Archive

Chile Holds Steady, Cuts Deferred

• Chile's central bank held the policy rate at 4.5% as the consensus expected, signalling a pause in the easing cycle rather than a shift to tightening.
• With inflation falling toward the 3% target and expectations anchored, the decision preserves scope for future cuts if activity data weaken further.
• Forward guidance points to the March IPoM as the key juncture for potential renewed easing, keeping a gradual rate-cut path in play but highly data-dependent.

UK Politics: The Beginning of the End?

• A post-local election Labour Party leadership challenge remains high, despite Andy Burnham being blocked from standing for parliament in a forthcoming by-election.
• In this event, whoever prevailed would likely still be beholden to the left within the Parliamentary Labour Party, which markets would not welcome.
• However, investors might find some solace in a new leader’s likely willingness to move more quickly on closer economic and defence ties with Europe.

By Alastair Newton

Hawkish BOJ Outlook Signals Rate Hikes

• BOJ held rates at 0.75% as expected, but a hawkish outlook and upgraded core inflation reinforce expectations of further hikes in 2026.
• An 8–1 vote, with one member preferring a hike to 1%, and persistent wage-driven inflation, suggests structural pressures that argue for a higher terminal rate.
• With labour tightness and rising inflation expectations, markets now price additional hikes, making the timing and pace of BOJ normalisation the key policy focus.

HEW: Recovering UK Data

• UK macro data filled a release calendar with positive news on activity from retail sales, the PMIs, public finances, and even unemployment through its first stability since July.
• Inflation data didn’t offset this hawkish pressure. It increased despite the early sample and the EA rate getting revised even softer. Greenland’s travails distracted markets.
• Next week’s calendar is dominated by the Fed’s guidance around its likely unchanged policy decision. We don’t see the Fed in any rush to cut again, nor the BoE or ECB.

By Philip Rush