Archive

January 15, 2025
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UK Airfares Disinflate Before Christmas

  • UK inflation slightly undershot our below consensus call as airfares were even softer than we assumed. The early index date missed the expensive festive period.
  • Airfares distort core and services inflation even more, but 70% reliably unwinds in January. Meanwhile, the monthly median inflation impulse annualised above 3% again.
  • The BoE ignores airfare distortions when convenient, with the lower outcomes fitting its bias to cut rates again in February. Excessive easing may need reversing in 2026.

By Philip Rush

January 14, 2025
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2025: In Like A Dove, Out Like A Hawk

  • Ongoing economic resilience strengthens the conviction in our long-held view that neutral policy rates are high. Rate cuts outside of a recession are usually reversed.
  • Market pricing aligns with our previously contrarian rate view. As the end of the cutting cycle approaches, pricing should embed the possibility of hikes like in 1998-99.
  • We expect at least the Fed and BoE to hike their policy rates in 2026, with the debate beginning in 2025 and potentially crystalising in a move later this year.

By Philip Rush

January 13, 2025
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Europe: Chaos ex Machina

  • Political uncertainty in Berlin and Paris has created a leadership vacuum in Europe which will not be filled in the foreseeable future. In Germany, investors are getting ahead of the political reality over prospects for reform of the debt brake. France faces another indecisive legislature election in mid-year as Marine Le Pen looks to pressure Emmanuel Macron into stepping down early.

By Alastair Newton

January 10, 2025
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HEW: Happy(ish) New Year

  • Markets began arguably as they will continue in 2025, with little beta and many quirks to source alpha. US payrolls boomed while EA inflation unsurprisingly rose.
  • More releases return next week, with UK inflation our highlight, as low airfares may disappoint many forecasts. US CPI and final EA HICP also matter. It’s still quiet for monetary policy decisions, with Indonesia and Korea the only exceptions.
  • Note: Smartkarma becomes our research portal in January, so clients should set their login details to maintain smooth access (send queries to transition@smartkarma.com).

By Philip Rush

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