Heteronomics Archive

December 10, 2025

Dual Mandate, Divided Fed: 2026 Crossroads

The Fed cuts by 25bp for the third time, but hawkish dissent is deeper than voting suggests. Six members judged rates should still be 3.875%, and three members are pencilling in rate hikes next year.
Despite revising 2026 PCE inflation forecasts down to 2.4% (from 2.6%), the Committee still projects only one 2026 cut, making a hawkish shift in the reaction function.
2026 rate projections split, with seven dots above the 3.375% forward median, four at the median, and eight below. Policy will depend on labour market and inflation data.

December 09, 2025

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.

December 05, 2025

RBI cuts repo rate by 25bps to 5.25% as expected, citing exceptional disinflation (0.25% October CPI) and 8.2% growth, though maintaining a neutral stance signals easing cycle may be nearing end.
It forecasts headline inflation to fall to 0.6% in Q3 before rebounding sharply to 2.9% and 3.9% subsequently, limiting the scope for additional rate cuts despite growth moderating from current highs.
Durable liquidity injections alongside rate cuts acknowledge monetary transmission constraints. The consensus sees 5.25% as the terminal rate, with policy dependent on inflation normalisation and external sector stability.

November 27, 2025

The BOK maintained 2.5% rates as the consensus expected. Upward inflation revisions to 2.1% (2025) and 2.1% (2026) signal stronger price persistence than previously forecast, increasing rate-cut caution.
Policy remains data-dependent with the "possibility" of cuts only after material disinflationary evidence emerges. Financial stability risks around housing and household debt levels now drive policy constraints more than growth concerns.
Exchange rate depreciation and sticky service inflation create headwinds against achieving the 2% target, likely keeping rates elevated through early 2026 despite modest growth recovery expectations of 1.8%.