Archive

UK Electoral Hopes Rise In Asian Victories

• Landslide victories for recently appointed Prime Ministers calling snap elections in Japan and Thailand offer hope to Labour MPs hoping Keir Starmer stands aside soon.
• Peter Mandelson’s conduct is damned in the Court of Public Opinion, including evidence that he was unfaithful to his political colleagues and husband. Starmer can’t escape it.
• Leadership challengers aren’t ready yet, so Starmer remains likely to limp on longer. But change will bring fiscal easing that the dovish BoE fails to anticipate adequately.

By Philip Rush

BoE: Presumptive Doves Fly

• The MPC held rates in a shockingly finely balanced 5:4 vote again. Assumptions in the analytical boxes were uniformly dovish and widely cited as driving the dovish flight.
• We see target-consistent wage growth lower, only partly because of productivity. Fiscal policy will not match tight plans, and elevated expectations can’t be assumed away.
• Only one of the two members open to cutting soon is needed to deliver it. We no longer see enough time for dovish assumptions to be disproved, making a late April cut likely.

By Philip Rush

HEM: Feb-26 Views & Challenges

• Policymakers have broadly signalled caution against cutting too far, feeding pricing for prolonged pauses.
• Resilient output, expanding credit, and the UK’s unbroken excess inflation problem should prevent further cuts.
• Risks from rising unemployment eased with stabilisation after a bad round of releases during December.

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