Archive

Brazil’s High-Rate Path

• Brazil's Copom unsurprisingly held the Selic at 15%, signalling a prolonged, highly contractionary stance to force inflation back toward the target.
• Deanchored inflation expectations and resilient services inflation mean cuts are unlikely before clear disinflation and weaker labour data emerge.
• Fiscal doubts, BRL weakness and US policy risks raise upside inflation pressures, keeping the door open to renewed hikes and delaying the start of an easing cycle.

China Re-rooting Rather Than Dumping

• China’s rising export growth to Europe in November demonstrates base effects around a steady trend that predates US tariff increases. It isn’t about dumping.
• Avoidance measures remain rife, with transhipping through Vietnam not dented by the provisions in their US trade deal. Effective tariff rates aren’t rising belatedly.
• Profit-maximising companies still seem to be working around US measures, keeping the impact on inflation and growth smaller than many other economists feared.

By Philip Rush

Inflation Resurgence Tests RBA Patience

• The RBA held rates at 3.60% despite inflation surprising at 3.8% and signs of broader price pressures, reflecting uncertainty about data persistence and mixed demand signals.
• Recent wage and unit labour cost strength alongside tight labour market conditions have shifted the rate outlook from cuts to potential hikes within twelve months if pressures persist.
• The Board signals a willingness to tighten if inflation or demand accelerates, but emphasises data dependency (inflation and labour markets) through February 2026.

2026 Politics: Nine Guesses & A Certainty

• In what promises to be another year fraught with uncertainty, politics and markets will again be dominated by the United States in general and Donald Trump in particular.
• Widely differing views of equity market prospects demonstrate this, i.e. the ‘bubble is about to burst’ doomsayers versus the bullish seeming consensus on Wall Street.
• However, the biggest challenge facing investors is focusing on what really matters amid the continuing ‘noise’ emanating from the Trump Administration in particular.

By Alastair Newton