Archive

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

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Jun-25

• The FOMC maintained the federal funds rate at 4.25% to 4.5%, in line with expectations, citing resilient economic activity and a still-elevated inflation profile.
• Revised projections indicate slower GDP growth and a higher inflation path for 2025, with upside risks to inflation dominating the policy outlook and contributing to a more cautious approach to rate normalisation.
• Future interest rate decisions will hinge on the persistence of inflationary pressures—particularly from tariffs—and the anchoring of inflation expectations, with the Committee retaining a flexible, data-dependent stance.

US/China: Sprint vs Stamina

• Last week’s US/China trade talks underlined the extent to which Beijing has the upper hand in terms of both leverage and willingness to dig in. Avoiding a re-escalation at the end of the current 90-day truce, therefore, depends on Washington giving more ground.

By Alastair Newton

US Consumer Pricing Still Ignores Tariffs

• Another downside surprise in headline US inflation reflected the lack of pass-through from tariff increases, with headline and core rates of only 0.1% m-o-m in May.
• Commodities, less food, energy and car prices stalled as airfares and apparel fell again. But services (ex-shelter) inflation stayed too high to be consistent with the target.
• Low headline rates raise dovish political pressure and the risk of a cut, but the tight labour market should encourage the Fed to keep rolling potential cuts later.

By Philip Rush