Archive

February 17, 2025
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US vs EU Part 3: Russia/Ukraine

  • The commentariat’s misreading of last week’s Trump/Putin phone exchange accounts in part for why markets have now got ahead of the curve on Russia/Ukraine. As long as Europe’s leaders stay in denial over transatlantic relations, investors’ watchwords should remain ‘caveat emptor’.

By Alastair Newton

February 12, 2025
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US Inflation Ending Cutting Cycle

  • Intensifying US inflationary pressures significantly exceeded consensus expectations in January, accumulating news potentially worth 1pp in 2026 since the Fed first cut.
  • We now doubt there can be sufficient downside news to offset these hawkish pressures, with the Fed on hold in March. That means we see the next Fed move as a hike in 2026.
  • Annual core inflationary pressures are not outliers in the US, nor is its labour market resilience, so other central banks should struggle to sustain cutting cycles beyond H1.

By Philip Rush

February 11, 2025
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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 10, 2025
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France: Temporary Reprieves

  • After all the political drama in France in the second half of last year, the Bayrou government managed to pass a 2025 budget last week with barely a murmur. However, this is very likely only a temporary reprieve politically and, even without taking account of probable US tariffs, fiscally.

By Alastair Newton

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