Archive

March 18, 2025
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UK Inflation Excess Survives Reweighting

  • Updated inflation basket weightings can shift the inflation outlook without any new fundamental shock. The seasonal and trend outlook is unaffected by the 2025 update.
  • Although our forecast is broadly unchanged, this still mitigates the risk that reduced weights on energy and sanitation utilities dampen the surge in April and July forecasts.
  • This outcome further emboldens our confidence in our above-consensus forecast. We also note that the average import intensity is now weighted near historic lows.

By Philip Rush

March 12, 2025
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US Lands Some Disinflation In Feb-25

  • The upwards trend in monthly US inflation of the past several months broke in February with a surprisingly steep slowing to 0.2% m-o-m, although airfares drove the downside.
  • Drift in consensus expectations is not yet obviously broken, with this outcome 0.2pp above forecasts from a month ago. A rebound after Easter remains likely.
  • Disinflation is unlikely to dissuade the Fed from holding rates in March. We doubt soft surveys will translate to recessionary conditions, so we still see no more Fed cuts.

By Philip Rush

March 03, 2025
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EA Inflation Drift And Skew Survives

  • Euro area inflation exceeded consensus expectations again in February, despite an ongoing drift up in forecasts, although the 2.4% outcome precisely matched our call.
  • ECB easing anticipated a drop below target by now, so its disappointment should exceed any relief at the 0.1pp slowing, driven by French energy bills, after four straight rises.
  • Wage inflation remains too fast to sustainably achieve the target, which should urge the ECB to slow its easing after cutting on 6 March. We still see June as the last rate cut.

By Philip Rush

February 25, 2025
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Euro Area Wage Growth Is Too Hot

  • Negotiated wages grew by 4.1% in Q4, slowing sharply from Q3, but little changed on the average from 2024 and 2023. It is not yet on an obvious path of improvement.
  • Broader labour costs have also slowed and are suggesting unit labour cost growth of around 4% y-o-y, although that would mark an abrupt rise in the quarterly pace.
  • Labour costs are growing too fast to be consistent with a sustainable return to the ECB’s inflation target. We expect its easing cycle to end in H1, much earlier than priced.

By Philip Rush

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