Archive

UK CPI Trips Into The Fall

• UK inflation’s march higher ended early as expectations tripped over a drop in airfares to slow slightly in September, ahead of slightly falling back through the Fall seasonal.
• Weakness elsewhere cut the annualised median rate below 2% for the first time since March. That is likely to be a small soft spot relative to the worrying cumulative upside.
• Our forecasts remain close to or below the consensus until June, after other forecasts rose in last month’s survey. We still see wages stoking an excessive underlying trend.

By Philip Rush

Indonesia Pauses Easing on FX Pressures

• BI held rates at 4.75%, surprising consensus expectations of a 25bp cut. The pause addresses rupiah stability concerns amid USD5.26bn capital outflows.
• Inflation is benign at 2.65% (core 2.19%) within the target range. Enhanced macroprudential policy is complementing easing with credit growth incentives.
• Further cuts are likely as the Fed eases, depending on rupiah stability, credit transmission effectiveness, and fiscal-monetary policy coordination.

Credit Cockroaches Incubating

• Write-downs at two regional banks follow the cockroaches of First Brands and Tricolor bankruptcies, and should not be dismissed as isolated idiosyncratic events.
• Overly accommodative monetary conditions are stimulating markets to incubate cockroach eggs that may spawn as private credit malinvestment in the next recession.
• It is too early for these eggs to hatch, aided by the warm support of further Fed rate cuts. So, risk assets will probably keep on rising in the void of economic data releases.

By Philip Rush

EA: Inflation Rises Briefly In The Fall

• Inflation’s rise to a high 2.3% in September was confirmed in the final print, although some payback remains likely in October. We doubt it goes fully back to the target then.
• Underlying inflation metrics were broadly stable again at about 2.5%, with little progress in most statistical measures for over a year.
• There is little cause for alarm at this stage, so the ECB can keep waiting in a good place, but we still see a greater risk of hikes than cuts in 2026.

By Philip Rush