Archive

September 03, 2025
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Cutting After Pauses

  • The BoE and Fed rarely resume cutting cycles after a pause, yet the Fed seems set to break its hold with a cut just as the BoE and ECB enter their own pauses.
  • 2002-03 is the best historical parallel for the Fed, which signals potential cuts should be shallow and are likely to be reversed. Politics is no match for the fundamental need.
  • Persistently excessive UK pressures should prevent the BoE from cutting in November or beyond, with a quarterly pause historically unlikely to resolve in another rate cut.

By Philip Rush

August 20, 2025
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UK CPI Trend Extends Excess In July

  • Another upside surprise in UK CPI inflation extended the accumulated drift to 1.3pp over the past year, yet was only 0.2pp above our old call.
  • This outcome matched the BoE’s latest call, with airfares driving the rise, and median pressures holding slightly above a target-consistent pace, so there is less policy impact.
  • The MPC was finely balanced in its support for August’s cut, and this rise will not lead dissenters to support past action, let alone another cut, which we still doubt occurs.

By Philip Rush

August 18, 2025
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UK Excess Inflation Expectations

  • The upwards trend in consensus inflation forecasts reflects persistent excess effective expectations supporting wages amid policymakers’ failure to re-anchor at the target.
  • Easing on the assumption of success predictably negated the required conditions, so we forecasted the problem. Nonetheless, expectations were also stickier than we assumed.
  • Without renewed progress, wage growth should keep trending above the BoE’s forecast, discouraging further rate cuts. Hikes may even be needed in 2026 to break excesses.

By Philip Rush

August 14, 2025
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UK: Slowdown Softened In Q2

  • June’s remarkable rebound compounded the resilience revealed by April’s upwards revision, which also broke flimsy fundamental stories blaming tariffs for a slowdown.
  • IP no longer declined in April, but the broader growth profile still matches the residual seasonality that spuriously drives GDP dynamics in our forecast. H2 will be weaker.
  • The BoE discounts headline GDP volatility without blaming seasonality, so another surprisingly strong quarter will be hard for hawks to ignore, reducing the rate cut risk.

By Philip Rush

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