Archive

MAS Pivots to Tightening Path

• MAS holds S$NEER policy unchanged while raising 2026 core inflation forecasts to 1.0-2.0% vs 0.5-1.5% prior. This inflation normalisation creates scope for future band steepening if wage pressures materialise.​
• Growth resilience and rising unit labour costs shift the outlook hawkishly. A positive output gap persists, and upside inflation risks from wages/geopolitics favour policy tightening over 2026.
• A July steepening is likely if Q2 data confirms momentum: Current settings risk a 2%+ inflation trajectory incompatible with the price stability mandate without adjustment.

EA: Goldilocks In The Good Place

• Surveys of output in the Euro area are converging on a core narrative of resilience, with the ESI the highest in almost three years and broadly shared among member states.
• Price expectations have fallen for businesses in the consumer goods sector, but this isn’t because of weak demand. Retailers are most optimistic about sales in four years.
• Less uncertainty about better growth is bullish, but not hawkish, amid a disinflationary shock. The ECB should enjoy being in a good place, like Goldilocks, without the bears.

By Philip Rush

Riksbank Pauses in Turbulent Times

• The Riksbank holds its policy rate at 1.75% as expected, with an unchanged outlook, supporting growth and 2% inflation target amid a resilient economy.
• ​Krona strength and VAT cuts heighten downside inflation risks, potentially prompting rate cuts over hikes if pressures persist into 2026.
• ​Geopolitical shocks raise uncertainty, but the vigilant Riksbank is prepared to adjust rates if US tariffs erode Swedish growth and sentiment rapidly.

UK Shelter Costs Coasting

• The unusual stability of UK house prices is unlikely to last, while rent inflation is set to slow further. We expect the price-to-rent ratio to stabilise here at pre-pandemic levels.
• Rapid wage increases in the UK’s unbroken regime of excess inflation have eroded the price-to-earnings ratio to its lowest in over a decade, and will probably extend further.
• Banks have more regulatory space to lend while lower rates feed the affordability of leveraging up, so there are upside inflationary risks to this benign coasting narrative.

By Philip Rush