Archive

BoE Survey Says Stagflation Survives

• CFOs keep telling the BoE their prices will rise by 3.5% in 2026, with wage increases similarly substantial. There has been no significant break lower in over 18 months.
• Employment plans have also deteriorated, lending some support to the dovish case as well. But this side is an unreliable signal, while inflation has proved brutally accurate.
• Doves need the employment aspect to be true, but the transmission to prices not to be. This survey signals upside inflation risks that should discourage rate cuts in 2026.

By Philip Rush

Activity Thaws Into Winter

• The worst services PMIs thawed in November, broadening growth even as averages held steady. Activity in the US services ISM has trended up to exceed the PMI data now.
• A slight fading of stagflationary pressures in the latest US surveys probably balances out in the Fed’s policy trade-off. We still fear that it is easing excessively.
• Rising unemployment rates in the US and UK are concerns not experienced in most of the world. This theme feeds their recent divergence from the global surprise tendency.

By Philip Rush

EA: False Dawn For Disinflation

• A surprise rise in EA inflation to 2.2% in November meant October’s long-awaited dip was a false dawn for a disinflationary consensus exceeded by 0.4pp since June.
• The accumulated extent and the increase in service inflation to 3.5% are concerning, but the latest news was narrowly concentrated in Greece, with other errors being minor.
• Stronger underlying momentum into year-end is preventing the January base effects from driving it significantly below target. The ECB’s good place isn’t breaking dovishly.

By Philip Rush

HEM: Dec-25 Views & Challenges

• Volatile markets and policy guidance washed out, with pricing and forecasts little changed on the month.
• Bailey is biased to ease, but the BoE is awakening to its inflation problem. It should cut less than dovishly priced.
• Higher unemployment could move beyond a structural shift from policy to signal a less elevated neutral rate.