Archive

Brexit Redux: Rejoining PEM

• Rejoining PEM would better integrate the UK into regional supply chains by easing rules of origin and tariffs for manufacturers reliant on EFTA and Mediterranean suppliers.
• PEM rules have become more flexible but could impose stricter conditions on EVs and batteries before 2027, creating short-term risks for UK automotive production.
• Although it would not transform UK-EU trade, simplifying compliance, lowering costs, and improving market access make it a pragmatic step in reducing post-Brexit frictions.

By Philip Rush

EA Inflation Protrudes Pressure In 2025

• Euro area inflation shockingly rose again in January by 0.1pp to 2.52% y-o-y. That only exceeded the latest expectations by 0.1pp but is 0.3pp above the previous consensus.
• Only food prices marginally undershot expectations. Services inflation was stickiest at 3.9%, still close to its late-2023 pace as pressures persist.
• Tight labour markets still suggest monetary conditions are relatively loose. Easing is no solution to structural problems. Market pricing looks inconsistent with the cyclical story.

By Philip Rush

HEM: One More For The Road

• BoE, ECB and Fed cuts are likely at their next meeting
• We expect at least a policy pause beyond that
• Labour cost rises remain above target-consistent levels
• Activity trends signal monetary policy as nearly neutral
• The ECB is not as exceptional as markets dovishly price

HEW: Rates Hop, Skip, and Jump

• AI news shocked market pricing at the start of the week, but policy decisions proceeded as planned. The ECB, Riksbank and BoC cut by 25bp, the Fed and Chile skipped a step in this cycle while Brazil jumped up 1pp again as it hurries to unwind premature stimulus.
• The BoE dominates next week’s policy calendar with its likely 25bp cut after skipping in December. We expect two hawkish dissents. Sticky flash Euro area inflation and resilient US payrolls are the most critical data releases topping and tailing the week.
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By Philip Rush