Chief Economist, Heteronomics

Phil Rush

Chief Economist

Heteronomics

Heteronomics represents a different kind of economics. We believe analysis should delve into the details of what is really going on, rather than using overly simplistic assumptions to quick-sell stories. Independence from myopic institutional pressures allows us to focus on the realities underlying your asset allocation decisions, without the conflicts of the old market structures. Heteronomics targets the themes driving UK asset prices, offering the benefits of depth, independence and ultimately price.

UK-centric macro research

Macroeconomics

<ul>
<li>The BoE delivered a third back-to-back rate hike in March to 0.75%. However, Jon Cunliffe surprisingly dissented against a change now.</li>
<li>Some modest tightening “might be appropriate in the coming months”, consistent with another hike in May. The BoE now notes “risks on both sides of that judgement”. </li>
<li>We still expect a slower tightening pace (quarterly) beyond May as rates get closer to neutral (1.5%) and the peak passes in inflation pressures.</li>
</ul>


The BoE delivered a third back-to-back rate hike in March to 0.75%. However, Jon Cunliffe surprisingly dissented against a change now.
Some modest tightening “might be appropriate in the coming months”, consistent with another hike in May. The BoE now notes “risks on both sides of that judgement”. 
We still expect a slower tightening pace (quarterly) beyond May as rates get closer to neutral (1.5%) and the peak passes in inflation pressures.


BoE: Rates Hit Third Base During Home Run

<ul>
<li>The UK unemployment rate fell by 11bps to 3.9% as the labour force shrunk enough to offset stagnant employment levels. Gaps are more critical to monetary policymakers.</li>
<li>Unemployment is closing in on the BoE’s 3.8% forecast for Q1, historically consistent with the Bank rate at 0.75%, supporting another 25bps hike in March.</li>
<li>Wage settlements are responding to the tight market and inflation driving real terms declines. That should encourage additional rate hikes this year.</li>
</ul>


The UK unemployment rate fell by 11bps to 3.9% as the labour force shrunk enough to offset stagnant employment levels. Gaps are more critical to monetary policymakers.
Unemployment is closing in on the BoE’s 3.8% forecast for Q1, historically consistent with the Bank rate at 0.75%, supporting another 25bps hike in March.
Wage settlements are responding to the tight market and inflation driving real terms declines. That should encourage additional rate hikes this year.


<ul>
<li>UK GDP rebounded by 0.8% m-o-m to reach a record high level in Jan-22. Activity broadly brushed off the lingering covid restrictions.</li>
<li>We raise our Q1 GDP growth forecast by 0.1pp to 1.1%. Changing to that would be substantial for the BoE (0%) and consensus (0.6%), supporting another rate hike.</li>
<li>Growth slows more later in our forecast as the real income squeeze mounts. Painfully high core inflation underlying that means it is far from a dovish development.</li>
</ul>


UK GDP rebounded by 0.8% m-o-m to reach a record high level in Jan-22. Activity broadly brushed off the lingering covid restrictions.
We raise our Q1 GDP growth forecast by 0.1pp to 1.1%. Changing to that would be substantial for the BoE (0%) and consensus (0.6%), supporting another rate hike.
Growth slows more later in our forecast as the real income squeeze mounts. Painfully high core inflation underlying that means it is far from a dovish development.


Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.</li>
<li>Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.</li>
<li>I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.</li>
</ul>


In my monthly recap note, I provide a performance update of my trade recommendations in emerging markets FX and rates.
Of the total of 35 trade recommendations made so far, I have recommended closing 25 of which 18 were in the money.
I also update my views on the open trade recommendations and go over the rationale behind those that I closed recently.


Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

<ul>
<li>Inflation has continuously exceeded expectations as traditional economic models fail to capture the regime shift. Prices are far below equilibrium and rising towards it. </li>
<li>We now incorporate this macro convergence at a micro-level, bridging the gap between approaches. This fix reflects the new distribution, including the higher median impulse.</li>
<li>The pull toward equilibrium cumulatively adds about 1pp to UK inflation over the year ahead, driving us further above the consensus. Second-round effects would extend it. </li>
</ul>


Inflation has continuously exceeded expectations as traditional economic models fail to capture the regime shift. Prices are far below equilibrium and rising towards it. 
We now incorporate this macro convergence at a micro-level, bridging the gap between approaches. This fix reflects the new distribution, including the higher median impulse.
The pull toward equilibrium cumulatively adds about 1pp to UK inflation over the year ahead, driving us further above the consensus. Second-round effects would extend it. 


United Kingdom

The British Pound Sterling is the official currency of The United Kingdom. 

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BoE: Rates Hit Third Base During Home Run

The BoE hiked again in March with a fourth back-to-back step on track for May. We still expect a slower tightening pace (quarterly) beyond May as...

Phil Rush

UK: Labour Market on a Tight Track

The UK unemployment rate fell to 3.9% on a falling labour force. Wage settlements are responding to the tight market and inflation. That should...

Phil Rush

UK: Output Brushes-Off Covid in Jan-22

We raise our Q1 UK GDP growth forecast by 0.1pp to 1.1% - that would be a big rise for the BoE (0%) and consensus (0.6%), supporting another hike....

Phil Rush

Alpha Bites: Performance Summary of Trade Recommendations in FX and Rates – March 2022

I provide a performance update of all my trade recommendations along with discussing the open trades. I have closed 25 of the 35 trades recommended...

Gautam Jain, PhD, CFA

Prices Obliterating Forecasts

Economic models fail to capture the inflation regime shift. Prices are far below equilibrium and rising towards it, with the pull adding about 1pp...

Phil Rush

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