Archive

RBNZ Cuts OCR to Stimulative 2.5%

• The RBNZ cut its OCR by 50bps to 2.5%, beyond the 25bp consensus, with unanimous committee support signalling a more aggressive stance than August's split vote.
• Inflation is forecast at 3% in Q3 but returns to 2% midpoint by H1 2026 due to spare capacity, providing scope for further easing.
• The Committee remains open to additional cuts with the November meeting live, as terminal rate expectations fall below the previous neutral 3% estimate.

Thailand Defies Consensus with Policy Hold

• BOT holds rate at 1.50% in a 5-2 vote, surprising 70% of economists who expected a 25bp cut, citing limited policy space and timing concerns amid economic uncertainty.
• Economy faces 2H25-2026 slowdown from US tariff impacts, with exports declining and GDP growth revised to 2.2% (2025) and 1.6% (2026) despite a front-loaded boost.
• Credit contraction continues affecting vulnerable SMEs while inflation at -0.72% remains below target, but the dovish new governor signals potential future easing.

US: Steady As She Shuts

• The US government shutdown causes vital economic data to go dark, leaving the Fed facing market pressure to blindly cut rates as priced, creating risks of policy error.
• Both parties see strategic value in prolonging the shutdown, risking disruption that lasts well beyond historical norms. But levels will rebound when it inevitably ends.
• In the interim, private surveys signal weakness, and this picture is unlikely to improve significantly enough to block cuts in 2025, but that won’t drive more Fed cuts in 2026.

By Philip Rush

HEM: Oct-25 Views & Challenges

• Hawkish inflation and policy rate pricing shifts toward our UK/EA view did not stop US rates frontloading more cuts.
• We still see markets overpricing easing, with UK inflation expectations stuck above target, and neutral rates high.
• A break in activity data, especially unemployment, and underlying price/wage inflation, would threaten our view.