Archive

UK: Only A Little Less Fiscally Bleak

• The UK public finances ended 2025 bullishly with cash receipts jumping ahead of forecasts, sending an encouraging signal ahead of January’s critical tax deadline.
• Tracking a slightly better performance in 2025-26 is unlikely to create a post-pandemic low in borrowing after years of imprudence that relied on restraint rolling ever later.
• Borrowing should be £30-40bn above the initial forecast for this year, made during the depths of covid doom. Fiscal slippage remains the real rule investors should remember.

By Philip Rush

Norway's Restrictive Pause Amid Inflation Dilemma

• Norges Bank held the policy rate at 4% as expected, reiterating that cuts are likely later in 2026 but only if disinflation progresses as projected.
• Guidance points to one or two cuts this year, but policymakers stress a restrictive stance until underlying inflation, stuck near 3%, moves closer to the 2% target.
• A March cut looks unlikely; the path and timing of easing hinge on labour market softening, cost pressures, and krone moves ahead of new forecasts in March.

UK: Inflationary Bump On Slow Descent

• UK inflation’s rebound reversed much of the recent undershoot, partly because of airfares, and despite the early index date. Seasonal payback will weigh in January.
• There is little headline news for the BoE since November, while underlying inflation is too strong, supported by the fundamental pressure from excessive wage growth.
• Our forecast continues to trend above the consensus through the year, which could encourage the MPC to keep rolling back its assumed rate cut, then never deliver it.

By Philip Rush

UK: LFS Fades Extremes

• Some of the support offered to both hawkish and dovish narratives faded in the latest labour market data, but this won’t break the case for any camp on the MPC.
• The unemployment rate held steady for the first time since July. Employment isn’t keeping up with the surging labour force, including students not finding flexible work.
• Redundancies retraced lower, and wage growth has slowed, but the fall in private pay is probably exaggerated by reclassification to the public sector. We still see no more cuts.

By Philip Rush