Archive

UK Jobs Find Their Floor

• Stability in unemployment at 4.66%, while payrolls only marginally decline, suggests the labour market has found its floor before disinflationary pressures accumulate.
• A narrative-breaking improvement could occur next month. Tax rises structurally explain the scale of the previous shock, with weakness seemingly not going beyond that.
• Excess supply is needed to break wage growth to a target-consistent trend. Without that, the MPC should hold rates before potentially reversing by raising them in 2026.

By Philip Rush

HEW: Crystalising Policy Divergence

• Spreads between ECB and Fed expectations widened again this week as the ECB held rates with a neutral bias while disappointing US labour market data drive dovish hopes.
• Underlying US services inflation was soft, and initial jobless claims spiked, albeit over Labor Day. We think US pricing has gone too far, and political pressure won’t dominate.
• Guidance with the Fed’s upcoming cut could start to correct that. The BoE will hold rates, after more hawkish macro news next week, and should trim its QT plan this year.

By Philip Rush

ECB: Balanced In The Good Place

• Staying in the ECB’s “good place” encouraged a neutral bias around its unanimous decision for no change, while being appropriately open to tackling future shocks.
• Staff inflation forecasts still undershoot the target, with recent upside news seemingly postponing passthrough rather than trimming the extent into something like our view.
• President Lagarde sounded relaxed about France’s spread widening, and the ECB did not discuss the TPI. We still expect no ECB easing against this, or further rate cuts.

By Philip Rush

Peru Nears Neutral as Rates Cut to 4.25%

• BCRP cut rates by 25bp to 4.25%, approaching neutral policy as August inflation fell to 1.1% YoY, the lowest since 2018, below consensus expectations.
• The real ex-ante rate is now 2.07%, very close to the 2% neutral estimate, suggesting limited scope for further easing without overstimulating the economy.
• Global trade tensions create a medium-term downward bias for growth outlook, with a data-dependent approach maintained for future policy adjustments.