Archive

EA: Inflation Rises Briefly In The Fall

• Inflation’s rise to a high 2.3% in September was confirmed in the final print, although some payback remains likely in October. We doubt it goes fully back to the target then.
• Underlying inflation metrics were broadly stable again at about 2.5%, with little progress in most statistical measures for over a year.
• There is little cause for alarm at this stage, so the ECB can keep waiting in a good place, but we still see a greater risk of hikes than cuts in 2026.

By Philip Rush

HEM: Oct-25 Views & Challenges

• Hawkish inflation and policy rate pricing shifts toward our UK/EA view did not stop US rates frontloading more cuts.
• We still see markets overpricing easing, with UK inflation expectations stuck above target, and neutral rates high.
• A break in activity data, especially unemployment, and underlying price/wage inflation, would threaten our view.

EA: Rounding Jobs For Migrants

• A surprise rise in EA unemployment reflects rounding rather than alarming weakness, with labour supply and demand still surging. Finland’s woes are more idiosyncratic.
• Supply has trended much faster post-pandemic, sustaining demand at its old trend without extreme capacity constraints. Migration has more than accounted for the rise.
• Ukrainians are dominating the flow and complicating the read through to disinflationary spare capacity. Wage growth is an even more critical signal when supply is uncertain.

By Philip Rush

EA: Core Excess Revealed In Sep-25

• Inflation’s break above target to 2.23%, within 1bp of our forecast, came as past energy price falls dropped out to reveal the more resilient underlying pressures.
• Small upside surprises in large countries, like Germany and Italy, were balanced in number and contribution by larger surprises in small ones, like Greece and Estonia.
• We expect less negative payback in October and January, preventing our profile from languishing below the target through 2026, like the consensus view does.

By Philip Rush