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May 13, 2025

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UK Labor Market – How Much Slack?
Paying Article

May 13, 2025 9:57 AM UTC

Even the BoE has acknowledged that the UK economy is developing slack and the continued trend rise in activity rates will only serve to reinforce the impression of a labor market that is not so much less tight but decidedly getting looser. As a result, pay pressures seem to be receding (Figure 1) an

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Markets: Less U.S. Recession Risk, But Trade Headwinds
Paying Article

May 13, 2025 9:38 AM UTC

Though we had expected a U.S./China trade truce, the terms are more favorable to U.S. growth than we anticipated.  Combined with the UK framework deal, we have revised down the probability of a U.S. recession from 35% to 20%.  In turn we have revised up the end 2025 and end 2026 S&P500 forecasts t

May 12, 2025

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Optimistic CBR Publishes Summary of Key Rate Decision on May 12
Paying Article

May 12, 2025 5:24 PM UTC

Bottom Line: Central Bank of Russia (CBR) published the summary of the key rate decision on May 12, showing CBR’s views on economic developments. CBR highlighted in its report that “The current inflationary pressures eased in Q1, whereas food and services prices were still rising at a fast pa

U.S. Fed's Kugler - Tariffs still likely to have significant economic effects
Paying Article

May 12, 2025 4:22 PM UTC

Fed Governor Adriana Kugler still sounds hawkish despite the somewhat reduced tariff risks.

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UK CPI Preview (May 21): How Big and Durable a Surge?
Paying Article

May 12, 2025 2:32 PM UTC

The UK and the rest of the DM world are about to decouple, at least in terms of inflation, where the UK faces a surge, (largely home-grown) just as W European sees their respective inflation fall back to, if not below, targets.  Although relegated by current market ructions and tariff threats, the

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Preview: Due May 13 - U.S. April CPI - Upside risk after a below trend March
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May 12, 2025 12:02 PM UTC

We expect April CPI to increase by 0.3% overall and by 0.4% ex food and energy, the core rate reflecting a rebound from a below trend March as well as some impact from tariffs, though the extent of the tariff impact is highly uncertain. We see the core rate at 0.38% before rounding.

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Trump Tariffs: China and UK Precedents
Paying Article

May 12, 2025 8:02 AM UTC

 The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days.  Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this.  This is in line with our previous thinki

Ceasefire or Reset? India Redraws the Rules
Freemium Article

May 12, 2025 6:05 AM UTC

India and Pakistan have entered a fragile ceasefire after a week of precision strikes, drone warfare, and missile exchanges. But New Delhi’s clear message—that future terror attacks will be treated as acts of war—marks a strategic shift. Deterrence in South Asia has a new author, and India is

May 09, 2025

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A Windfall with Caveats: RBI’s Likely Record Dividend
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May 9, 2025 2:00 PM UTC

India is set to receive a record INR 3–3.5tn dividend from the RBI, offering a fiscal cushion amid softening tax revenues and rising geopolitical tensions with Pakistan. While this windfall may help the government stick to its 4.4% fiscal deficit target for FY26, it also highlights India’s growi

U.S. Fed's Barr - Fears tariffs could lead to persistent inflation
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May 9, 2025 11:53 AM UTC

Fed's Barr fears both higher unemployment and persistent inflation as a consequence of the tariffs, comments that we see as on the hawkish side.

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Household Divergence Into the Downturn?
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May 9, 2025 10:55 AM UTC

Overall, the shock faced by the U.S. from tariffs is a negative supply shock, which can then be followed by job losses and restrained income and consumption growth.  This 2 round can be amplified if a hard landing is seen and quickens job losses, which would really hurt low income households. Howev

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India CPI Preview: Cooling Prices, Warming Room for Rate Cuts
Paying Article

May 9, 2025 9:48 AM UTC

India’s retail inflation likely fell to 3.2% in April, its lowest since 2019, driven by a sharp decline in food prices. The benign inflation print strengthens the case for another RBI rate cut as growth momentum softens. 

