Archive

Growth Broadly Back In The Black

• PMI recoveries extended in June, taking averages above 50 as manufacturing is its strongest since Sep-22, and services almost align with its averages of recent years.
• The UK survey balances suffered from bad vibes, so they are the primary beneficiary of sentiment improving. Their recovery can extend further as vibes improve.
• Broad expansion helps labour demand to keep pace with supply, denying doves proof of a disinflationary demand shock. Without that, cuts roll later and may not resume.

By Philip Rush

BoE Still Seeking Evidence

• Guidance around an unsurprisingly unchanged BoE rate preserved the necessary uncertainty about when it might ease again, albeit with a broad bias to do more later.
• Dave Ramsden joined the dovish dissent, taking it to three for a 25bp cut, but none of them are in the MPC majority revealed in May as leaning towards a slower pace of cuts.
• We believe the August decision remains finely balanced for the majority. Ongoing data resilience, discouraging the Fed and ECB from easing, should also keep the BoE on hold.

By Philip Rush

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Jun-25

• The FOMC maintained the federal funds rate at 4.25% to 4.5%, in line with expectations, citing resilient economic activity and a still-elevated inflation profile.
• Revised projections indicate slower GDP growth and a higher inflation path for 2025, with upside risks to inflation dominating the policy outlook and contributing to a more cautious approach to rate normalisation.
• Future interest rate decisions will hinge on the persistence of inflationary pressures—particularly from tariffs—and the anchoring of inflation expectations, with the Committee retaining a flexible, data-dependent stance.

US/China: Sprint vs Stamina

• Last week’s US/China trade talks underlined the extent to which Beijing has the upper hand in terms of both leverage and willingness to dig in. Avoiding a re-escalation at the end of the current 90-day truce, therefore, depends on Washington giving more ground.

By Alastair Newton