Archive

April 17, 2024
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UK Stuck With High Services Inflation

  • UK CPI inflation exceeded the consensus by 0.1pp as it only slowed to 3.2% in March, as we forecasted. Services inflation stuck at 6%, and high-frequency impulses increased.
  • Persistently high pay settlements sustain wage and underlying price inflation above target-consistent levels. We only see services slowing below 4.5% in September.
  • We expect the BoE to cut in November after the ECB and Fed. Further resilience in UK and global data could still cause all three to roll back even further.

By Philip Rush

April 16, 2024
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UK Paying More for Fewer Workers

  • UK unemployment jumped surprisingly far in February 2024 to hit 4.2% as employment fell. More long-term jobless suggests this is neither a new shock nor too disinflationary.
  • Average earnings growth surged by 0.7% m-o-m, meaning the wage bill still rose despite fewer jobs. Regular pay growth is in rude health at 6% y-o-y or 2.1% in real terms.
  • Wage settlements are stuck at 5%, with a skew higher into April. Embedded inflation expectations are too high and demand tight policy despite some cyclical softening.

By Philip Rush

April 15, 2024
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Europe, The Elections And The Economy

  • Although the centre seems set to hold in the upcoming European Parliament elections, a strong performance by nationalist parties, especially in France and Germany, could hinder Europe’s ability to revive its stagnant economy, especially in the face of new external threats.

By Alastair Newton

April 11, 2024
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ECB Loosely Tied to Cut in June

  • The ECB maintained its policy rates and did not pre-commit to a June cut. However, a few members wanted to cut now, and the statement added explicit conditionality.
  • Guidance now ties the ECB to a June cut, albeit with ongoing data dependence preserving wriggle room. Sticky services inflation and Fed rates won’t stay its hand.
  • Resilient data are rolling back Fed views to our September call, but we now doubt the ECB will want to delay past June. The BoE would probably only then wait until Nov-24.

By Philip Rush

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