UK CPI Review: Down from Likely Peak?

November 19, 2025 7:50 AM UTC

It does seem as if the September CPI outcome (a third successive and lower-than-expected outcome of 3.8%) will prove to be the inflation peak.  Indeed, the just released October figure fell a little less than the consensus but in line with BoE thinking, to 3.6%, helped by favourable energy base eff

UK Budget Outlook (Nov 26): The Fiscal Blame Game – Yet Again!

November 18, 2025 3:09 PM UTC

If not the most keenly awaited Budget for some years, Chancellor Reeve’s updates on Nov 26 is certainly the one that has attracted the most speculation and from all sides.  What is clear is that amid several factors, a marked fiscal tightening is in store.  This though now seems as if it will be

Markets 2026

November 18, 2025 10:30 AM UTC

·        The Fed, ECB and BOE will likely drive further 10-2yr government bond yield curve steepening, with 10yr Bund yields rising due to ECB QT and German fiscal expansion. 10yr JGB yields are set to surge through 2%, as BOJ QT remains excessive and underestimated.  The BOJ could partiall

Financial Stability Risks: Vulnerable To A Recession

November 17, 2025 1:00 PM UTC

The November Fed financial stability review highlights continued concern over hedge funds and insurance company leverage, while the IMF GSFR is concerned about U.S. equity market overvaluation and growing links between banks and non-bank financial intermediaries.  However, the main adverse shock wo

Japan: Money Begins to Pour

November 17, 2025 3:00 AM UTC

Japan Pm Takaichi began her stimulus plan

ECB – In a Good Place or Just Complacent?

November 14, 2025 11:55 AM UTC

The ECB is of the view that downside growth risks have dissipated somewhat, this possibly helped by its recent actions which it suggests leave its current policy stance in a good place.  However, amid a hint of what we think is a complacent upgrade about the EZ’s alleged resilience, we think, the

Japan/China Tensions Over Taiwan

November 13, 2025 10:45 AM UTC

China wants to make Japan cautious about helping the U.S. in future military scenarios.  With PM Takaichi tougher stance, China could decide to escalate tensions to reduce the risk of Japan becoming involved in future years.  This could be restrictions of some critical minerals from China to Japan

UK GDP Review: Underlying Economy Listless - At Best

November 13, 2025 8:10 AM UTC

As we have underlined, GDP has hardly moved since March and, again, the latest update undershot consensus thinking.  Indeed, GDP has fallen in two of the last three months (Figure 1), albeit where some recovery should be in store for the current quarter as these September numbers were hit (temporar

U.S. Supreme Court Threat to Trump Tariffs

November 12, 2025 1:44 PM UTC

Hearings at the U.S. Supreme Court over the legality of Trump’s reciprocal tariffs suggests that at least a partial ruling against the tariffs is likely, probably before the end of the year, though there is no date set for the decision.  Over half of Trump’s tariffs are threatened by the case b

UK Gilts: Fiscal, Politics and BOE

November 12, 2025 9:55 AM UTC

·        2yr Gilt yields have scope to fall through 2026, as we see growth and inflation slowing more than the BOE and this will likely see the MPC changing view and cutting policy rates to 3.25% in H1 2026. Though a pause could then be seen, we see one final BOE cut then being delivered to

EZ Rates: 2026 ECB Easing But 2027 French Crisis?

November 11, 2025 9:45 AM UTC

·       Financial conditions are tighter than suggested by a 2% ECB depo rate, which will both dampen an EZ economic pick-up and cause further disinflation.  We see the ECB delivering two further 25bps cuts to a 1.5% ECB depo rate, which can mean a further decline in 2yr Bund yields.  Howev

UK Labor Market: Continued Private Sector Job Losses Weighing Even More Clearly on Wages

November 11, 2025 8:01 AM UTC

Previous signs that the labor market is haemorrhaging jobs less clearly have evaporated, with fresh and deeper falls in the more authoritative payrolls.  Indeed, private sector payrolls are still falling, down almost a full ppt in y/y terms and more steeply so (Figure 1).  Regardless, the latest l

UK CPI Preview (Nov 19): Falling Back Broadly From Likely Peak?

