Archive

June 25, 2025
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Defence Spending Is Not Stimulative

  • NATO raised its target for defence spending to 5% of GDP, with Spain opting out. This increases pressure for tighter monetary conditions than were otherwise appropriate.
  • Defence spending offers weak growth multipliers, so the policy is more likely to stoke deficits than productivity. Central banks may respond with a more hawkish stance.
  • With debt levels already high, the move risks crowding out other spending and lifting sovereign risk premiums. Bond yields suffer from higher deficits and future rates.

By Philip Rush

June 24, 2025
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Israel/Iran/US: Ten Pointers

  • ‘Events’ over the past four days have underlined how hard it is to forecast with any degree of confidence how the Iran/Israel conflict will unfold. However, and recent headline-driven volatility notwithstanding, the supply/demand equation continues to dominate market thinking on oil.

By Alastair Newton

June 23, 2025
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Growth Broadly Back In The Black

  • PMI recoveries extended in June, taking averages above 50 as manufacturing is its strongest since Sep-22, and services almost align with its averages of recent years.
  • The UK survey balances suffered from bad vibes, so they are the primary beneficiary of sentiment improving. Their recovery can extend further as vibes improve.
  • Broad expansion helps labour demand to keep pace with supply, denying doves proof of a disinflationary demand shock. Without that, cuts roll later and may not resume.

By Philip Rush

June 19, 2025
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BoE Still Seeking Evidence

  • Guidance around an unsurprisingly unchanged BoE rate preserved the necessary uncertainty about when it might ease again, albeit with a broad bias to do more later.
  • Dave Ramsden joined the dovish dissent, taking it to three for a 25bp cut, but none of them are in the MPC majority revealed in May as leaning towards a slower pace of cuts.
  • We believe the August decision remains finely balanced for the majority. Ongoing data resilience, discouraging the Fed and ECB from easing, should also keep the BoE on hold.

By Philip Rush

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