December 24, 2020
- The UK and EU negotiators have agreed a deal on their future trading relationship, broadly along the lines of the compromise we’ve expected for over a year. It should be approved by both parliaments, albeit with the European leg as a belated rubber stamp.
- This deal remains a skinny one, focussed on goods, despite the fat legal text. Additional trade frictions are still likely to weigh on growth in 2021 and beyond, although such economic damage is small beer compared to the Covid-related catastrophe.
November 25, 2020
- Downgraded growth forecasts and increased expenditures drove another large rise in the Spending Review’s projections for public sector net borrowing. However, my bottom-of-consensus view for growth in 2021 creates risks of even more borrowing.
- Despite the desperate need for supportive creditors, the government sanctioned a permanent reduction in the RPI inflation measure that will be materially detrimental for inflation-linked gilts. No compensation will be offered in good faith… its buyer beware.
November 18, 2020
- Inflation increased by a tenth more than we expected in October to 0.7% y-o-y on the CPI and 1.3% on the RPI. Upside news in clothing prices is likely to be short-lived owing to the payback relationship into Novembers being the strongest of the year.
- The extent of the seasonality around yearend remains a key uncertainty in our forecast profile. A return towards the target should only occur in the Spring amid sizeable base effects, while the inflation outlook is unlikely to threaten the BoE’s easing programme.