Archive

April 16, 2025
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UK: Price War Dents Spring Inflation

  • A supermarket price war hit food prices, slowing UK CPI inflation below the headline consensus again. Upside news in clothing was offset by downside in game prices.
  • Repeating 2008’s experience would drive a game price rebound, but the food effect is more likely to persist. The median inflationary impulse should also rebound soon.
  • Unit wage costs remain inconsistent with the target, while energy and water utility bills will drive a massive jump in April. We still forecast a final 25bp BoE rate cut in May.

By Philip Rush

April 10, 2025
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US Travel Crashes Inflation In Mar-25

  • Downside news from February’s US CPI print extended into a March crash with a 0.2pp undershoot at -0.05% m-o-m, not just because of a 2.4% m-o-m fall in energy prices.
  • Hotels joined another sharp fall in airfares to drive the core inflation weakness. The late Easter appears responsible, similar to 2023, ahead of an April resurgence.
  • Market participants are unusually unfazed by data that does not reveal the impact of substantial policy changes. Resilience should damp dovish hopes for cuts returning.

By Philip Rush

April 03, 2025
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US Tariff Impact Estimates

  • New US tariffs ignored any notion of reciprocity, reaching shockingly substantial sizes. However, the UK was relatively fortunate in landing on the 10% minimum rate.
  • Repeating 2024’s imports would raise $577bn in tariff revenue, which is worth ~3% of consumption. 70% pass-through to prices would add 2% to the level over 1-2 years.
  • Negotiations need to conclude rapidly to avoid these front-loaded price rises. The EU’s likely retaliations would magnify its pain, but the US is the biggest stagflationary loser.

By Philip Rush

April 01, 2025
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EA Disinflates March’s Excess

  • Euro area inflation slightly undershot consensus expectations in March, consistent with the correlation of surprises and energy prices. Yet it was 7bps above our forecast.
  • Services prices drove core inflation down to 2.4%, creating some dovish space. However, the headline outcome reversed last month’s upside to match February forecasts.
  • Resilience in the real economy still justifies more cautious easing close to neutral, so we expect graduated cuts to skip April for June, but the risk of an extra cut has risen.

By Philip Rush

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