Archive

HEM: Fear of Fear Itself

• Fear of tariffs and DOGE is depressing vibes in US surveys
• Resilient labour markets suggest dovish fear is overblown
• Underlying price and wage inflation remains too high
• Paused easing cycles do not resume without recessions
• Reversing unnecessary easing remains more likely in 2026

US Tariffs: No Fooling!

• The announcement of individual reciprocal tariff rates for US trading patterns on 2 April is rightly seen as a watershed moment for investors. Nevertheless, in a drive to re-industrialise America, it may well prove to be no more than the end of the beginning in a protracted trade war.

By Alastair Newton

UK: Low CPI As Seasonal Sales Extend

• UK CPI inflation slowed by 15bps to 2.84%, rounding slightly under expectations. The services rate was surprisingly resilient, and January’s upside news broadly persisted.
• Downside news from clothing and core goods prices occurred because January sales extended broadly and unusually. Postponed Spring lines should drive a March rebound.
• Headline inflation outcomes are benign enough not to threaten the BoE’s likely cut in May, but ongoing resilience still makes that the final move in our forecast.

By Philip Rush

UK Fiscal Smoke Over Treading Water

• Attempts to recreate fiscal headroom after slippage rely on implausible and optimistic assumptions. Further tax rises and delayed prudence are likely in the Autumn budget.
• Replacing aid resources with capital defence spending helps loosen fiscal policy inside the budgetary rules. Policy changes are relatively neutral over the next few years.
• Without corrective action, the gross financing requirement path is £18bn a year higher than in the Autumn, and almost £50bn higher than last Spring, burdening gilt issuance.

By Philip Rush