Archive

April 17, 2025
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ECB: Cutting In Shadow of Shocks

  • The ECB’s seventh 25bp deposit rate cut to 2.25% risks becoming stimulative, but the shock from US trade policy seen through market moves demanded a response.
  • Central bankers are no more aware of the trade policy outlook than markets, but they are more aware of the potential inflationary effects and limits to effective easing.
  • Time will reveal the tariffs and impact, allowing the agile ECB to tackle this rather than just the shadow it has cast on anticipatory market pricing. We still expect a June cut.

By Philip Rush

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 16, 2025
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EA Disinflation Confirmed For ECB Doves

  • An unrevised final HICP print confirmed the disinflationary space driving the ECB to cut again in April, despite growing desire to slow easing before it becomes stimulative.
  • The median inflation impulse remains at, or slightly below, the target. However, other statistical measures are stickier and labour costs are fundamentally growing too fast.
  • EURUSD appreciation compounds disinflationary energy price pressures to trigger another likely slowing in April that might dovishly surprise the consensus again.

By Philip Rush

April 15, 2025
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UK: Green Shoots For Unemployment Wilt

  • Signs that statistical effects might lower the unemployment rate in the Spring have weakened, with stability at 4.4% now more likely amid stagnant underlying trends.
  • Levels remain healthy and redundancies are low despite falling vacancies, suggesting resilience survives rather than thrives. Rapid wage growth is more problematic.
  • Dovish hopes that excesses will break soon, aided by destructive US trade policy, keep the BoE on track to cut in May. Sterling strength also adds disinflationary space.

By Philip Rush

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