December 04, 2023

HEM: Persistence Underpriced

  • Rate cuts may come next but need not start soon
  • Excessive wages raise inflation and activity resilience
  • UK persistence is more structural than cyclical
  • The BoE can wait until 2025 even if the ECB cuts in July
  • Market pricing has become too dovish

November 07, 2023

HEM: Stay Tight for Long Haul

  • The BoE, ECB and Fed have likely finished hiking
  • High wages are helping economies resist recessions
  • Second-round effects particularly support UK inflation
  • Rate cuts appear distant, even if they are next
  • Elevated neutral rates discourage policy cuts

October 02, 2023

HEM: Autumn Lifts EU Gloom

  • Cuts are rolling back while neutral rates grind higher
  • Residual seasonality overstates EA/UK summer gloom
  • Underlying inflation is close to the target
  • Excess wage growth encourages a final BoE hike
  • We still see limited cuts only coming after a long wait

September 04, 2023

HEM: Cuts Can Wait for Godot

  • The BoE-Fed “Icarus Spread” has melted further
  • Disinflation is not yet on course to meet targets
  • Wage growth pushes BoE hikes as the ECB pauses
  • Policy doesn’t look too tight amid resilient activity
  • High neutral rates mean cuts can roll later