March 19, 2021

HEW: RPI reflation, and our new portal!

  • There has been a bit of everything over the past week. Inflation data from the euro area (HICPxT exactly on our forecast) and Sweden (slightly below are sub-consensus forecast). A hawkish Norges Bank that seemed to eagerly follow-through on the pressures we flagged last week (see Norges Bank: The end of ZIRP), and a beautifully steady BoE decision (see BoE: taper-ready for May). We also expanded upon some of our broader thematic views, like pushing back on the bullish narrative around savings (see UK: savings are not for splurging). And we explored the substantial macroeconomic effects of the ongoing de-globalisation pressures, and how that plays into the policy reaction function (see De-globalisation’s macro impacts). Both themes have got legs, and are well worth reading. As ever, we’re available to discuss further too.
  • Next week is a much quieter affair. Or at least it is outside the UK, because here we have our main monthly deluge of data – i.e. the labour market report, inflation and retail sales. We are 0.2pp above the current RPI consensus with our maintained 1.7% forecast, as explained in the preview below.
  • In Heteronomics news, watch out for an email on Monday about your login details to our new website (from That will complete the migration of our full research archive, including for central bank quotes, on to our new website. Once you’re all on board there, things can start to get really interesting… think interactive content and simulation interfaces to our mighty models. Let us know what else you’d like and it may soon appear!

March 12, 2021

HEW: Norges Bank MPR and the BoE

  • It has been a relatively thin week for data, at least in the UK, where the only outcome of note was GDP’s surprisingly modest decline. The vaccination programme may not be saving the UK from lockdown-driven underperformance in Q1, but it is enough direct spending to limit the fall (see UK: the economy attached to NHS suffers). Meanwhile, the ECB’s decision was the prime policy event of the week. Its attempt to discourage further yield rises is unlikely to prevent markets pricing that if US yields go there, though (see ECB: insignificant prevention).
  • The next central bank in our coverage universe to make a policy announcement is the Norges bank, which we expect to be more accepting of higher yields. An upside surprise in inflation (see Norway: CPI energised above consensus) has followed stronger growth data, raising hawkish pressures. UK inflation and growth have also beaten expectations since the February MPR, but the extent is smaller and the depression deeper. Euro area HICP is the main data release, but we expect it to confirm at 0.9%.

March 05, 2021
HEM: UK pain and HICP gain_image

HEW: ECB twizzling its compass

  • The UK Budget has hung over the entire past week, initially with speculation about what would come, then the reality, and the dissections. Difficult decisions were avoided as the OBR didn’t update its view of long-term scarring, despite lockdown 3. We expect downgrades and difficult decisions ahead but see the state staying a larger and more imposing influence. That extends to it taking more responsibility for demand management from monetary policy (see Fiscal conquers monetary hegemony). We also reiterated our core counter-consensus call of a disappointing GDP recovery and why we see frequent inflation surprises this year (see HEM: reverberations).
  • Next week, UK GDP data for Jan-21 are scheduled to guide how deep the drop is from lockdown. That is only an initial guide, not helped by the ONS’s failure to capture the pain of shuttered businesses by considering respondents as equally representative. We are a bit gloomier than the consensus at -6% m-o-m, but most of the relative weakness in our bottom-of-consensus forecast lies in H2.