Archive

US Shutdown: A Means To An End

• The Democrats opted for a US government shutdown despite the Administration being well prepared for what it sees as an opportunity to promote its longer-term agenda.
• While they hold out, the president’s ‘grim reaper’, OMB Director Russell Vought, will have a free hand to cut the size of government and pursue his unitary executive vision.
• Some of his actions will undoubtedly be challenged in the courts, but the signs are that the Supreme Court will continue to side firmly with the Administration.

By Alastair Newton

RBNZ Cuts OCR to Stimulative 2.5%

• The RBNZ cut its OCR by 50bps to 2.5%, beyond the 25bp consensus, with unanimous committee support signalling a more aggressive stance than August's split vote.
• Inflation is forecast at 3% in Q3 but returns to 2% midpoint by H1 2026 due to spare capacity, providing scope for further easing.
• The Committee remains open to additional cuts with the November meeting live, as terminal rate expectations fall below the previous neutral 3% estimate.

Thailand Defies Consensus with Policy Hold

• BOT holds rate at 1.50% in a 5-2 vote, surprising 70% of economists who expected a 25bp cut, citing limited policy space and timing concerns amid economic uncertainty.
• Economy faces 2H25-2026 slowdown from US tariff impacts, with exports declining and GDP growth revised to 2.2% (2025) and 1.6% (2026) despite a front-loaded boost.
• Credit contraction continues affecting vulnerable SMEs while inflation at -0.72% remains below target, but the dovish new governor signals potential future easing.

US: Steady As She Shuts

• The US government shutdown causes vital economic data to go dark, leaving the Fed facing market pressure to blindly cut rates as priced, creating risks of policy error.
• Both parties see strategic value in prolonging the shutdown, risking disruption that lasts well beyond historical norms. But levels will rebound when it inevitably ends.
• In the interim, private surveys signal weakness, and this picture is unlikely to improve significantly enough to block cuts in 2025, but that won’t drive more Fed cuts in 2026.

By Philip Rush