Archive

UK: Mixed Messages On Labour Market

• Most narratives can find some support in the latest labour market report, preserving uncertainty that should keep the BoE on hold at least until some clarity emerges.
• Unemployment has increased (LFS) or stabilised (payrolls), while pay is shockingly resurgent (inc-bonuses), slowing as expected (ex-bonus) or stagnating (private pay).
• Weakness isn’t as clear as the consensus and press sometimes make out, but concerns aren’t invalidated. We still expect resilience to preserve excess inflation hawkishly.

By Philip Rush

HEW: Rate Surprises In The US Void

• Most central bank decisions surprised consensus expectations this week, despite the void over the US situation. Neutral rate views often contributed to the directional news.
• The Fed is encouraged to ease by the lack of evidence not to, stimulating market values further. The UK government is suffering from another likely downgrade to productivity.
• Next week’s calendar is thinned by the possible delay of the US CPI data, leaving the EA as the inflationary highlight. The UK gets a potentially hawkish labour market report.

By Philip Rush

Peru Holds Rates Near Neutral at 4.25%

• Peru held rates at 4.25% as expected, near its neutral level, with inflation at 1.4% approaching the target midpoint by year-end.
• Policy pause reflects balanced risks: benign domestic inflation vs global trade restrictions weighing on medium-term growth outlook.
• Future moves depend on inflation drivers, but immediate easing is unlikely given the proximity to the 2% neutral real rate estimate.

UK: Poor Productivity Paradigms

• The OBR looks likely to trim its productivity trend assumption to 1%, which would still be a bullish break from the current stagnation. Trends rarely break outside recessions.
• High taxes are squeezing the most productive and being transferred to the inactive. It should not be surprising that the UK’s political choices have stalled productivity.
• We see no reason to think the UK will pull off an internationally exceptional jobs-light boom from here. Ongoing stagnation would extend the UK’s rule for fiscal slippage.

By Philip Rush