Ben Ford
Summary The RBA cautiously lowered the cash rate by 25bps to 4.1% at its February meeting. Three factors drove the easing bias, one held it back. 1) Moderating underlying inflation saw price pressures below RBA forecast. Forward-looking data suggests continued easing, too. 2) Subdued private demand growth has worried the RBA. They have baked in […]
Henry Occleston
Summary The BoE cut 25bp, as expected. MPR forecasts were bearish, and comments still indicate more cuts ahead. I read little into the two 50bp votes. Upward revisions to MPR near-term inflation forecasts exceeded our expectations, with smaller impact from one-offs than we anticipate. Despite labour market loosening, medium-term inflation is below target but still […]
Henry Occleston
Summary We expect the BoE will cut rates by 25bp this week, with an 8:1 vote split. The updated MPR projections will likely be much more bearish on the labour market and GDP, despite strong wage growth. Along with updated supply-side analysis, this should see inflation undershooting target by even more in the medium term […]
Viresh Kanabar
Summary The BoC cut 25bp as expected, while ending QT. The reduction in 2025 GDP growth forecast is not dovish as the BoC reduced its assumption for potential growth. Importantly, the bank’s estimate of the output gap narrowed to -0.75% from -1.25%. This implies there is less economic slack than previously thought. Despite stronger consumer […]
Dominique Dwor-Frecaut
Summary The Fed held rates as expected with its economic assessment and policy outlook unchanged, though a lack of details on the Trump administration’s policies has created unusual uncertainty. Chair Jerome Powell expects the immigration decline to continue and lead to a combination of lower job creation and continued labour market balance. Powell’s presser and […]
4 researchers
Market Pricing The market is pricing a 29% probability of a Fed cut in March and two cuts by 2025. UST Market Technicals A fortnight ago, our US Rates Technical Report (USRTR) showed technicals across the curve were oversold in all the UST futures contracts. Yesterday’s USRTR showed technicals are now a lot cleaner than […]
Viresh Kanabar
Summary We expect the BoC to cut its policy rate by 25 bps tomorrow. Despite a bearish consensus, we don’t see a further reduction in growth forecasts but appreciate the risks to the downside. That’s because we see green shoots in activity, hiring, and investment. Expect Gov Macklem to continue pushing the case for slower […]
Dominique Dwor-Frecaut
Summary The Fed will likely hold rates steady next week as inflation and growth remain stable and high. It will have too little information on the Trump administration’s economic program to assess the impact on policy. Market Implications I still expect no cut in 2025 against markets pricing about 1.5 cuts. Stable and High Inflation […]
Dominique Dwor-Frecaut
Summary The Fed eased as expected but communicated a shallower trajectory for the Federal Funds Rate (FFR) with only two 2025 cuts. Jerome Powell stressed the Fed was entering a new phase: with the FFR close enough to its neutral value, actual disinflation progress would be required for further FFR cuts. Market Implications I still […]
Ben Ford
Summary Having passed the federal government’s long-delayed amendments to the Reserve Bank Act back in November, Treasurer Chalmers has delivered the composition of the two new RBA boards. Two new members will join the Monetary Policy Board: Renée Fry-McKibbin and Marnie Baker. Four current board members will transition to the board. The new MPB will […]
Ben Ford
Summary The SNB cut the policy rate by 50bps, to 0.5%. That was their fourth cut of the cycle, but their first 50bp reduction since January 2015. Underlying inflation pressures are weakening with growth proving modest. The unemployment rate is grinding higher, too. In culmination, it led to a lower inflation forecast in the near-term. […]
Dominique Dwor-Frecaut
Summary The Fed is likely to cut next week despite disinflation stalling as it believes policy is still restrictive and risks to the mandate are balanced. The SEP is likely to show two 2025 cuts next year due to: Recently slower progress on inflation. Risks of higher R*. Uncertainty on the incoming Donald Trump administration. […]
Henry Occleston
Summary We expect the ECB to cut 25bp on 12 December. It will also update macroeconomic projections, which are likely to see dovish revisions with inflation sustainably at target in H1 2025. We expect the ECB to avoid fully opening the way to 50bp cuts, but comments will likely add that they are flexible to […]
Viresh Kanabar
Summary Recent developments including Japan’s Q3 GDP data, the October inflation report, and Rengo’s wage demand support the BoJ’s FY 2024 outlook. The LDP announced measures to support the economy, including further cash transfers to low-income workers and raising the income tax threshold. Taken with the recent data, it poses the question: why wait for […]
Henry Occleston
Summary ECB voters have started discussing where R* is. But there is little appetite right now in discussing cutting below the neutral rate. We estimate consensus R* is around 2-2.5%, making the market pricing (1.70% in October 2025) look overly dovish. The US election outcome has driven some of this. It probably underestimates the reality […]
Dominique Dwor-Frecaut
Summary The immigration surge has been the main driver of the recent episode of disinflation with above trend growth. With the immigration surge over, GDP growth is likely to slow about 0.75 ppt over the next 12 months, wage growth will remain stuck around its current level and cost pressures will continue. Demand pressures, as […]
Henry Occleston
Summary The BoE cut 25bp last week as expected. The MPR forecasts and tone of comments were largely in line with our base-case expectation. Inflation was revised down near-term, but revised up in the long-term too, albeit with the positive skew removed as per our base-case. Headline and core CPI profiles to year-end seem reasonable, […]
Dominique Dwor-Frecaut
Summary The FOMC cut 25bp as expected. Powell expressed his confidence in a soft landing and willingness to accept inflation above target for another couple of years. The Fed is likely to cut 25bp in December as core PCE is likely to remain in its comfort zone. Market Implications I agree with markets pricing about […]
Henry Occleston
Summary We expect the BoE will cut rates by 25bp this week, with a 6:3 vote split. The accompanying MPR will be important, there are many moving parts, particularly the inclusion of the UK’s new budget. My expectation is that BoE look through much of the budget impact, retain expectations for further gradual easing, and […]
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