weak yen and the rise in crude oil costs has driven recent inflationary pressure. However, policymakers believe the economic recovery and a more balanced output gap will ensure it achieves the inflation target. 

Crude oil prices are higher than when the Bank last updated its medium-term economic growth and inflation forecasts in July, which will likely prompt the bank to raise its core CPI outlook for this fiscal year from its previous 2.4% prediction.

MNI INTERVIEW: Canada Heading Back To 1990s Debt Wall- Ragan

Canada’s government is in danger of heading for a repeat of its 1990s fiscal crisis and officials are underplaying dangers of a global yield surge, extra pressure on the central bank to tighten, and scarce room to tackle another downturn, former Finance Canada and Bank of Canada adviser Chris Ragan told MNI.

Federal and provincial governments have time to stabilize things but they must get over a sense of complacency, Ragan said. Today no federal party advocates a balanced budget -- there hasn't been one since 2008 -- and Prime Minister Mark Carney instead touts Canada's triple-A credit ratings and low debt-to-GDP versus G7 peers.

“But it's also true that we're 20 points higher than we were just before the financial crisis, and we're not right there, but we are approaching that danger zone of what we experienced in 1995," Ragan said. "I don't think it's just relative to other G7 countries that matters.”

Debts of federal and provincial governments are 74% of gross domestic product, Ragan estimates, up from about 50% before the 2008 global financial crisis. Canada faces "forced austerity" if that ratio approaches 95% he said, adding that if the present trajectory is maintained it is on course to reach the 99% seen in the 1990s.

YIELD LIFT

Federal bond yields are closely linked with Treasuries and that creates further risk, Ragan said. "We don't know whether the U.S. will turn around their ship. I kind of don't think so anytime soon.”

The 10-year bond yield has climbed about 50 basis points this year versus 115bp for a similar U.S. Treasury, increases that could become more costly if investors shun G7 bonds, Ragan said. (See: MNI: Canada Studied Vulnerability To Fiscal Risk Premium)

Carney has pledged to shrink only the deficit as a percentage of GDP and to balance the operating budget in the next few years while running deficits for military equipment and infrastructure. The power of a fiscal anchor is willingness to stick with it Ragan said, but so far officials are gambling solid growth and low interest rates will do the hard work.

MONETARY SQUEEZE

Higher spending will pressure the Bank of Canada towards higher interest rates, Ragan said. “High government debt complicates monetary policy, even if there's nothing nefarious coming from the government, even if there's no challenge to the independence of the central bank," he said. "The higher government debt becomes, the more bondholders come to expect that maybe inflation will be used.”

It's unlikely Carney -- a former BOC chief -- will directly put pressure Governor Tiff Macklem as Donald Trump has on the Federal Reserve, Ragan said. 

“I am cautiously optimistic that the Bank of Canada will in fact maintain its commitment to 2% inflation, and that the government won't engineer with that. But the truth is, we don't know,” he said. (See: MNI INTERVIEW: Macklem-BOC Faces Tough Calls Ahead On Rates)

“If they are doing a whole bunch of new net spending, and they clearly are, then that is pushing up aggregate demand and other things being equal that means central banks are going to have to raise interest rates to keep inflation on target.”

THE EASY PATH

There's room to cut spending, but the options are unpopular even if Carney's economic background makes him a strong candidate to maintain public support, Ragan said. Raising taxes should be avoided because Canada is seeking to lure investment and skilled workers, and a higher federal sales tax is a political non-starter, he said.

Elderly benefits are a good candidate for austerity because it's one of the most expensive budget items and some payouts go to rich households, he said. Military spending will probably rise by CAD100 billion in the next few years, and there's no sign yet of offsetting cuts, Ragan said.

“They are taking the easy path because they know they can much more easily put this on the credit card than they can to raise taxes or cut other spending.”

RPT-MNI: Next Spanish Gov't To Back De Cos For ECB Role

Bank for International Settlements General Manager and former Bank of Spain Governor Pablo Hernandez de Cos will continue to receive support to succeed Christine Lagarde as president of the European Central Bank from any Spanish government to emerge from general elections on Nov 29, sources from the country’s two main political parties told MNI.

In late September, Spain’s Prime Minister Pedro Sanchez publicly announced his support for Hernandez de Cos, and his Socialist Party will continue to do so regardless of the election result, a source in the Spanish government told MNI. (See MNI: Spain To Support De Cos For ECB Head After Initial Doubts) 

The centre-right main opposition People’s Party, which is leading in the polls, would also rally behind Hernandez de Cos as ECB candidate, a source in the party with knowledge of economic policy told MNI. The same source dismissed a press report in which Hernandez de Cos was mentioned as a potential finance minister in a government led by the PP.

