Archive

UK Shelter Costs Coasting

• The unusual stability of UK house prices is unlikely to last, while rent inflation is set to slow further. We expect the price-to-rent ratio to stabilise here at pre-pandemic levels.
• Rapid wage increases in the UK’s unbroken regime of excess inflation have eroded the price-to-earnings ratio to its lowest in over a decade, and will probably extend further.
• Banks have more regulatory space to lend while lower rates feed the affordability of leveraging up, so there are upside inflationary risks to this benign coasting narrative.

By Philip Rush

Canada: Trade Risk and Rate Flexibility

• The Bank of Canada held rates at 2.25%, as expected, with this second straight hold signalling a cautious pause as policy is firmly data‑dependent.
• With core inflation easing but still near 2.5% and unemployment elevated, rates are likely on hold through 2026 unless inflation or growth deviates materially.
• Trade uncertainty and CUSMA talks are key wildcards; the next move (probably a hike) is seen in 2027 if growth and inflation remain near projections.

Chile Holds Steady, Cuts Deferred

• Chile's central bank held the policy rate at 4.5% as the consensus expected, signalling a pause in the easing cycle rather than a shift to tightening.
• With inflation falling toward the 3% target and expectations anchored, the decision preserves scope for future cuts if activity data weaken further.
• Forward guidance points to the March IPoM as the key juncture for potential renewed easing, keeping a gradual rate-cut path in play but highly data-dependent.

UK Politics: The Beginning of the End?

• A post-local election Labour Party leadership challenge remains high, despite Andy Burnham being blocked from standing for parliament in a forthcoming by-election.
• In this event, whoever prevailed would likely still be beholden to the left within the Parliamentary Labour Party, which markets would not welcome.
• However, investors might find some solace in a new leader’s likely willingness to move more quickly on closer economic and defence ties with Europe.

By Alastair Newton