Archive

BoE Closer To Slowing Cuts

• The shockingly divided MPC’s offsetting votes weren’t the most hawkish signal alongside its 25bp rate cut. Most of the five backing it were only recently convinced.
• Maintained guidance for a gradual and careful approach not only disappoints dovish hopes, but signals a 5:2:2 bias between a slower, constant and faster pace of cuts.
• We still expect this gradualism to help the BoE resist cutting in August (and June) while waiting for dovish evidence that never emerges, making this the last cut.

By Philip Rush

HEM: Dovish Prices Deranged

• Activity remains surprisingly strong, defying dovish fears
• Labour markets are tight, and manufacturing is stable
• Underlying price and wage inflation is still too high
• Rates underrepresent the rebounding risk sentiment
• BoE cut pricing ahead of the Fed looks the most deranged

UK: Tax Hikes Disrupt Housing Market

• Domestic tax hikes are more substantial than US tariffs in April, so the impact should not be forgotten, even if the UK government wants to blame any damage on Trump.
• Frontrunning April’s stamp duty increases stoked transactions and lending, and may take at least a few months to recover afterwards. Resilient approvals are reassuring.
• Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.

By Philip Rush

UK Politics: Labour Day, Not Labour’s Day

• With the balance of how many seats Labour loses to Reform UK relative to the LibDems and Greens being potentially decisive in internal party wrangling, the outcomes of the 1 May local elections and a concurrent by-election stand to have a significant impact on government policy.

By Alastair Newton