Archive

Chile's Disinflation Sprint Meets Policy Limits

• Chile cut rates by 25bp to 4.5%, in line with expectations, forecasting inflation to hit 3% in Q1 2026, supporting further easing if convergence holds.
• Peso appreciation and slowing labour costs beat forecasts, but wages are above historical averages and the neutral rate of 3.75-4.75% signals limited space ahead to cut.
• Future cuts hinge on labour market data and external risks (copper, global growth). Policy is data-dependent amid a narrowing gap to the neutral rate.

UK: LFS Strengthens Policy Division

• Doves and hawks on the MPC will find support for their views in the UK labour market data. It should strengthen divergent views in December, not resolve disagreement.
• Another rise in the unemployment rate and a shocking spike in redundancies can feed dovish fears that activity in the labour market is breaking into disinflationary weakness.
• Hawks can see another round of upwards revisions to wages, driving surprise persistence again. Total pay’s trend is stable in recent years, and regular pay is sticking too high.

By Philip Rush

US: Noisy November After Reopening

• US private payroll growth stayed steady through the government shutdown. Statisticians failed to collect much data for November, yielding a noisy surge in unemployment.
• The employment-to-population ratio is steady, as are job openings and layoffs. Churn is still low, with few quits or hires, but broad resilience appears to remain unbroken.
• Jobless claims are also stable into December, when headline data should improve. The Fed pre-empted bad news with past cuts and is unlikely to keep going in January.

By Philip Rush

HEW: Packing Festive Presents

• Another hawkish repricing occurred, despite little support from the Fed, although the six members favouring higher rates reveal hawkish discomfort beyond current voters.
• Trade with China is still avoiding the trade war well enough to prevent a massive shock, and UK GDP data kept following its residual seasonality rather than fundamental stories.
• It’s all happening next week as central banks and statistical authorities ram releases in before Christmas. Bailey’s bias to pivot should deliver a BoE cut while the ECB holds.

By Philip Rush