UK inflation has peaked, but the latest data is a tad hawkish for the Bank of England. Food inflation was strong, which is red meat for the hawks. Services inflation rose, once volatile items are stripped out. However, we still expect the Bank to cut rates in December
Energy price developments have resulted in a tick down in headline inflation, while core inflation remains at 2.4%. Overall, the inflation environment seems to remain very stable around the ECB's target for the moment
Both food and services inflation are undershooting the Bank of England's forecasts, and together with softer wage growth, that brings another 2025 rate cut firmly back into play. Everything now depends on the details of the November Autumn Budget
Price pressures remained at a constant 9.9% in September, with seasonal food items offering mild relief. Services inflation continues to show resilience, and wage growth dipping below 5.0% adds further drag on demand. Our year-end projections remain 9.6% for 2025 and 4.5% for 2026
Hungary's September inflation numbers came in flat as expected, but we don't take long-term comfort in that. Price pressures are still far from the central bank’s target. Looking ahead, there is some light at the end of the tunnel. A warning, though: it could be a train
Unprocessed food was mainly responsible for Czech headline inflation ticking lower. Meanwhile, pricing in services remains robust, and may affect inflation expectations. One softer-than-expected inflation print is unlikely to alter the central bank's hawkish stance. We'd need to see more relaxed core inflation and disinflation in services first
With all driving factors set to remain in place, we expect inflation in Italy to continue to move within a narrow sub-2% band over the fourth quarter and confirm our forecast for average 2025 inflation at 1.7%
Private sector employment fell further in August, which should help take wage growth below 4% by year-end. That keeps the door open to further Bank of England easing, though our call for a November rate cut hangs in the
Unlike financial markets, we still think the odds are tilted slightly in favour of another Bank of England rate cut in November. Nothing is guaranteed, though, and these are the key data points that will decide the fate of the Bank's easing cycle later this year
UK inflation was higher than expected in July, but given it was driven primarily by airfares, the Bank of England won’t be too concerned. A November rate cut hangs in the balance, though it remains our base case
At its last meeting in January, Norges Bank’s Monetary Policy Committee kept the policy rate unchanged at 4.5% but reiterated the guidance that “the policy rate will likely be reduced in March”. Since then, spot activity data remained subdued, but the labour market showed signs of resilience and business expectations turned more positive.
The yen is finishing the week on a softer footing with USD/JPY rising back above 149.50 after hitting a low yesterday at 148.18. The pair is currently on course for the second consecutive week of modest gains. The yen has been undermined this week by the BoJ’s cautious policy update (click here) when they expressed more unease over elevated overseas uncertainties which were described as “rising quickly”.
The pound has outperformed alongside other European currencies this month benefitting from the significant improvement in investor sentiment towards the region. It has helped to lift cable back up towards the 1.3000-level for the first time since last year’s US election. In contrast, the pound has weakened modestly against the euro lifting EUR/GBP back above the 0.8400-level for the second time this year.
