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Philippines: 25bp Rate Cut to 5.5% (Consensus 5.5%) in Apr-25

• The BSP cut its policy rate by 25bps to 5.50%, aligning with expectations and marking a shift towards accommodation following the unexpectedly hawkish February hold.
• Substantial downward revisions to inflation forecasts, with 2025 inflation now seen at just 2.3%, support the easing decision and suggest scope for further rate reductions.
• Despite a dovish tilt, the BSP signalled a cautious, data-driven approach to additional cuts, with external headwinds and inflation risks dictating the pace of monetary easing.

RBNZ: 25bp Rate Cut To 3.5% (Consensus 3.5%) in Apr-25

• As widely expected, the Monetary Policy Committee reduced the OCR by 25 basis points to 3.5%, citing stable inflation near the midpoint of the target range and significant spare capacity in the domestic economy.
• The recent imposition of global trade barriers has increased downside risks to economic activity and inflation, prompting a reassessment of the medium-term inflation outlook.
• While global inflation dynamics remain uncertain, the Committee signalled that further rate cuts remain possible, contingent on the evolution of inflationary pressures and external economic developments.

UK: Spillover effects from US tariffs

• The UK output destroyed by reciprocal US tariffs is only partly due to the direct impact of the new 10% rate (worth ~0.2% of GDP) and generally weaker US prospects (0.1%).
• Global GDP growth is depressed by this policy, indirectly destroying demand for UK exports from elsewhere (0.2%), especially if countries harm themselves by retaliating.
• An overall 0.6% GDP hit has two-sided risks and a skew lowered by likely negotiations. Fears of items dumping into the UK market are overblown excuses for protectionism.

By Philip Rush

US vs EU: Worse to Come

• The response to ‘Liberation Day’ by policymakers and investors alike still falls short of appreciating the scale of the threat posed by the US, as ‘transactional Trump’ is succeeded by a president who seeks to turn the clock back to a supposedly golden era in his quest to make America great again.

By Alastair Newton