Archive

February 24, 2025
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EA Inflation Excess Persists In 2025

  • The final Euro area inflation print for January confirmed the headline rise to 2.52%, 0.1pp above flash forecasts and 0.4pp above the consensus prevailing in December.
  • Median inflation rates were at least more subdued than in the UK, but our persistence-weighted and latent trend estimates remain awkwardly high amid rapid wage growth.
  • Inflation should slow with French energy prices in February. Unfortunately, it seems set to stick above the target in 2025, discouraging ECB cuts from matching market pricing.

By Philip Rush

February 19, 2025
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UK Prices Surge Into 2025

  • UK CPI inflation jumped 0.2pp beyond expectations to 3% y-o-y in January amid broadly excessive price rises, to the extent that the median annualises at almost 6%.
  • Underlying pressures have been trending higher since easing began, and the headline rate is set to keep rising, albeit with little change before the BoE’s likely cut in May.
  • Demand growth keeps unemployment low, suggesting monetary conditions are too loose for tight cyclical pressures. We expect rate hikes in 2026 to reverse premature cuts.

By Philip Rush

February 12, 2025
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US Inflation Ending Cutting Cycle

  • Intensifying US inflationary pressures significantly exceeded consensus expectations in January, accumulating news potentially worth 1pp in 2026 since the Fed first cut.
  • We now doubt there can be sufficient downside news to offset these hawkish pressures, with the Fed on hold in March. That means we see the next Fed move as a hike in 2026.
  • Annual core inflationary pressures are not outliers in the US, nor is its labour market resilience, so other central banks should struggle to sustain cutting cycles beyond H1.

By Philip Rush

February 03, 2025
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EA Inflation Protrudes Pressure In 2025

  • Euro area inflation shockingly rose again in January by 0.1pp to 2.52% y-o-y. That only exceeded the latest expectations by 0.1pp but is 0.3pp above the previous consensus.
  • Only food prices marginally undershot expectations. Services inflation was stickiest at 3.9%, still close to its late-2023 pace as pressures persist.
  • Tight labour markets still suggest monetary conditions are relatively loose. Easing is no solution to structural problems. Market pricing looks inconsistent with the cyclical story.

By Philip Rush

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