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UK GDP Preview (May 15): Q1 GDP Jumps But Underlying Picture Nearer Zero
Paying Article

May 9, 2025 9:32 AM UTC

We see the surprise and sizeable February GDP jump consolidating in the March GDP release with a flat m/m reading, this coming after that 0.5% jump (Figure 1).  But there are downside risks given the possible (marked) correction back that may occur after what seems to be a very erratic February jum

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Deterrence on a Deadline: India, Pakistan, and the New Escalation Paradigm
Freemium Article

May 9, 2025 6:29 AM UTC

India and Pakistan are now embroiled in their most serious military confrontation in years, with hostilities expanding across air, land, and unmanned domains. Following the May 7 cross-border strikes under Operation Sindoor, India launched a calibrated military offensive on Thursday targeting Pakist

May 08, 2025

Canada: BoC's Macklem - Getting closer to lower-tariff scenario from April MPR
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May 8, 2025 6:11 PM UTC

The BoC is getting less pessimistic about the tariff scenario, though we are not yet in the better of two scenarios outlined in April's MPR, just closer. Earlier today the BoC's Financial Stability Report saw resilience in the financial system with reduced consumer debt relative for income, while no

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BoE Review: Divided by Scenarios?
Paying Article

May 8, 2025 1:24 PM UTC

The widely expected 25 bp Bank Rate cut (to a 2-year low of 4.25%) came amid a less dovish rather than a more hawkish assessment than was envisaged beforehand.  While the new Monetary Policy Report MPR) now sees inflation fall below target almost a year earlier than seen three months ago (Figure 1)

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Norges Bank Review: Policy Easing Continues to be Deferred?
Paying Article

May 8, 2025 8:49 AM UTC

It was hardly a surprise that the Norges Bank again kept policy on hold when it gave its latest verdict as was the fact that it failed to be any more explicit about when the rate cut cycle may begin. Instead, while still suggesting rate cuts later this year, it cautions about premature easing.  Thi

Indonesia’s Q1 GDP Disappoints, Deepening Case for Rate Cut
Paying Article

May 8, 2025 8:05 AM UTC

Bottom line: Indonesia’s Q1 GDP growth slipped to 4.87% yr/yr, missing the 5% target as public spending declined. Household consumption edged down and fixed investment declined sharply. Looking ahead, Q2 may bring further softening. 

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Sweden – Riksbank Review: Fresh Easing Hints Confirmed?
Paying Article

May 8, 2025 8:03 AM UTC

The very much expected stable policy decision at this Riksbank verdict was the second in succession but where the Board veered away from its previous assertion that that, with the policy rate now at 2.25%, this may be the end of the easing path.  Instead, and amid the stronger currency and softer C

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Brazil: Reaching the Rate Peak
Freemium Article

May 8, 2025 6:43 AM UTC

Forward guidance from the BCB after the 50bps hike to 14.75% suggests that we are close to a rate peak, with inflation concerns now cited on both sides.  The disinflationary impact of Trump tariffs on global trade and commodity prices is now being watched, as BCB members have signaled over the last

May 07, 2025

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FOMC Likely to Remain Cautious Unless Economy Falls into Recession
Paying Article

May 7, 2025 7:43 PM UTC

Fed’s Powell made clear that with high uncertainty the Fed is in no position to move rates at this point, though how long that will persist is unclear. We see no reason to adjust our existing Fed call of only one easing in 2025, by 25bps in December, and two more in 2026. This would take the Fed F

U.S. Fed's Powell - Still in wait and see mode
Paying Article

May 7, 2025 6:46 PM UTC

Fed's Powell has provided no real surprises yet, in no hurry to move on rates while leaving options open.

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FOMC leaves rates unchanged, sees increased risk on both sides of mandate
Paying Article

May 7, 2025 6:15 PM UTC

The FOMC has left rates unchanged at 4.25-4.5% as expected.  The main change in the statement is to note that the risks of higher unemployment and higher inflation have both risen, which gives little insight on any policy bias though suggests that the Fed could be responsive to data going forward.

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Switzerland: A Triple Disinflationary Threat?
Paying Article

May 7, 2025 1:30 PM UTC

A further 25 bp cut (to zero) in the SNB policy rate on June 19 now looks almost certain.  Weak(er) business surveys suggest that the tariff threat is both tangible and growing.  Meanwhile, there is the strong currency where FX intervention on aby major scale could provoke US retaliation against a

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Eurozone Labor Market: Rising Supply Adding to Lower Wage Pressures
Freemium Article

May 7, 2025 9:34 AM UTC

With the EZ jobless rate nestling at record lows, it would support the ECB assessment that the EZ labor market is strong, the central bank seeing only a small rise in the jobless rate this year and on to be reversed from early next year onwards.  However, that glosses over the fact that the labor m