Archive

February 11, 2025
2025-02-11 neutral_head.png

Neutral Rates Are Shifting Sands

  • Central banks provide vague and evolving estimates of neutral rates that are unreliable guides to policy decisions, although these estimates inform the perceived terminal rate.
  • Resilient labour markets and persistent unit labour cost growth challenge the dovish view that policy rates are well above their neutral settings, urging caution.
  • Neutral estimates gradually drift to explain the prevailing regime, which doesn’t prevent a pause in cuts or a return to rate hikes consistent with historical norms.

By Philip Rush


February 07, 2025
2025-02-06 UK_head.png

BoE Activist Joins 50bp Dissent

  • The BoE’s 25bp rate cut came with a shockingly dovish vote split as the former hawkish dissenter proved to be an activist in backing an immediate 50bp reduction.
  • Bank inflation forecasts are trending up and only touch the target with one or two more cuts as the MPC appears to be more cautiously concerned about persistence.
  • We maintain our call for the BoE to hold rates in March before delivering a final 25bp cut in May, assuming conditions that also end the Fed’s cycle in March and ECB in June.

By Philip Rush


February 05, 2025
2025-02-05 AN_head.png

US vs EU Part 2: Tax War

  • Even though Donald Trump has held fire for now in the case of Canada and Mexico, the threat of tariffs on America’s allies suggests that the tax war he launched, almost unnoticed, on 20 January against Europe could get even bloodier than battles over trade-in-goods.

By Alastair Newton


February 04, 2025
2025-02-04 PEM_head.png

Brexit Redux: Rejoining PEM

  • Rejoining PEM would better integrate the UK into regional supply chains by easing rules of origin and tariffs for manufacturers reliant on EFTA and Mediterranean suppliers.
  • PEM rules have become more flexible but could impose stricter conditions on EVs and batteries before 2027, creating short-term risks for UK automotive production.
  • Although it would not transform UK-EU trade, simplifying compliance, lowering costs, and improving market access make it a pragmatic step in reducing post-Brexit frictions.

By Philip Rush