Archive

January 08, 2024
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HEM: Fading Silly Season

  • Markets herded prices higher without fundamental news
  • Wage growth remains inconsistent with inflation targets
  • UK persistence is more structural than cyclical
  • High wage settlements should delay BoE cuts until 2025
  • Underlying EA inflation allows an ECB cut this summer
December 04, 2023
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HEM: Persistence Underpriced

  • Rate cuts may come next but need not start soon
  • Excessive wages raise inflation and activity resilience
  • UK persistence is more structural than cyclical
  • The BoE can wait until 2025 even if the ECB cuts in July
  • Market pricing has become too dovish
November 07, 2023
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HEM: Stay Tight for Long Haul

  • The BoE, ECB and Fed have likely finished hiking
  • High wages are helping economies resist recessions
  • Second-round effects particularly support UK inflation
  • Rate cuts appear distant, even if they are next
  • Elevated neutral rates discourage policy cuts
October 02, 2023
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HEM: Autumn Lifts EU Gloom

  • Cuts are rolling back while neutral rates grind higher
  • Residual seasonality overstates EA/UK summer gloom
  • Underlying inflation is close to the target
  • Excess wage growth encourages a final BoE hike
  • We still see limited cuts only coming after a long wait

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