Archive

February 13, 2025
2025-02-13 UK_head.png

UK: GDP Rebounds From Statistical Low

  • GDP defied dovish expectations by surging 0.4% m-o-m, flipping the expected sign on Q4 to grow by 0.1% q-o-q amid broadly positive performances across industry and services.
  • We called November the statistical bottom amid residual seasonality, which is turning higher into what should be a more resilient H1 again. That call remains on track.
  • Statistical noise misled dovish rate views into seeing a spurious fundamental weakness. A lack of follow-through should allow cuts to end after a final one in May.

By Philip Rush

February 11, 2025
2025-02-11 neutral_head.png

Neutral Rates Are Shifting Sands

  • Central banks provide vague and evolving estimates of neutral rates that are unreliable guides to policy decisions, although these estimates inform the perceived terminal rate.
  • Resilient labour markets and persistent unit labour cost growth challenge the dovish view that policy rates are well above their neutral settings, urging caution.
  • Neutral estimates gradually drift to explain the prevailing regime, which doesn’t prevent a pause in cuts or a return to rate hikes consistent with historical norms.

By Philip Rush

February 07, 2025
2025-02-06 UK_head.png

BoE Activist Joins 50bp Dissent

  • The BoE’s 25bp rate cut came with a shockingly dovish vote split as the former hawkish dissenter proved to be an activist in backing an immediate 50bp reduction.
  • Bank inflation forecasts are trending up and only touch the target with one or two more cuts as the MPC appears to be more cautiously concerned about persistence.
  • We maintain our call for the BoE to hold rates in March before delivering a final 25bp cut in May, assuming conditions that also end the Fed’s cycle in March and ECB in June.

By Philip Rush

February 05, 2025
2025-02-05 AN_head.png

US vs EU Part 2: Tax War

  • Even though Donald Trump has held fire for now in the case of Canada and Mexico, the threat of tariffs on America’s allies suggests that the tax war he launched, almost unnoticed, on 20 January against Europe could get even bloodier than battles over trade-in-goods.

By Alastair Newton

By country