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August 14, 2025
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Peru: Cuts Paused As Space Squeezed

  • Peru's central bank (BCRP) held rates at 4.5% as expected, maintaining a cautious stance despite well-anchored inflation at 1.7% within the target range.
  • Global trade uncertainty weighs on the outlook, but future cuts are conditional on inflation data and external conditions affecting the economy.
  • The real rate is slightly above neutral, providing limited scope to ease, with a terminal rate around 4.0-4.25% reached by early 2026.
August 13, 2025
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BoE: Policy Mistake Diagnosis

  • Inflation expectations have been persistently too high, while productivity trends poorly, driving wage and price inflation forecasts to grind higher in recent years.
  • The BoE’s cutting cycle contributed to reversing the trend decline in expectations, and in turning a slight overshoot into a massive one, with a 3.2pp revision since Feb-23.
  • We forecasted this excess for these reasons, so it was predictable and therefore a policy mistake to cut so soon. Further surprise should prevent the MPC from cutting again.

By Philip Rush

August 13, 2025
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Thailand Cuts Rates Amid Trade War

  • The BOT unanimously cut rates by 25bp to 1.50%, the fourth cut in 10 months, amid US trade policy headwinds and SME vulnerabilities.
  • Growth forecasts were maintained at 2.3%/1.7% for 2025/2026 despite the front-loaded export boost fading; so further easing is likely by year-end.
  • An accommodative policy stance addresses subdued inflation (-0.7% July) and negative credit growth while preserving financial stability.
August 12, 2025
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UK Jobs Suggest Summer Stabilisation

  • Unemployment broke a four-month streak of increases at 4.66%, with favourable cohort effects risking a fall soon. Payrolls may also be revised to grow again from July.
  • The structural hit from tax increases is matched by the cumulative fall in payrolls so far. Fundamental explanations for its divergence from the LFS aren’t supported yet.
  • Ongoing resilience in wage growth stokes unit labour cost pressures alongside taxes that are beyond the target. We still expect the MPC to resist cutting rates again.

By Philip Rush

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