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Monetary Policy Tide Is Turning Up

• Markets are already pricing the return of rate hikes in 2026 for Canada, Australia and New Zealand, while policymakers elsewhere are starting to warn of the possibility.
• Transitional support to structural adjustments needs unwinding, as Canada signals most prominently. Broader activity resilience and inflation reveal the risk of overstimulation.
• The BoE already committed a policy mistake by easing too early, and is split by those recognising the persistent danger. Market pricing remains too dovish for 2026.

By Philip Rush

BSP Cuts Near Endpoint Amid Structural Headwinds

• The BSP unsurprisingly cut rates by 25bps to 4.50% and signalled the cycle as near its end despite weakness; this matched the consensus but marks the fifth consecutive cut with 200bps total easing since August 2024.
• Growth decelerated to a three-year low of 4.0% in Q3 amid governance concerns and trade policy uncertainty. Recovery is dependent on improved fiscal spending and confidence restoration.
• Inflation forecasts are revised upward to 3.2% (2026) and 3.0% (2027), approaching the upper target band. Further easing is "likely limited" pending data showing effective transmission.