Archive

UK: Turning the Statistical Corner

• The UK GDP surprise flipped to exceed expectations with 0.3% m-o-m growth in Nov-25 as residual seasonality turned past its trough. We now track 0.14% q-o-q for Q4.
• Further upside news is likely over the next few months as output surges again in Q1, pushing back dovish hopes for another rate cut. We still see the cutting cycle as over.
• Economists prefer to tell fundamental stories, ignoring statistical ones, but we should not be shocked by the impact of the predictable surprises created by this shortcoming.

By Philip Rush

BoE Faces Renewed Margin Pressure

• CFOs suffered squeezed margins in 2025 that they intend to partly recover in 2026, reversing a source of disinflation into another reason for hawkish concern.
• Price and wage inflation expectations remain excessive while the November crash in employment sentiment reversed, dampening the dovish ammunition.
• The MPC’s three pivotal members need dovish news to bring forward another cut not implied until at least April. This outcome merely encourages the inactive course.

By Philip Rush

HEM: Jan-26 Views & Challenges

• Hawkish cuts led markets to price less easing, or even hikes, but there was little change in BoE views.
• The MPC is split in the face of wage growth persistently above target-consistent levels but is bias to ease in May.
• Rising unemployment rates may aid the appropriateness of previous cuts if the neutral rate is less elevated.

BoE: Three Camps, Two Votes, 1 Cut

• The MPC’s 5:4 vote split delivered another finely balanced rate cut, but the doves are divided, with only two likely to roll straight into supporting another cut in February.
• Most MPC members favour caution, or an explicitly slower path of rate cuts, which probably means they expect to wait until March or May before easing further.
• The disinflationary evidence may not arrive with pay settlement plans in the new year, or later, so we still see this as the last BoE rate cut. The global policy cycle is turning.

By Philip Rush