Archive

Malaysia: Policy Rate Held At 3.0% (Consensus 3.0%) in May-25

• Bank Negara Malaysia held its official policy rate at 3%, in line with consensus, maintaining a supportive stance amid resilient domestic demand and heightened global trade tensions. The decision reflects concern over downside risks from external uncertainties and weaker global sentiment.
• Headline and core inflation remained subdued in Q1 2025, at 1.5% and 1.9% respectively, with the outlook deemed manageable due to easing global cost pressures and limited domestic demand-pull inflation. Inflation risks remain externally driven, linked to commodity markets and trade policies.
• The ringgit continues to be influenced by external volatility, though Malaysia’s structural reforms and narrowing interest rate differentials lend support. Future rate decisions will depend on the trajectory of inflation and the balance of risks to growth amid an uncertain global environment.

BoE Closer To Slowing Cuts

• The shockingly divided MPC’s offsetting votes weren’t the most hawkish signal alongside its 25bp rate cut. Most of the five backing it were only recently convinced.
• Maintained guidance for a gradual and careful approach not only disappoints dovish hopes, but signals a 5:2:2 bias between a slower, constant and faster pace of cuts.
• We still expect this gradualism to help the BoE resist cutting in August (and June) while waiting for dovish evidence that never emerges, making this the last cut.

By Philip Rush

Trading Inside Trump’s Collar

• Market volatility is closely tied to US politics, where unfriendly measures can cap equity prices, while reversals limit potential falls, creating a political floor and ceiling.
• Attempts to avoid all losses lose relevance if they can reverse swiftly. Hedging against falls in the SP500 beyond recent lows better matches the risk of a recessionary crash.
• Selling year-end upside above 5750 covers the insurance cost and nets a 3.8% return, with price losses and gains capped at 7% and 6.4% by this “Trump Collar” strategy.

By Philip Rush

Brazil: 50bp Rate Hike To 14.75% (Consensus 14.75%) in May-25

• Brazil's Copom raised the Selic rate by 50bp to 14.75%, as expected, slowing the pace of tightening while maintaining a restrictive stance amid persistent inflation pressures.
• Despite early signs of growth moderation, inflation expectations remain deanchored, and inflation readings are elevated, justifying continued policy restraint over a prolonged period.
• Future decisions will reflect heightened uncertainty and the advanced tightening stage, with Copom signalling greater flexibility and data-dependence in calibrating the path to price stability.