Archive

EA: Sticky Inflation Survives Euro’s Surge

• Inflation’s surprise stickiness at 2% was confirmed in the Euro area’s final print, with pressures broad based and slightly above a target-consistent pace in most countries.
• There has been little progress in inflation’s latent trend or our persistence-weighted measure, despite the Euro’s substantial and sustained appreciation.
• Without dovish second-round effects, the ECB can look through a potential slowing in headline inflation to a tight labour market and persistent pressures, then not cut rates.

By Philip Rush

New Zealand Extends Dovish Rate Cycle

• The RBNZ cut the OCR to 3% in August, matching consensus expectations amid stalled growth and stable medium-term inflation.
• This decision was split, with a minority favouring a larger cut. Further reductions to 2.5% are likely unless inflation surprises persist.
• Weak household demand and global uncertainty may extend the easing cycle, making future rate policy highly data-dependent.

Riksbank Holds at 2% Amid Fragile Outlook

• The Riksbank held its rate at 2% while seeing above-target summer inflation as temporary.
• Weak growth and a fragile labour market sustain rate-cut probability later in 2025.
• The policy outlook hinges on fading inflation pressures, demand recovery, and global risks.

Indonesia’s Surprise Summer Rate Cut

• Bank Indonesia’s surprise 25bps cut to 5.00% signals proactive easing amid subdued inflation and global uncertainty.
• The Rupiah’s strength and solid capital inflows provide policy space to support domestic growth despite external risks.
• Further cuts are likely this year, contingent on exchange rate stability, fiscal support, and global economic developments.