Archive

February 18, 2026
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UK: Stickier CPI Than BoE Assumes

  • UK inflation’s base effect-driven slide was stickier than the BoE expected in January, only reaching 3%. Core and services inflation hawkishly drove the resilience.
  • Underlying inflation measures broadly remain stuck above levels consistent with the BoE’s 2% target, although it assumes the problem away with a dovish bias.
  • We still expect the BoE to wait until 30 April before cutting again. It won’t see another inflation print until after the 19 March meeting, and there is good reason for caution.

By Philip Rush

February 11, 2026
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UK: Unsustainable Wage Growth

  • Wage growth of 3.25% is unlikely to be consistent with achieving the 2% inflation target, contrary to the BoE’s assessment that relied on consistently dovish-biased assumptions.
  • Stagnant productivity and a recovery in profit margins are problems that should inform any coincident assessment. But the Bank is relying on the world to bail out UK excesses.
  • The Euro area and China are not structurally exporting disinflation anymore, and the latter is not politically tolerable. The biased BoE seems set to keep missing its target.

By Philip Rush

January 28, 2026
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UK Shelter Costs Coasting

  • The unusual stability of UK house prices is unlikely to last, while rent inflation is set to slow further. We expect the price-to-rent ratio to stabilise here at pre-pandemic levels.
  • Rapid wage increases in the UK’s unbroken regime of excess inflation have eroded the price-to-earnings ratio to its lowest in over a decade, and will probably extend further.
  • Banks have more regulatory space to lend while lower rates feed the affordability of leveraging up, so there are upside inflationary risks to this benign coasting narrative.

By Philip Rush

January 21, 2026
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UK: Inflationary Bump On Slow Descent

  • UK inflation’s rebound reversed much of the recent undershoot, partly because of airfares, and despite the early index date. Seasonal payback will weigh in January.
  • There is little headline news for the BoE since November, while underlying inflation is too strong, supported by the fundamental pressure from excessive wage growth.
  • Our forecast continues to trend above the consensus through the year, which could encourage the MPC to keep rolling back its assumed rate cut, then never deliver it.

By Philip Rush

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