Archive

UK CPI Trend Extends Excess In July

• Another upside surprise in UK CPI inflation extended the accumulated drift to 1.3pp over the past year, yet was only 0.2pp above our old call.
• This outcome matched the BoE’s latest call, with airfares driving the rise, and median pressures holding slightly above a target-consistent pace, so there is less policy impact.
• The MPC was finely balanced in its support for August’s cut, and this rise will not lead dissenters to support past action, let alone another cut, which we still doubt occurs.

By Philip Rush

EA: Sticky Inflation Survives Euro’s Surge

• Inflation’s surprise stickiness at 2% was confirmed in the Euro area’s final print, with pressures broad based and slightly above a target-consistent pace in most countries.
• There has been little progress in inflation’s latent trend or our persistence-weighted measure, despite the Euro’s substantial and sustained appreciation.
• Without dovish second-round effects, the ECB can look through a potential slowing in headline inflation to a tight labour market and persistent pressures, then not cut rates.

By Philip Rush

New Zealand Extends Dovish Rate Cycle

• The RBNZ cut the OCR to 3% in August, matching consensus expectations amid stalled growth and stable medium-term inflation.
• This decision was split, with a minority favouring a larger cut. Further reductions to 2.5% are likely unless inflation surprises persist.
• Weak household demand and global uncertainty may extend the easing cycle, making future rate policy highly data-dependent.

Riksbank Holds at 2% Amid Fragile Outlook

• The Riksbank held its rate at 2% while seeing above-target summer inflation as temporary.
• Weak growth and a fragile labour market sustain rate-cut probability later in 2025.
• The policy outlook hinges on fading inflation pressures, demand recovery, and global risks.