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October 07, 2025
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US: Steady As She Shuts

  • The US government shutdown causes vital economic data to go dark, leaving the Fed facing market pressure to blindly cut rates as priced, creating risks of policy error.
  • Both parties see strategic value in prolonging the shutdown, risking disruption that lasts well beyond historical norms. But levels will rebound when it inevitably ends.
  • In the interim, private surveys signal weakness, and this picture is unlikely to improve significantly enough to block cuts in 2025, but that won’t drive more Fed cuts in 2026.

By Philip Rush

October 06, 2025
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HEM: Oct-25 Views & Challenges

  • Hawkish inflation and policy rate pricing shifts toward our UK/EA view did not stop US rates frontloading more cuts.
  • We still see markets overpricing easing, with UK inflation expectations stuck above target, and neutral rates high.
  • A break in activity data, especially unemployment, and underlying price/wage inflation, would threaten our view.
September 25, 2025
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Resilience Is Reinstating

  • Falling US jobless claims and bullish GDP revisions are reinstating evidence of ongoing resilience. Underlying GDP only slowed by about 0.1pp in H1, or 15% of 2024’s average.
  • Risk management rate cuts to balance the higher costs of being wrong on the downside raise the probability that easing proves premature and swiftly ends.
  • The ECB already sees the transmission of its past cuts trending loan growth higher. It may reach pressures consistent with hikes next year, and it already clashes with easing.

By Philip Rush

September 24, 2025
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Will AI save the US Economy?

  • European policymakers and investors see Donald Trump’s economic policies harming Republican prospects in the 2026 midterms and the 2028 general election.
  • The Trump Administration is placing a good deal of faith in AI as a panacea. But the US may not have the skilled labour or the power-generating capacity to fuel an AI boom.
  • Nor is it clear whether the current Administration is preparing for the related socio-economic disruption from which the MAGA faithful would be far from immune.

By Alastair Newton

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