Archive

RBA: Cautious Hold in Uncertain Times

• The RBA held its cash rate at 3.6% as anticipated, but its decision marks a shift from easing after September's inflation surprise, signalling an extended pause in rate cuts through at least mid-2026.​
• Central forecasts now project trimmed mean inflation above 3% for the coming quarters before settling at 2.6% in 2027, requiring mildly restrictive policy rates of 3.4% by mid-2026—materially slower easing than many forecasters anticipated.​
• Labour market softening provides limited comfort as elevated vacancies and wage pressures persist. Two-sided uncertainty around demand strength and the global outlook creates risks justifying a cautious approach to future cuts.

BoE: Hawkish Surprise Set For November

• Markets have erroneously repriced a BoE rate cut as potentially imminent and repeated. Policymakers are tending to surprise hawkishly in the UK and elsewhere recently.
• Downside news on excess inflation is mild, while the activity data have, if anything, exceeded BoE forecasts. Pay growth signals remain strong, not disappointing the BoE.
• Six MPC members have favoured slower easing, inconsistent with a November cut. Fiscal consolidation is unlikely to frontload a shock large enough for the MPC to accommodate.

By Philip Rush

ECB: Less Downside From The Good Place

• Downside activity risks have reduced, while the inflation outlook holds steady, keeping the ECB in its “good place” despite an implied shift up in the balance of risks.
• Upside risks while inflation is seen settling at 2% would imply a hawkish bias, which the ECB isn’t ready to convey. But the skew may have swung within insignificant margins.
• We still expect no more ECB rate cuts this cycle. If underlying inflation fails to slow as hoped, the ECB’s balanced bias could easily break into a hawkish one in 2026.

By Philip Rush

BOJ Holds: Caution Amid Uncertainty

• The BOJ held rates at 0.5% as expected, with a 7-2 vote showing continued division. A December hike is now priced at 50-55%, down from 68% pre-Takaichi.
• Inflation forecasts are unchanged at 2.7% (FY25), 1.8% (FY26), with sluggish underlying price growth and downside economic risks delaying tightening.
• Wage sustainability and trade policy uncertainty dominate the outlook. 2026 labour talks and corporate profit trends will determine the rate path timing.