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Assets May Inflate Like It’s ‘98

• Rate cuts are rare outside of recessionary regimes. The 1998 experience seems a more similar historical example for the BoE than 1989 or 2005, when its policy diverged.
• CPI inflation will probably be less benign because wage growth is much higher, so sterling may not stay as stable. The speed of possible policy reversal would be critical.
• Loosening monetary conditions when the real economy doesn’t need it risks stimulating a financial bubble. Carefully hedged investments would help avoid the eventual bust.

By Philip Rush

Greene - Two puzzles: recent UK labour market dynamics

Megan Greene looks at two recent puzzles in the UK labour market: first that unemployment has remained relatively low despite subdued output, and second that some wage strength remains unexplained as inflation expectations ease and the labour market loosens. She evaluates whether excess labour hoarding can partly explain both puzzles and what the monetary policy implications may be going forward.

In this speech, Megan Greene focuses on two puzzles in the UK labour market: unemployment remaining low despite weak economic growth and high wages despite a slowing labour market. Greene explores the concept of labour hoarding, where firms hold on to workers during periods of subdued demand, and analyzes the evidence of excess labour hoarding in the UK. She also discusses the impact of labour hoarding on inflation dynamics and the implications for the Monetary Policy Committee's policy stance. Overall, Greene highlights the importance of understanding labour hoarding and its effects on the labour market and inflation in shaping the monetary policy outlook.


Positivity score: 70
Uncertainty score: 80

Philippines Policy Rate 6.5% (consensus 6.5%) in May-24

• The BSP maintained its policy rate at 6.5%, aligning with the consensus forecast, reflecting a balanced approach amid persistent inflationary pressures and moderated economic activity.
• While the inflation forecast for 2024 eased slightly to 3.8%, the forecast for 2025 increased to 3.7%, indicating persistent inflation risks from higher transport, food, electricity, and oil prices.
• The BSP's restrictive policy stance aims to anchor inflation expectations and ensure price stability, with readiness to adjust policy settings as necessary, supported by government measures to address supply-side pressures.

Australia Unemployment Rate 4.05% (consensus 3.9%) in Apr-24

- The unemployment rate in Australia increased to 4.05% in April 2024, surpassing the consensus forecast of 3.9% by returning to the highest level since January.
- That slackening occurred despite a surprisingly large employment increase of 38,500 in April, owing to faster labour force growth.