Archive

ECB Loosely Tied to Cut in June

• The ECB maintained its policy rates and did not pre-commit to a June cut. However, a few members wanted to cut now, and the statement added explicit conditionality.
• Guidance now ties the ECB to a June cut, albeit with ongoing data dependence preserving wriggle room. Sticky services inflation and Fed rates won’t stay its hand.
• Resilient data are rolling back Fed views to our September call, but we now doubt the ECB will want to delay past June. The BoE would probably only then wait until Nov-24.

By Philip Rush

UK Politics: Plague On Both Your Houses

• If, as recent opinion polling suggests, the Conservative Party suffers a record defeat in the forthcoming general election, there is a risk that Labour and especially the Conservatives seize the wrong lessons from the outcome.

By Alastair Newton

HEM: Rolling Precariously

• Data are resilient, but markets doubt the policy effect
• Rising unemployment would signal a need for rate cuts
• UK wage settlements support a high floor in inflation
• Excess demand and inflation delay BoE cuts to Feb-25
• The Fed and ECB may only delay to Sep-24

UK Wage Wealth is an Inflationary Illusion

• Nominal disposable income continues to surge amid widespread enormous pay rises. Unmatched by productivity, the nominal boost is eroded by inflation to real stagnation.
• The regime of high nominal increases nonetheless inflates away the debt stock, helping sustain affordability despite forceful interest rate increases.
• An inflationary reduction in debt burdens is not real wealth. The UK’s net worth is crashing to record negatives as corporates and households suffer post-pandemic.

By Philip Rush