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UK Disinflationary Kool-Aid

• UK disinflation relied on smaller utility price hikes and only went as far as the 3.6% forecast before September’s dovish surprise. It does not mean a path to 2% lies ahead.
• A broad rebound in price increases took the annualised median impulse above 4% to average 2.5% over two months, or 3% on the year, as the underlying problem persists.
• The BoE’s December decision pivots around the Governor, who seemingly needs upside news to avoid delivering a cut, so this outcome preserves that riskily dovish course.

By Philip Rush

Indonesia Holds Rates as External Headwinds Intensify

• Bank Indonesia paused rate cuts at 4.75%, shifting focus from growth to rupiah stability. This outcome was no surprise to the consensus as external risks intensified.​
• Further easing depends on rupiah stabilisation, not inflation alone. Elevated term premia and expanded FX operations reflect caution.​
• Macroprudential incentives and FX measures aim to support growth while monitoring weak credit transmission after previous rate cuts.

EA: Unsatisfying disinflationary snack

• Slower food price inflation nibbled the EA rate down to 2.1% in October, while services increased to their fastest pace since April. Labour costs are still rising too fast.
• Underlying inflation metrics are broadly a bit beyond target, risking a slight overshoot in the medium term, but the median impulse is reassuring, weighed down by France.
• Energy prices are set to bump inflation around the target in 2026, averaging above the consensus in our view. The ECB would need tightness elsewhere to shift rates, though.

By Philip Rush

HEW: Back To Business

• The US government reopened after some of those seeking to expand the state inevitably broke ranks to reverse some shrinkage, although the fight could resume in January.
• UK activity data were broadly disappointing as unemployment rose and GDP fell at the end of Q3, after downwards revisions helped realign with the residual seasonality.
• Next week’s UK inflation data will be more insightful for the BoE’s hawks and us. The belated release of US macro data will probably be more substantive market news.

By Philip Rush