Archive

UK: Jobless Embolden Bailey’s Cut

• Another disappointing rise in the unemployment rate should embolden Bailey’s bias to cut rates in December. Falling net underemployment contradicts, but is easily ignored.
• Another step down in payrolls, matched by employment this time, could be blamed on fears for the Budget. Redundancies also spiked, although vacancies are stable.
• Headline pay growth is slowing as expected, while the monthly impulse remains excessively strong, so the hawks are unlikely to see inflation persistence as broken.

By Philip Rush

BoE: Bailey Leans Over December Fence

• Another 5:4 vote split broke the BoE’s run of quarterly rate cuts. Governor Bailey is revealed to be the pivotal member, with the others worried about inflation persistence.
• Bailey endorsed market pricing and a forward-looking Taylor Rule path that includes a cut this quarter. His verbal comments imply a presumption in favour of cutting then.
• Upside news over the next two monthly release cycles would be needed to block that December cut. Resistance to cutting should only grow stronger as time passes.

By Philip Rush

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

HEM: Nov-25 Views & Challenges

• Pushback by Powell and peers trimmed some excessively dovish pricing, but the BoE converged down on poor data.
• The BoE should also resist pressure as underlying issues are unbroken by relatively marginal recent payback.
• We now see markets overpricing easing most in the UK. More weakness is needed to signal a threatening trend.