Archive

EA: Goldilocks In The Good Place

• Surveys of output in the Euro area are converging on a core narrative of resilience, with the ESI the highest in almost three years and broadly shared among member states.
• Price expectations have fallen for businesses in the consumer goods sector, but this isn’t because of weak demand. Retailers are most optimistic about sales in four years.
• Less uncertainty about better growth is bullish, but not hawkish, amid a disinflationary shock. The ECB should enjoy being in a good place, like Goldilocks, without the bears.

By Philip Rush

Riksbank Pauses in Turbulent Times

• The Riksbank holds its policy rate at 1.75% as expected, with an unchanged outlook, supporting growth and 2% inflation target amid a resilient economy.
• ​Krona strength and VAT cuts heighten downside inflation risks, potentially prompting rate cuts over hikes if pressures persist into 2026.
• ​Geopolitical shocks raise uncertainty, but the vigilant Riksbank is prepared to adjust rates if US tariffs erode Swedish growth and sentiment rapidly.

UK Shelter Costs Coasting

• The unusual stability of UK house prices is unlikely to last, while rent inflation is set to slow further. We expect the price-to-rent ratio to stabilise here at pre-pandemic levels.
• Rapid wage increases in the UK’s unbroken regime of excess inflation have eroded the price-to-earnings ratio to its lowest in over a decade, and will probably extend further.
• Banks have more regulatory space to lend while lower rates feed the affordability of leveraging up, so there are upside inflationary risks to this benign coasting narrative.

By Philip Rush

Canada: Trade Risk and Rate Flexibility

• The Bank of Canada held rates at 2.25%, as expected, with this second straight hold signalling a cautious pause as policy is firmly data‑dependent.
• With core inflation easing but still near 2.5% and unemployment elevated, rates are likely on hold through 2026 unless inflation or growth deviates materially.
• Trade uncertainty and CUSMA talks are key wildcards; the next move (probably a hike) is seen in 2027 if growth and inflation remain near projections.