Archive

Norway: 25bp Rate Cut To 4.25% (Consensus 4.5%) in Jun-25

• The Norges Bank unexpectedly reduced its policy rate to 4.25%, defying consensus expectations for a hold, citing a faster-than-anticipated decline in underlying inflation and increased economic slack.
• The Committee signalled that, if the economy develops as projected, further gradual rate cuts are likely in 2025, but emphasised that policy will remain restrictive until inflation is sustainably on target.
• Future rate decisions will be highly data-dependent, with the Committee closely monitoring domestic wage and price dynamics, labour market conditions, and external risks such as geopolitical tensions and global trade policy uncertainty.

UK Course-Corrected CPI Stays High

• UK inflation unsurprisingly slowed in May as a correction to vehicle excise duty knocked 0.1pp from the rate, reversing all the upside to our above-consensus April forecast.
• Services inflation aligns with the BoE’s forecast from its May forecast, where MPC members were biased towards slowing their easing. Underlying rates remain too high.
• Inflation keeps trending above the consensus, cumulating a 1pp error since rate cuts began, but aligning with our forecast from 1yr and 2yrs ago. We remain hawkish.

By Philip Rush

EA Inflation Predictably Near The Target

• Disinflationary news from May’s flash inflation release was confirmed in the final print, although a rebound in some underlying inflation measures damped the initial signal.
• Resurgent oil prices could rapidly reverse the dovish space expanded by past falls. Our forecast bumps around the target through 2026 and 2027, settling at 2%.
• Other forecasts are a little lower and only suffer a slight bias to be exceeded. The ECB can remain reassured by an outlook close to 2% without cuts, and not deliver any more.

By Philip Rush

Indonesia: Policy Rate Held At 5.5% (Consensus 5.5%) in Jun-25

• Bank Indonesia maintained the BI-Rate at 5.50% in June 2025, in line with consensus expectations, citing stable inflation and a resilient rupiah as key factors.
• The decision reflects a cautious approach amid persistent global uncertainties, with BI emphasising the need to preserve macroeconomic stability while supporting growth through accommodative macroprudential and payment system policies.
• The interest rate outlook remains data-dependent, with the central bank signalling potential for further easing if inflation and currency stability persist, but maintaining a prudent stance given external risks and the need to attract foreign capital.