Archive

Currency Constraint Ends Korea's Easing Cycle

• The BoK held the policy rate at 2.50%, in line with consensus, but effectively ended the easing bias, signalling a prolonged on-hold stance for 2026.​
• Despite improving growth and near-target inflation, FX weakness and financial stability risks limit the scope for future cuts and keep rate hikes a low-probability tail risk.​
• Housing and household debt vulnerabilities mean any change in the 2.50% rate will hinge on clearer won stabilisation and a sustained, benign inflation trajectory.

US Inflation Resumes Without Payback

• US inflation resumed its monthly trend in headline, core, and underlying services after nonsensical methodological noise around the shutdown, including non-collection itself.
• Payback from late sampling in November didn’t have an apparent inflationary effect, perhaps because the gap between collections didn’t leave long for other prices to rise.
• Surprises are skewing lower, but inflation is stuck above the target, so there isn’t a compelling case to cut again. We still expect the Fed to hold rates in January.

By Philip Rush

HEW: Turning 2026 Resiliently

• A festive feast in resilient GDP data has extended into tracking estimates for Q4 in the US and UK, while the US unemployment rate has fallen from revision-tempered highs.
• Falling PMIs were less encouraging, but don’t break resilient signals nor persistently excessive inflation signals. Plans to recover profit margins add to the BoE’s challenge.
• Next week’s US inflation data provides the first clean monthly rate after November’s nonsensical gap-filling. UK GDP data for November is the other highlight for us.

By Philip Rush

BoE Faces Renewed Margin Pressure

• CFOs suffered squeezed margins in 2025 that they intend to partly recover in 2026, reversing a source of disinflation into another reason for hawkish concern.
• Price and wage inflation expectations remain excessive while the November crash in employment sentiment reversed, dampening the dovish ammunition.
• The MPC’s three pivotal members need dovish news to bring forward another cut not implied until at least April. This outcome merely encourages the inactive course.

By Philip Rush