November 10, 2025 10:49 AM UTC

After the upside (and broad) June CPI surprise, CPI inflation rose further, up another 0.2 ppt to 3.8% in July and stayed there for the two following months, with the September outcome having been lower-than-expected outcome in what we (and the BoE) think will be the inflation peak.  Indeed, we see

BoE Review: Fiscal Elephant in the Room Ignored – For Now!

November 6, 2025 1:47 PM UTC

A tight vote was always likely for the November MPC verdict, but the 5:4 split was closer than expected, but almost a repeat of the August decision when rates were cut to the current 4%.  What seems clear is that the effective swing voter was Governor Bailey but who coloured his decision with a cle

Norges Bank Review: All Ready For December Cut?

November 6, 2025 9:31 AM UTC

No change in policy and little shift in rhetoric was the message from the Norges Bank’s latest verdict.  After what was to some a surprise (and seemingly far from a formality) move in September, in which the Norges Bank cut is policy rate by a further 25 bp to 4.0%, we see no change at Nov 6 verd

Japan: Not Abenomics 2

November 5, 2025 10:30 AM UTC

·       While some fiscal stimulus into 2026 is likely from the new PM Takaichi, this is unlikely to be aggressive given the JGB supply pressures and the need for support from other parties in passing fiscal measures.  A return to QE (2nd arrow of Abenomics) is highly unlikely, with the BOJ

Sweden Riksbank Review: Board Sticks to it Plans

November 5, 2025 9:44 AM UTC

As we anticipated in our preview, the Riksbank Board is pleased with the data flow since its last and very probably final rate cut on Sep 23 (to 1.75%).  GDP indicators suggest a strong Q3 showing of over 1% q/q while previously troublesome CPI data have softened appreciably thereby confirming (bot

Canada Budget Sees Larger Deficits, Slower Growth

November 4, 2025 9:58 PM UTC

Canada’s budget has seen the deficit for 2025-26 revised up to C$78.3bn from C$42.2bn in the December 2024 statement, which will now be 2.5% of GDP versus 1.3%, still a level that is quite small compared to many other developed countries. The deficit is projected to slip after that, reaching C$56.

U.S. Treasuries: Waiting for Data and Yield Curve Steepening

November 4, 2025 1:57 PM UTC

•    Multi quarter we still look for 75bps of further Fed easing by end 2026, which will likely initially bring 2yr yields down to 3.4%.  However, once the Fed Funds rate get closer to 3.0-3.25% and the slowdown turns into a soft landing, the 2yr will likely move to a premium versus Fed Funds

UK GDP Preview (Nov 13): Cyber Crime Shock but Underlying Economy Listless

November 3, 2025 4:01 PM UTC

Notably, the level of UK GDP has hardly moved since March but we think there will be distinct setback in the September numbers where the cyber-attack of JLR vehicle manufacturing may be sizeable – car reduction may have fallen some 25% m/m-plus in the month alone.  As a result, we see September G

EZ HICP Review: Services Inflation Problematic?

October 31, 2025 10:39 AM UTC

With what were previously unfavourable energy-related base effects reversing, EZ inflation edged down 0.1 ppt to 2.1% in October, largely in line with consensus thinking, but with the main core rate stable at 2.4%.  The latter reflected a slight pick-up in services (up 0.2 ppt to a six-mth high of

U.S./China Trade Framework: Avoiding Escalation

October 31, 2025 7:48 AM UTC

·         The U.S./China framework deal avoids renewed escalation of trade tension, but is unlikely to be followed by a comprehensive trade deal in 2026 as China does not want major import and bilateral trade commitments.  The economic effects will likely be small and the deal main aim app

ECB Review: Hedging its Bets, Hoping to Stay in a Good Place

October 30, 2025 3:23 PM UTC

There ie nothing tangible in the ECB update today to suggest that a further easing is likely at the next meeting on Dec 17-18.  However, amid a hint of what we think is a complacent upgrade about the EZ’s resilience alongside a perceived reduction in global risks, the easing window has not been c

October 30, 2025 10:25 AM UTC

 It continues to be the case that, for an economy that has seen repeated upside surprises and apparently above trend growth, now some 1.3% in the year to Q3, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking save to encourage a Council view of EZ eco

October 30, 2025 5:31 AM UTC

The BoJ has kept rates unchanged at 0.5% in the Oct 30th meeting with a 7-2 vote

BoE Preview (Nov 6): Easing Door Opening Afresh?

