Archive

UK: LFS Strengthens Policy Division

• Doves and hawks on the MPC will find support for their views in the UK labour market data. It should strengthen divergent views in December, not resolve disagreement.
• Another rise in the unemployment rate and a shocking spike in redundancies can feed dovish fears that activity in the labour market is breaking into disinflationary weakness.
• Hawks can see another round of upwards revisions to wages, driving surprise persistence again. Total pay’s trend is stable in recent years, and regular pay is sticking too high.

By Philip Rush

HEW: Packing Festive Presents

• Another hawkish repricing occurred, despite little support from the Fed, although the six members favouring higher rates reveal hawkish discomfort beyond current voters.
• Trade with China is still avoiding the trade war well enough to prevent a massive shock, and UK GDP data kept following its residual seasonality rather than fundamental stories.
• It’s all happening next week as central banks and statistical authorities ram releases in before Christmas. Bailey’s bias to pivot should deliver a BoE cut while the ECB holds.

By Philip Rush

Monetary Policy Tide Is Turning Up

• Markets are already pricing the return of rate hikes in 2026 for Canada, Australia and New Zealand, while policymakers elsewhere are starting to warn of the possibility.
• Transitional support to structural adjustments needs unwinding, as Canada signals most prominently. Broader activity resilience and inflation reveal the risk of overstimulation.
• The BoE already committed a policy mistake by easing too early, and is split by those recognising the persistent danger. Market pricing remains too dovish for 2026.

By Philip Rush

BSP Cuts Near Endpoint Amid Structural Headwinds

• The BSP unsurprisingly cut rates by 25bps to 4.50% and signalled the cycle as near its end despite weakness; this matched the consensus but marks the fifth consecutive cut with 200bps total easing since August 2024.
• Growth decelerated to a three-year low of 4.0% in Q3 amid governance concerns and trade policy uncertainty. Recovery is dependent on improved fiscal spending and confidence restoration.
• Inflation forecasts are revised upward to 3.2% (2026) and 3.0% (2027), approaching the upper target band. Further easing is "likely limited" pending data showing effective transmission.