Archive

UK: Jobless Embolden Bailey’s Cut

• Another disappointing rise in the unemployment rate should embolden Bailey’s bias to cut rates in December. Falling net underemployment contradicts, but is easily ignored.
• Another step down in payrolls, matched by employment this time, could be blamed on fears for the Budget. Redundancies also spiked, although vacancies are stable.
• Headline pay growth is slowing as expected, while the monthly impulse remains excessively strong, so the hawks are unlikely to see inflation persistence as broken.

By Philip Rush

HEW: Caution Echoes Outside the BoE

• The BoE resisted cavalier calls for a rate cut this week, but it is much less cautious than we expected. A December rate cut is now likely, absent significant upside surprises.
• All other central bank announcements this week fit the trend, with cautious holds in Australia, Sweden, Norway, Malaysia and Brazil, and a more careful cut in Mexico.
• Next week’s UK labour market (and GDP) data are one of the few things that could clear the evidential hurdle to block a cut, although we doubt good news will extend that far.

By Philip Rush

BoE: Bailey Leans Over December Fence

• Another 5:4 vote split broke the BoE’s run of quarterly rate cuts. Governor Bailey is revealed to be the pivotal member, with the others worried about inflation persistence.
• Bailey endorsed market pricing and a forward-looking Taylor Rule path that includes a cut this quarter. His verbal comments imply a presumption in favour of cutting then.
• Upside news over the next two monthly release cycles would be needed to block that December cut. Resistance to cutting should only grow stronger as time passes.

By Philip Rush

Inflation Persistence Constrains Norges Bank

• The Norges Bank held rates at 4% as expected. Core inflation at 3% constrains further cuts despite emerging economic slack in the coming year.
• Governor Bache stressed the bank is "not in a hurry" to cut rates, projecting one reduction annually through 2028. Cuts depend on disinflation progressing as forecast.
• December's new forecasts will be critical—faster disinflation or sharper labour market weakness could accelerate cuts, while persistent inflation could keep rates higher for longer.