Archive

HEW: Hawkishly Easing Into Holidays

• There was a remarkable lack of surprise over the past week, with several central bank decisions and top-tier data releases matching forecasts. Hawkish cuts, primarily from the Fed, dominated the relatively dovish holds from the BoE, BOJ and Norges bank.
• Releases dry up like market liquidity for Christmas next week. This publication series will return on 10 January, although clients will get a few other pieces in between.
• Note: Smartkarma becomes our research portal in January, so set your passwords ready. Should there be any queries, please direct them to transition@smartkarma.com.

By Philip Rush

Colombia: 25bp Rate Cut To 9.5% (Consensus 9.25%) in Dec-24

• Banco de la República reduced the benchmark rate by 25bps to 9.50%, undershooting market expectations of a 50bp cut due to concerns over persistent inflation and exchange rate volatility.
• While headline inflation fell to 5.2% in November, stable core inflation and peso depreciation constrain BanRep’s scope for faster rate cuts, as imported inflation risks remain significant.
• Robust Q3 GDP growth and a resilient labour market support gradual monetary easing; however, heightened external financial pressures and fiscal uncertainties will heavily influence future policy decisions.

BoE Doves Frame Cut For February

• The BoE matched widespread expectations again by holding the Bank rate at 4.75%, although the three dissenters exceeded the two we expected (consensus was for one).
• Surprisingly high wage growth is reinforcing the gradualist urge of most members. Softer labour market conditions will likely be used to justify a February rate cut.
• We maintain our call for BoE cuts in February and May before an extended pause that may end with rate hikes to remove accidental stimulus amid high neutral rates.

By Philip Rush

Sweden: 25bp Rate Cut to 2.5% (Consensus 2.5%) in Dec-24

• The Riksbank cut its policy rate by 25bp to 2.5%, meeting consensus expectations and reflecting a total reduction of 1.5 percentage points since May 2024 to support weak economic activity and stabilise inflation near the target.
• Forward guidance indicates the potential for another rate cut in H1 2025, contingent on stable inflation and growth projections, emphasising evaluating the lagged effects of earlier policy adjustments.
• External uncertainties, including geopolitical tensions and trade policy ambiguities, alongside domestic risks, such as the krona's exchange rate and fragile recovery momentum, will influence future monetary policy decisions.