Archive

UK: Poor Productivity Paradigms

• The OBR looks likely to trim its productivity trend assumption to 1%, which would still be a bullish break from the current stagnation. Trends rarely break outside recessions.
• High taxes are squeezing the most productive and being transferred to the inactive. It should not be surprising that the UK’s political choices have stalled productivity.
• We see no reason to think the UK will pull off an internationally exceptional jobs-light boom from here. Ongoing stagnation would extend the UK’s rule for fiscal slippage.

By Philip Rush

BSP Delivers Unexpected Policy Easing

• BSP cut rates 25bp to 4.75% surprising market expectations for a pause, citing a weakened growth outlook from infrastructure governance concerns.
• Benign inflation at 1.7%, well below the 2-4% target, provides scope for accommodation despite electricity and rice tariff upside risks.
• Further easing is likely in December as BSP signals the policy "sweet spot" is lower than expected amid persistent growth headwinds.

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.