Archive

Norway's Restrictive Pause Amid Inflation Dilemma

• Norges Bank held the policy rate at 4% as expected, reiterating that cuts are likely later in 2026 but only if disinflation progresses as projected.
• Guidance points to one or two cuts this year, but policymakers stress a restrictive stance until underlying inflation, stuck near 3%, moves closer to the 2% target.
• A March cut looks unlikely; the path and timing of easing hinge on labour market softening, cost pressures, and krone moves ahead of new forecasts in March.

BNM: Flexibility Amid Global Bifurcation

• BNM kept its OPR at 2.75%, in line with the consensus. Benign inflation and solid growth justify a steady near-term rate path.
• With inflation anchored near 2% and growth resilient, policy stays neutral, preserving flexibility rather than signalling a clear hike or cut bias.
• Future rate moves hinge on tariff and global inflation risks. Shocks to trade or prices could shift BNM from a prolonged hold to recalibration.

UK: Inflationary Bump On Slow Descent

• UK inflation’s rebound reversed much of the recent undershoot, partly because of airfares, and despite the early index date. Seasonal payback will weigh in January.
• There is little headline news for the BoE since November, while underlying inflation is too strong, supported by the fundamental pressure from excessive wage growth.
• Our forecast continues to trend above the consensus through the year, which could encourage the MPC to keep rolling back its assumed rate cut, then never deliver it.

By Philip Rush

Indonesia: Stability Over Stimulus

• BI held the policy rate at 4.75%, matching the consensus, as rupiah weakness and capital outflows constrain near-term scope for further rate cuts.
• Despite a dovish bias and inflation within target, BI signals that any future easing will be gradual and conditional on rupiah stabilisation and better policy transmission.
• Market expectations still point to modest cuts toward 4.25% in 2026, but global yields, FX volatility and fiscal concerns could delay or reduce the extent of easing.