Daily Brief Macro: BoE Dove Beaten Into Submission and more

• The BoE unsurprisingly held its policy rate at 4.5% in March, preserving its gradual easing path after resilient recent data. Only one MPC member dissented for a 25bp cut.
• Catherine Mann did not carry the extra 25bp of easing she supported from February to March. Her hyperactive vote relied on so little spurious evidence it was swiftly falsified.
• Core members emphasise the lack of a predetermined path, raising the hurdle to a May cut, but this remains the most likely outcome, even if it may require a rapid reversal.

• Unemployment remained at 4.4% in January amid rapid employment growth. Recent data suggest that the unemployment rate will likely decline over the next few months.
• Regular wage growth adhered to its 0.4% m-o-m trend. The headline is near 6%, leaving no progress over the past year. Financial sector bonuses weigh temporarily on total pay.
• Doves can temporarily dismiss this inconvenient resilience as unreliable noise, but the obvious risk is that it’s genuine and monetary stimulus has already become excessive.

• Surging demand for gold is leading to unexpected consequences in Ghana
• The gold industry is impacting cocoa production and causing environmental destruction
• Some individuals are turning to illegal gold mining out of necessity due to economic pressures

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• Recent reports that the Indonesian middle class has shrunk should not have come as a surprise, given long-running sluggishness in household consumption and poverty.  
• The problem goes beyond the pandemic dislocations: misguided reliance on extractive commodities sectors and a restrictive stance on foreign investments are primary culprits.
• Further squeezes on the middle class jeopardize Indonesia’s economic and political stability. Unfortunately, the government shows little sign of making the needed pivots.

• The USD is moderating, not just against developed market currencies, but also against Asian currencies. Usually, Asian currency revival is a lead indicator of acceleration of FII flows in Asia. 
• Our analysis of cumulative FII sales as proportion of market cap shows that Korea and Indonesia are oversold. India is almost there, but not quite. HK/China is still under-owned. 
• Taiwan and Thailand, despite large FII selling over an extended period, are still not oversold. Both markets face risks from the tariff war and could face more FII selling pressure.

• China accounts for 43.6% of total Malaysian NR exports in Jan
• Recovery and Rubber Production Enhancement Plan launched
• Risda may become sole purchaser of smallholder rubber

• Railway / In Depth: China’s soaring overland trade accelerates cross-border rail projects
• China-Japan /: Japan’s Ambassador to China sees a lot potential for economic cooperation
• Stocks /: Foreign investor enthusiasm for Chinese stocks is on the up

• Southeast Asia: Indonesia and Thailand face economic instability due to policy missteps, high lending rates, and unsustainable fiscal strategies.
• China: Focused on consumer confidence and liquidity rather than excessive government spending to drive economic stability.
• U.S. Economy: Inflation expectations remain high, delaying potential rate cuts while political uncertainty increases recession risks.

• The SNB lowered its policy rate by 25bps to 0.25%, in line with expectations, citing low inflation and downside risks to price stability. Inflation is projected to remain within the central bank’s target range, reducing the need for aggressive monetary easing.
• Switzerland’s economy remains resilient, with solid Q4 2024 growth, but global uncertainties—including geopolitical tensions and trade risks—could pose challenges. Domestic demand is expected to benefit from rising real wages, while weak foreign trade may dampen overall growth.
• Future policy decisions will be data-dependent, with the SNB closely monitoring inflation and external conditions. While further easing is possible, ongoing global inflationary pressures and fiscal stimulus in Europe could influence the central bank’s stance.

• As expected, the Riksbank kept its policy rate unchanged at 2.25%, citing broadly stable inflation and economic conditions despite recent global volatility.
• Inflation has exceeded expectations due to temporary factors, but it is projected to stabilise close to 2% next year as these effects normalise and the krona strengthens.
• Geopolitical tensions, trade policy shifts, and domestic economic factors such as household consumption and investment will be key in determining future monetary policy adjustments.