Archive

August 07, 2023
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HEM: Persistent Policy Peaks

  • The BoE-Fed “Icarus Spread” has crashed to earth
  • UK excess is less special outside wage settlements
  • BoE hikes have further to go, but the ECB may pause
  • Resilient activity data don’t justify turning looser
  • Global rate cuts will be slow to a high neutral level
July 04, 2023
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HEM: Icarus Policy Spreads

  • UK surprises are more divergent than the data
  • Expectations have woken up to second-round effects
  • More policy tightening is needed to break excesses
  • BoE pricing has flown too high relative to the Fed
  • Hyperactive data dependence can swing both ways
June 05, 2023
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HEM: Persistence Matters

  • Avoiding recession prolongs problematic excesses
  • Second round effects are especially bad in the UK
  • We expect two more ECB and BoE hikes (upside risks)
  • The BoE-Fed spread may have gone too far in 2023
  • Tightness should extend by being slow to cut rates
May 03, 2023
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HEM: Tighter For Longer

  • Excess demand decays slowly through flat activity
  • Underlying inflation is not breaking back to target
  • BoE hikes in May and June may be followed in August
  • The ECB’s problem is less bad, but it has further to go
  • Persistence of past policy will discourage future cuts

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