Archive

HEW: Doves Drown in Hot Data

• This week, the flurry of hawkish UK data extended into a torrent, with unemployment, wages, inflation, retail sales, and the flash PMI drowning dovish assumptions. Repriced rates don’t reflect the reality in the macro data where reversing hikes may be needed.
• Final Euro area inflation data and monetary policy decisions from Korea and Thailand are highlights incapable of changing global narratives. Negotiated EA wage data, policy speeches, and Trump’s regular shouting into the void may dominate instead.
• Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to transition@smartkarma.com).

By Philip Rush

UK Prices Surge Into 2025

• UK CPI inflation jumped 0.2pp beyond expectations to 3% y-o-y in January amid broadly excessive price rises, to the extent that the median annualises at almost 6%.
• Underlying pressures have been trending higher since easing began, and the headline rate is set to keep rising, albeit with little change before the BoE’s likely cut in May.
• Demand growth keeps unemployment low, suggesting monetary conditions are too loose for tight cyclical pressures. We expect rate hikes in 2026 to reverse premature cuts.

By Philip Rush

RBNZ: 50bp Rate Cut To 3.75% (Consensus 3.75%) in Feb-25

• The Monetary Policy Committee reduced the OCR by 50 basis points to 3.75%, in line with expectations, citing declining inflationary pressures and significant economic slack, with further cuts likely through 2025.
• While near-term inflation may experience volatility due to exchange rate depreciation and higher fuel costs, core inflation and inflation expectations remain well-anchored around the target midpoint.
• Global risks, including trade policy uncertainty and geopolitical fragmentation, pose downside risks to growth. Still, the Committee remains confident that maintaining inflation stability will provide flexibility to respond to future shocks.

Indonesia: Policy Rate Held At 5.75% (Consensus 5.75%) in Feb-25

• Bank Indonesia held the BI-Rate at 5.75%, in line with expectations, maintaining a cautious stance as inflation remains within target and global financial uncertainty persists.
• The central bank reinforced macroprudential measures to support credit growth and external stability, including expanding the KLM programme and strengthening foreign exchange policies.
• Future rate decisions will be data-driven, with further easing contingent on inflation stability, Rupiah resilience, and global financial market developments, particularly the trajectory of US monetary policy.