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BoE: Bailey Leans Over December Fence

• Another 5:4 vote split broke the BoE’s run of quarterly rate cuts. Governor Bailey is revealed to be the pivotal member, with the others worried about inflation persistence.
• Bailey endorsed market pricing and a forward-looking Taylor Rule path that includes a cut this quarter. His verbal comments imply a presumption in favour of cutting then.
• Upside news over the next two monthly release cycles would be needed to block that December cut. Resistance to cutting should only grow stronger as time passes.

By Philip Rush

Mexico: Cautious Easing in Uncertain Times

• Banxico cut rates by 25bp to 7.25%, in line with the consensus. Guidance turned more cautious, with policymakers less committed to further easing soon.​
• The 4-1 vote (one dissent for a hold) underscores internal concern about persistent core inflation, which could constrain scope for additional rate cuts.​
• With GDP contracting and core prices sticky, future rate moves hinge on inflation's path and external risks. The pace of easing will likely slow from here.

Inflation Persistence Constrains Norges Bank

• The Norges Bank held rates at 4% as expected. Core inflation at 3% constrains further cuts despite emerging economic slack in the coming year.
• Governor Bache stressed the bank is "not in a hurry" to cut rates, projecting one reduction annually through 2028. Cuts depend on disinflation progressing as forecast.
• December's new forecasts will be critical—faster disinflation or sharper labour market weakness could accelerate cuts, while persistent inflation could keep rates higher for longer.

Brazil's Cautious Monetary Pause

• Brazil's Copom holds Selic at 15% as expected, but signals a very prolonged pause ahead with rates to stay elevated while inflation expectations remain deanchored above target.
• The committee emphasises that a contractionary policy is needed despite moderate growth, citing tariff risks, currency depreciation pass-through, and resilient labour market pressures.
• Rate hikes remain optionally available if inflation expectations fail to re-anchor, but markets now price March 2026 easing, contingent on fiscal discipline and external stability.