Archive

MAS Pivots to Tightening Path

• MAS holds S$NEER policy unchanged while raising 2026 core inflation forecasts to 1.0-2.0% vs 0.5-1.5% prior. This inflation normalisation creates scope for future band steepening if wage pressures materialise.​
• Growth resilience and rising unit labour costs shift the outlook hawkishly. A positive output gap persists, and upside inflation risks from wages/geopolitics favour policy tightening over 2026.
• A July steepening is likely if Q2 data confirms momentum: Current settings risk a 2%+ inflation trajectory incompatible with the price stability mandate without adjustment.

Riksbank Pauses in Turbulent Times

• The Riksbank holds its policy rate at 1.75% as expected, with an unchanged outlook, supporting growth and 2% inflation target amid a resilient economy.
• ​Krona strength and VAT cuts heighten downside inflation risks, potentially prompting rate cuts over hikes if pressures persist into 2026.
• ​Geopolitical shocks raise uncertainty, but the vigilant Riksbank is prepared to adjust rates if US tariffs erode Swedish growth and sentiment rapidly.

UK Shelter Costs Coasting

• The unusual stability of UK house prices is unlikely to last, while rent inflation is set to slow further. We expect the price-to-rent ratio to stabilise here at pre-pandemic levels.
• Rapid wage increases in the UK’s unbroken regime of excess inflation have eroded the price-to-earnings ratio to its lowest in over a decade, and will probably extend further.
• Banks have more regulatory space to lend while lower rates feed the affordability of leveraging up, so there are upside inflationary risks to this benign coasting narrative.

By Philip Rush

Canada: Trade Risk and Rate Flexibility

• The Bank of Canada held rates at 2.25%, as expected, with this second straight hold signalling a cautious pause as policy is firmly data‑dependent.
• With core inflation easing but still near 2.5% and unemployment elevated, rates are likely on hold through 2026 unless inflation or growth deviates materially.
• Trade uncertainty and CUSMA talks are key wildcards; the next move (probably a hike) is seen in 2027 if growth and inflation remain near projections.