October 29, 2025 4:43 PM UTC

That the BoE kept Bank Rate at 4% after last month’s MPC meeting was all but certain, as was the two vote dissent in favor of further easing.  But of more note, and amid what have been recent hawkish hints from the MC majority, was that the MPC adhered to its (conventional) policy guidance, still

October 29, 2025 10:35 AM UTC

Having delivered what was described as a final rate cut last time around (ie Sep 23), the Riksbank Board will be pleased with the data flow since.  GDP indicators suggest a strong Q3 showing of over 1% q/q while previously troublesome CPI data have softened appreciably thereby confirming suspicions

October 29, 2025 4:14 AM UTC

The BoJ will keep rates unchanged at 0.5% in the Oct 30th meeting 

Eurozone: Tighter Credit Standards By EZ Banks Confirmed

October 28, 2025 9:44 AM UTC

Hardly a surprise despite the ECB suggestions to the contrary as the reported net tightening credit standards merely accentuates trends in the two previous Bank Lending Surveys (BLS).  This updated BLS therefore echoes what we have seen in other ECB surveys and in actual credit dynamics and thus un

UK Food Inflation; Not Just a Domestic Issue, Despite Industry Claims

October 28, 2025 8:45 AM UTC

Food price inflation is becoming an increasing issue for both policy makers and households as well as companies that are generating and selling the produce. Particularly in the UK, rising food price inflation is helping shore up well-above target CPI inflation and thereby deterring the BoE from what

U.S-China Trade Tensions Ease, US-Canada Tensions Escalate

October 27, 2025 3:32 PM UTC

Trade tensions between the US and China appear to be easing, with it looking increasingly unlikely that the US will impose a threatened extra 100% tariff on China on November 1. However trade tensions with Canada have increased, with Canada receiving an extra 10% tariff, adding to downside economic

ECB Monetary Worries Emerging as Corporate Credit Dynamics Weaken More Clearly

October 27, 2025 10:36 AM UTC

As a foretaste of the Bank Lending Survey BLS) due tomorrow, the ECB released two associated pieces of data today, both corroborating and continuing an ever worrying pattern, namely weakness in corporate credit. The data showed growth in later has fallen to its lowest in almost two years (Figure 1).

Norges Bank Preview (Nov 6): On Hold but Another Cut Flagged By End-Year

October 27, 2025 9:26 AM UTC

After what was to some a surprise move in September, in which the Norges Bank cut is policy rate by a further 25 bp to 4.0%, we see no change at Nov 6 verdict.  After all, there will be no fresh forecasts, albeit with the Board likely to reinforce existing hints of a further 25 bp move at the Dec 1

EZ HICP Preview (Oct 31): No Halloween Horror from HICP Update

October 23, 2025 12:09 PM UTC

Mainly due to unfavourable base effects, EZ inflation has edged up in the last few months, but we think that this is temporary and that a fresh fall, possible to below the 2% target may occur in the October flash numbers – with a formal forecast of a 0.3 ppt drop to 1.9% and the core falling almos

When And How Will the U.S. Government Shutdown End?

October 22, 2025 3:01 PM UTC

The US government shutdown is now entering its fourth week and there are no signs of an imminent solution, though once progress starts, it could gain momentum quickly. It looks likely that pressure to reach a solution will start to build in early November, though the nature of the eventual settlemen

Eurozone Flash GDP Preview (Oct 30): Resilience in the Dock?

