Archive

August 20, 2025
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EA: Sticky Inflation Survives Euro’s Surge

  • Inflation’s surprise stickiness at 2% was confirmed in the Euro area’s final print, with pressures broad based and slightly above a target-consistent pace in most countries.
  • There has been little progress in inflation’s latent trend or our persistence-weighted measure, despite the Euro’s substantial and sustained appreciation.
  • Without dovish second-round effects, the ECB can look through a potential slowing in headline inflation to a tight labour market and persistent pressures, then not cut rates.

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 12, 2025
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US Inflation Skips Several Months

  • July’s US inflation print reversed all of the increase built in from tariffs over the past several months, despite matching expectations prevailing into the release.
  • Core goods inflation eased slightly, suggesting ongoing corporate success in avoiding the tariff shock. But service inflation is stuck too high to be consistent with the target.
  • Anti-avoidance measures and belated pass-through will drive further rises. We doubt they will be as severe as many fear, yet still not create much space to cut rates.

By Philip Rush

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