Freya Beamish is the chief global economist at TS Lombard Global Data. After a long day at a conference in Eastern Europe she joined me to weigh in on the Bank of England’s latest policy meeting. Importantly, she doe s not see sticky U.K. inflation as a reason for the BOE to pause on its rate hiking path after making its second 25bps rate cut of the year at today’s meeting. In fact, she sees the BOE continuing to cut rates with its next move coming as soon as the central bank’s final meeting of the year in December.
”Whether it's by the end of the year or whether it's early, early next year, we're still expecting the Bank of England to continue with the rate cutting process. I think that the economy… deserves that. But I will caveat that by saying that I think that the UK is one of those high pressure economies and therefore it is one of our favorite economies. So maybe there's more rate cutting that needs to be
done at the beginning of the rate cutting cycle, but we might… find that the terminal rate is a little bit higher than it was in the 2010s.
”The natural rate of interest is to some degree endogenous to the policy environment in the sense that if we are moving away from fiscal austerity and we're moving to a situation where there's kind of slightly looser fiscal policy…tied to monetary policy, that that actually endogenously increases the terminal rate as compared with the 2010s.”
Freya and I also discussed the political shock waves that are rocking central banks around the world as they try set their interest rate paths, from Donald Trump’s landslide electoral victory which is opening the door to U.S. tariffs on imports from the rest of the world, to Germany’s call for a snap election.
So sit back, dive in and see, hear what Freya sees ahead for the U.K., the rest of the EU, and the U.S. as both monetary and fiscal officials try to navigate the uncharted policy waters that lie ahead.
Freya rejoined TS Lombard in 2021 as Head of Macro research and became Chief Economist in June 2022.
In 2011, she joined Charles Dumas and Diana Choyleva in identifying a loss of competitiveness of Chinese firms, leading to the slowdown in growth, and sharp rise in leverage.
In 2013, Freya called time on the bubble in Asian debt, immediately before the taper tantrum.
In 2016, she used flow of funds and liquidity analysis to forecast that China’s most likely path entailed a run-up in household debt, as a result of the corporate attempt to deleverage, generating a property shock at the end of the cycle. The Evergrande saga is a corollary.
In 2016, she showed how building financial fragilities in Japan’s external balance sheet would force the BoJ to switch to yield curve control.
In 2020, her forecast of the Q1 GDP contraction in the eye of the Covid storm was the closest among Bloomberg forecaster contributors, lending weight to her true real GDP estimates, at a moment when the authorities chose to reveal all in their official GDP print.
FREY
TS Lombard's Beamish Says BOE Rate Cuts to Continue