Archive

September 19, 2024
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BoE Holds Gaze On November

  • The BoE matched widespread expectations by holding the Bank rate at 5.00%, albeit with the lone dissent (Swati Dhingra) matching our relatively hawkish forecast.
  • Little news was seen in UK indicators. Broadly reduced market rate paths and increased uncertainty around near-term global activity could not overcome cautious inertia.
  • November was unsurprisingly identified as the occasion for the MPC to fully assess news, consistent with cuts aligning with MPR forecasts and the current consensus.

By Philip Rush

September 18, 2024
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UK Core CPI Strength Narrows

  • Headline UK inflation was broadly unchanged in August. However, core and services inflation rebounded, shrinking the undershoot relative to the BoE’s last forecast.
  • Airfares spiked, partly offset by ongoing weakness in hotel prices. Both should unwind in September. The median inflationary impulse sustained the most weakness since 2021.
  • Another round of inflation-busting wage increases sustains underlying pressures. Energy prices will also stoke above-target inflation in 2025 but not prevent a BoE cut in Nov-24.

By Philip Rush

September 18, 2024
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EA Inflation Fuelled To Dip Into Trough

  • Euro area inflation’s headline slowing was broadly confirmed in the final release for August, along with the rise in services and sticky core inflation rates.
  • Monthly median impulses are at or slightly above 2% again, as the previous lows look exaggerated. Other underlying measures are also settling excessively high.
  • Falling petrol prices compound base effects to push September inflation down. The ECB is braced for a low outcome, so that need not bring forward a cut from December.

By Philip Rush

September 17, 2024
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Forecast Stability Doesn’t Ensure Success

  • Inflation’s relative stability and predictability have reassured policymakers of their dovish forecasts, encouraging rate cuts despite some inconveniently resilient data.
  • Historically, outcomes two years after slight surprises have still skewed higher. Below-target 2yr forecasts have been three times as likely to surprise higher than lower.
  • Realising persistently above-target inflation would match our forecast and ultimately truncate easing cycles. Recent forecast stability only matters in the dovish short term.

By Philip Rush

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