February 05, 2024
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HEM: Dovish Dreams Decaying

  • Cut pricing should keep rolling later without weak data
  • Resilient activity suggests rates are not that tight
  • Wage growth is too high for import prices to offset
  • The Fed can cut in June ahead of the ECB in September
  • Structural issues still delay our BoE call until Feb-25

January 08, 2024
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HEM: Fading Silly Season

  • Markets herded prices higher without fundamental news
  • Wage growth remains inconsistent with inflation targets
  • UK persistence is more structural than cyclical
  • High wage settlements should delay BoE cuts until 2025
  • Underlying EA inflation allows an ECB cut this summer

December 04, 2023

HEM: Persistence Underpriced

  • Rate cuts may come next but need not start soon
  • Excessive wages raise inflation and activity resilience
  • UK persistence is more structural than cyclical
  • The BoE can wait until 2025 even if the ECB cuts in July
  • Market pricing has become too dovish

November 07, 2023

HEM: Stay Tight for Long Haul

  • The BoE, ECB and Fed have likely finished hiking
  • High wages are helping economies resist recessions
  • Second-round effects particularly support UK inflation
  • Rate cuts appear distant, even if they are next
  • Elevated neutral rates discourage policy cuts