March 08, 2023
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UK: Hawkish Tide Not Turning Yet

  • Market participants have renewed their hawkish views of inflation and monetary tightening in 2023. Hopes for a dovish pivot proved premature.
  • Firms’ expected price rises have lost some skew but are converging around 5%, as are wage settlements. Inflation expectations appear to be anchoring at excessive highs.
  • Frontloaded monetary tightening remains necessary with hawkish risks to a 4.5% BoE peak. The dovish turn should be swift and lucratively steep, but it isn’t here yet.

By Philip Rush

March 08, 2023

Dhingra - A cost-of-living crisis: Inflation during an unprecedented terms of trade shock

Swati Dhingra explains how the recent terms of trade shock has affected inflation. She discusses why this shock is unprecedented, and the role of supply chains in transmitting the shock. Swati analyses the direct and indirect effects of higher energy prices on domestic price growth. She reviews the outlook for inflation and explains how this influences her monetary policy strategy.

March 03, 2023

HEW: Core Problems Persist

  • Over the past week, flash inflation releases dominated the data-related news flow. A steady stream of upside member state prints led to a bumper EA headline and core. We also published our latest monthly and political insights on China/US and peak oil.
  • Next week’s calendar is the calm before the storm of central bank announcements, data, and the UK Budget. UK GDP is a highlight by standing out from the other events and in its likelihood of partially rebounding from Dec-22’s sharp fall.

By Philip Rush