Archive

BoE Cut Proves Finely Balanced

• Four MPC members refused to back the rate cut in August, and only one favoured a 50bp cut, but he was forced to vote for a 25bp cut to break the balanced 4:4 split.
• The group favouring a slower pace of easing may have expanded from 5:4 to 6:3, raising the hurdle to another cut. Four don’t even support the prevailing level.
• Inflation forecast revisions keep trending the profile higher. Rolling resilience in the broader data should keep the BoE on hold in November and beyond, like the ECB.

By Philip Rush

Banxico Delivers Expected Cut Amid Rising Risks

• Banxico cut rates 25bp to 7.75% as expected, with Heath dissenting again, maintaining a gradual easing pace despite core inflation sticking at 4.23%.
• The inflation outlook is mixed after the headline fell to 3.51% but core forecasts were revised up near-term with target convergence still expected in Q3 2026.
• Forward guidance stays data-dependent amid trade tensions. Further cuts are likely, but the pace is contingent on inflation progress and economic slack.

EA: Resilient Retail Rebound

• Consumers need to drive activity growth as tariffs and Euro strength harm export competitiveness. Reassuringly, retail sales returned to their trend after a trimmed fall.
• Growth was broad across countries and categories, taking the annual pace 0.5pp above consensus expectations. Non-food retail is critical and the strongest of them all.
• Surveys are gloomier, especially about the future, but rarely right. Resilient real wage and employment growth can sustain brisk retail trends, preserving economic expansion.

By Philip Rush

Payrolls Challenge Resilient Narrative

• Revisions drove payrolls into a stagnation that runs contrary to our narrative of rolling resilience, but some contributors are spurious and don’t break the broader strength.
• Seasonal adjustment caused 76k of the 258k revision. State and local education workers represented 108k, and are lower since April, despite the DOE closure shifting jobs here.
• Payrolls still grow by 1% y-o-y, like household employment, with JOLTs data fine and the unemployment rate stable. The Fed should resist cutting without follow-through.

By Philip Rush