Archive

Malaysia: 25bp Rate Cut to 2.75% (Consensus 2.75%) in Jul-25

• BNM trimmed the OPR to 2.75%, a move anticipated by just over half of surveyed economists, reflecting a mildly surprising tilt towards accommodation.
• Future rate decisions hinge on tariff negotiations, subsidy rationalisation, and whether subdued core inflation persists within the 1.5%–2.5% comfort band.
• With liquidity bolstered by an earlier SRR cut and inflation benign, the MPC retains scope for one further 25 bp reduction should external demand weaken further, but ringgit stability and fiscal adjustments will temper the pace of any additional easing.

Labour’s Collapsing Credibility

• Labour failed to campaign on a platform up to the UK’s structural problems, depriving it of the support to deliver change in its first year. Reform UK now lead most polls.
• Spending cut U-turns compound the fiscal hole exposed by the slippage of optimistic assumptions, making further tax hikes and more persistent deficits seem inevitable.
• Far-centrism has been rejected, but challenges to Labour’s right and left break its ability to triangulate back towards success. Investors may not stay so forgiving.

By Philip Rush

Australia: Policy Rate Held At 3.85% (Consensus 3.6%) in Jul-25

• The RBA surprised markets by maintaining the cash rate at 3.85%, rejecting consensus expectations for a cut and citing the need for further confirmation that inflation is sustainably on track to the 2.5% midpoint.
• The decision reflects persistent uncertainty in the global economic environment and a domestic outlook characterised by robust labour market conditions but only gradual recovery in household demand, with risks on both sides of the inflation outlook.
• The Board’s split vote and explicit data-dependent stance signal that future interest rate decisions will be highly sensitive to forthcoming inflation and labour market data, as well as evolving international developments.

Inconsistently Dovish Pricing

• Dovish market fears from April have unwound for the Fed, yet deepened for the BoE, despite broadly resilient data and cautious guidance from policymakers reluctant to cut.
• Equity prices have relied on this resilience to recover, yet expectations for extended rate-cutting cycles imply it breaks. Payrolls only forced half of the gap to close.
• We expect ongoing resilience to keep rolling market pricing for rate cuts later, with the unnecessary easing ultimately never being delivered by the BoE, Fed, or ECB.

By Philip Rush