Asked about the stance of the far-right Vox party, which polls suggest is likely to be the PP’s junior partner in a governing coalition, the PP said that it held the same view but this was not significant as Spanish legislation grants the prime minister the prerogative in the matter.

MNI was unable to contact any Vox official briefed on the subject.

While Hernandez de Cos’s ECB candidacy appears to be one of the few topics on which the Socialists and the PP can agree on, it is still unclear how they would coordinate should the process to select Lagarde’s successor begin while post-electoral negotiations to form a new Spanish government are still taking place. Reports have indicated that Lagarde could leave her post before her term ends in October 2027. (See MNI: Italy To Press ECB's Lagarde To Clarify Future - Sources )

MNI: Next Spanish Gov't To Back De Cos For ECB Role-Sources

Bank for International Settlements General Manager and former Bank of Spain Governor Pablo Hernandez de Cos will continue to receive support to succeed Christine Lagarde as president of the European Central Bank from any Spanish government to emerge from general elections on Nov 29, sources from the country’s two main political parties told MNI.

In late September, Spain’s Prime Minister Pedro Sanchez publicly announced his support for Hernandez de Cos, and his Socialist Party will continue to do so regardless of the election result, a source in the Spanish government told MNI. (See MNI: Spain To Support De Cos For ECB Head After Initial Doubts) 

The centre-right main opposition People’s Party, which is leading in the polls, would also rally behind Hernandez de Cos as ECB candidate, a source in the party with knowledge of economic policy told MNI. The same source dismissed a press report in which Hernandez de Cos was mentioned as a potential finance minister in a government led by the PP.

Asked about the stance of the far-right Vox party, which polls suggest is likely to be the PP’s junior partner in a governing coalition, the PP said that it held the same view but this was not significant as Spanish legislation grants the prime minister the prerogative in the matter.

MNI was unable to contact any Vox official briefed on the subject.

While Hernandez de Cos’s ECB candidacy appears to be one of the few topics on which the Socialists and the PP can agree on, it is still unclear how they would coordinate should the process to select Lagarde’s successor begin while post-electoral negotiations to form a new Spanish government are still taking place. Reports have indicated that Lagarde could leave her post before her term ends in October 2027. (See MNI: Italy To Press ECB's Lagarde To Clarify Future - Sources )

MNI INTERVIEW: German Industry To Shrink, Re-Focus On Europe

Germany’s manufacturing sector will shrink as a proportion of GDP over the next decade, and will focus more heavily on exports within Europe, though the car industry will remain a major employer and source of tax revenue, the managing director of Berlin’s Max Planck Institute for Innovation and Competition told MNI.

Germany will still have a larger manufacturing sector than many other countries, Dietmar Harhoff noted in an interview. But its auto manufacturers will mainly produce e-vehicles for European markets, and to a lesser extent for the United States, he said, as the country faces a new world of greater international trade barriers and extreme Chinese competition.

“New activities will emerge at the intersection of physical AI, robotics, manufacturing and industrial processes,” said Harhoff, Managing Director of Berlin’s Max Planck Institute for Innovation and Competition. “There will be much stronger R&D expenditure, which you can already see, as well as much stronger value creation in the digital part of the economy that is growing in importance.”

Harhoff cited 2023 research suggesting AI could raise productivity by 30-40% for particular people performing specific tasks, but said the economy-wide impact may be closer to half- to two-thirds of a percentage point over the next 10 years. Germany’s government is introducing open-weight AI models for use in state administration and regulated entities, he noted.

“These are still significant figures in real terms, but nowhere near what has been claimed. In the meantime, in the absence of major European LLM producers, adoption and diffusion are key, particularly in the manufacturing sector in order to raise productivity,” he said.

VENTURE CAPITAL

While state-backed efforts run by such as Germany’s Federal Agency for Breakthrough Innovation (SPRIND), and the Netherlands' National Agency for Disruptive Innovation (NADI) will steer efforts to take full advantage of AI, private players will be key, he said. Germany’s administration is heavily stacked with lawyers and lacks industry experience, Harhoff said, adding that the country’s venture capital industry - currently 0.15% of GDP - would be 60% larger had Berlin followed France in doing more to prop it up.

“We need to pull back from the illusion that the state can finance start-ups from creation to IPO. We need tax rebates or other incentives for private capital. We need more tools to attract global capital,” he said.

A government proposal to reduce employment protection for employees in higher salary brackets would bring greater labour flexibility and help address a shortage of experienced professionals who can help start-ups grow, he said, adding that another measure under consideration by Berlin, to allow ministries with money but not the capacity to use it effectively to transfer it to those which can, would also make sense.

Cooperation within Europe will also be essential if the region is to compete in AI, he said, pointing to SPRIND’s EUR150 million drive to develop the next generation of frontier AI models which supports 10 teams, with only three from Germany, together with two from the UK, two from Switzerland, two from France, and one from Italy.