October 22, 2025 9:11 AM UTC

As we highlighted repeatedly of late, for an economy that has seen repeated upside surprises and apparently above trend growth, now some 1.4% in the year to Q2, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. But we think this may shift as the ECB

October 22, 2025 7:05 AM UTC

After the upside (and broad) June CPI surprise, CPI inflation rose further, up another 0.2 ppt to 3.8% in July, higher than the consensus but matching BoE thinking. Despite adverse rounding and fuel costs, the headline stayed there in the August figure, and did so again in September in what was a lo

October 21, 2025 12:55 PM UTC

As with recent Council meetings, what is important when the ECB gives its next (almost certain) stable verdict on Oct 30, is not what it says.  Instead, in particular, it is how much the impression is left that the easing window has not closed. The ECB is clearly split about whether policy has trou

October 20, 2025 4:36 PM UTC

Germany’s disinflation process hit a further and more-than-expected hurdle in September, as the HICP measure rose 0.3 ppt for a second successive month, thereby even more clearly up from July’s 1.8% y/y, that having been a 10-mth low.  But we see most, if not all, of this rise being reversed in

Japan: Storm Calms or Reaches the eye?

October 20, 2025 2:48 AM UTC

The LDP and Japan Innovation Party have reached a broad agreement to form a coalition government

October 17, 2025 10:24 AM UTC

The ECB is clearly split about whether policy has troughed or not, this mainly a result of differences within the Council as to where inflation risks lie.  Hawks perceive upside risks emerging while the dovish camp feels the opposite.  These divisions are likely to magnify when the ECB updates its

UK GDP Review: Moving Sideways – At Best

October 16, 2025 6:39 AM UTC

Although the revisions up to July GDP data now confirm a small m/m fall for that month), this was unwound in the August numbers with a 0.1% rise (Figure 1). This put the less volatile three-month rate at 0.3% but we think this overstates what is very feeble momentum, which may actually be nearer zer

October 14, 2025 2:07 PM UTC

After the upside (and broad) June CPI surprise, CPI inflation rose further, up another 0.2 ppt to 3.8% in July, higher than the consensus but matching BoE thinking. Despite adverse rounding and fuel (and food) costs, the headline stayed there in the August figure, this foreshadowing a likely rise th

UK Labor Market: Continued Private Sector Job Losses Weighing More Clearly on Wages

October 14, 2025 9:22 AM UTC

There may be signs that the labor market is haemorrhaging jobs less clearly, if not actually indications that the more authoritative payrolls have stopped falling, albeit this largely due to increasing jobs within the health sector.  Indeed, private sector payrolls are still falling, down almost a

U.S-China Trade Tensions May Escalate Further Before Eventually Fading

October 13, 2025 3:19 PM UTC

Trump’s more conciliatory words after announcing a 100% tariff on China starting November 1 have eased market worries, though the issue is far from resolved. It is still possible that Trump will follow through with his threat on November 1, but unlikely that tariffs would remain elevated for very

Eurozone: Data Disappointments Off the ECB Radar

October 10, 2025 12:35 PM UTC

Although not fully high-profile,and mostly off the radar that the Council focuses on. the last few days have brought a series of data releases that will disappoint the ECB, certainly the hawks.  These range from weak services production data, further signs of a loosening in the labor market and mor

ECB Council Meeting Account Review: Complacency Rules the Day as Financial Conditions Tighten!

October 9, 2025 12:52 PM UTC

Unsurprisingly there was little in the account of the ECB Council Meeting of 10-11 September to suggest any rush to change policy with it clear that members on both sides of the hawks vs doves debate wanted more data amid what was considered to be great uncertainty.  Thus, the ECB offered little in

UK: BoE Financial Arm Warns of (Increasing) Risks But Ignores Tighter Financial Conditions

October 8, 2025 1:58 PM UTC

According to the BoE Financial Policy Committee (FPC) meeting this month, risks associated with geopolitical tensions, global fragmentation of trade and financial markets, and pressures on sovereign debt markets remain elevated.   In fact, the FPC was very clear of the increasing risk of a sharp ma

UK GDP Preview (Oct 16): Conflicting Signs To Veer Toward Weakness

October 7, 2025 1:37 PM UTC

Although we are pointed to a flat m/m GDP outcome for the July data, thereby matching the official outcome, the actual outcome was a small m/m fall (before rounding).  We see this being repeated in the August numbers with a 0.1% drop (Figure 1). This would leave the less volatile three-month rate a