Archive

BoE: Three Camps, Two Votes, 1 Cut

• The MPC’s 5:4 vote split delivered another finely balanced rate cut, but the doves are divided, with only two likely to roll straight into supporting another cut in February.
• Most MPC members favour caution, or an explicitly slower path of rate cuts, which probably means they expect to wait until March or May before easing further.
• The disinflationary evidence may not arrive with pay settlement plans in the new year, or later, so we still see this as the last BoE rate cut. The global policy cycle is turning.

By Philip Rush

Riksbank Holds at 1.75%: Steady Path Ahead

• Riksbank holds rate at 1.75% as expected (no surprise); expects stability through 2026 before gradual hikes to 2.1% by 2028 as recovery strengthens.
• GDP growth up to 2.9% (2026 vs 2.7% prior); inflation stable near 2% CPIF supports extended accommodation without cuts.
• Labour market improving amid risks (geopolitics, fiscal expansion); flexible to adjust if outlook shifts from baseline path.

Norges Hold at 4%: Steady Course

• The Norges Bank held rates steady at 4% as expected, signalling no urgency for cuts despite modest economic slack, as persistent underlying inflation near 3% and krone depreciation constraints remain material risks.
• The forward rate path of 1–2 cuts in 2026 and a gradual decline to ~3% by 2028 reflects cautious normalisation rather than large-scale easing, with wage growth and exchange rate dynamics conditioning policy sequencing.
• International trade uncertainty and the trajectory of global tariffs present asymmetric risks that justify patience. Future cuts depend critically on evidence of genuine disinflation and moderation in cost growth ahead.

UK: Christmas CPI Present For Doves

• UK inflation’s 31bps slowing to 3.15% went far further than expected, with significance raised by the substantial extent and the breadth of downside across divisions.
• However, the news was more concentrated at a component level, leaving the median impulse annualising to 2.3%. We still see underlying pressures driving persistent excess.
• The Governor sought confirmation of disinflation before cutting rates again, so this surprise should secure that move in December, without any commitment to do more.

By Philip Rush