Archive

February 18, 2026
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UK: Stickier CPI Than BoE Assumes

  • UK inflation’s base effect-driven slide was stickier than the BoE expected in January, only reaching 3%. Core and services inflation hawkishly drove the resilience.
  • Underlying inflation measures broadly remain stuck above levels consistent with the BoE’s 2% target, although it assumes the problem away with a dovish bias.
  • We still expect the BoE to wait until 30 April before cutting again. It won’t see another inflation print until after the 19 March meeting, and there is good reason for caution.

By Philip Rush

February 17, 2026
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UK: A Lame Horse Year?

  • The UK labour market ended 2025 on a disappointingly feeble note, with unemployment rising to 5.2%. Methodology and tax contributed, so the cyclical change isn’t so bad.
  • Wage growth also slowed in 2025, with disagreement about the extent. Most measures remain above 4%, although the distorted public vs private split depressed the latter.
  • Dovish BoE assumptions can lean on labour market weakness to cut again soon. We still lean towards the 30 April MPR, but soft CPI inflation could push Bailey to 19 March.

By Philip Rush

February 16, 2026
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BoE Failure is Institutionally Ignored

  • Bank staff ignored the possibility of excess inflation expectations when finding no structural change in an irrelevant construct that persuaded dovish dissents in February.
  • Staff can’t be expected to tell their leaders of their policy failure. Firms and households expect further excesses in price and wage inflation, but the MPC is not listening.
  • The 2% target has become a floor only broken by substantial temporary shocks. Loose fiscal policy enjoys this excessive accommodation, and both biases will likely persist.

By Philip Rush

February 13, 2026
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HEW: Assuming Success

  • Assumptions consistent with our hopes are alluring, but not always realistic. They can lead policymakers to learn the wrong lessons for politics and monetary conditions.
  • Recent election victories don’t mean a new soft-left UK leader will achieve the same. Current resilience need not break to target-consistent levels, nor create room for cuts.
  • Next week is packed with some of the most important UK releases coming before the BoE’s March decision, including unemployment and inflation’s likely January drop to 3%.

By Philip Rush

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