Archive

May 17, 2024
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EA Inflation Eases ECB Cut in June

  • The final EA HICP inflation print confirmed the unsurprising stability at 2.4% in the April flash release. Energy price base effects will probably push it higher again in May.
  • Underlying inflationary pressures have continued falling, with most statistical measures under 3% y-o-y with monthly impulses at or slightly below the ECB’s target.
  • Like the consensus, we expect inflation to stay close to 2%. This outlook and subdued underlying pressures will likely ease the ECB’s decision to start cutting rates in June.

By Philip Rush

May 15, 2024
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EA GDP Rebounds Without Productivity

  • Eurostat's second estimate confirmed the EA’s 0.3% q-o-q rebound out of technical recession. That fully recovers the H2 fall, although it was partial for Germany.
  • Employment growth matched GDP in Q1, extending the persistently poor productivity performance. Eastern Europe’s structural catch-up is a relatively small bright spot.
  • Jobs-intensive growth is keeping unemployment at its lows even as it rises elsewhere. EA potential looks relatively impaired rather than facing tighter monetary conditions.

By Philip Rush

May 13, 2024
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US Politics: Taking Trump At His Word

  • If Donald Trump returns to the White House in 2025, he will hit the ground running with an agenda that, among other things, stands to be deeply damaging to Europe both economically and politically. Europeans in denial should listen more carefully to his speeches and take him at his word.

By Alastair Newton

May 08, 2024
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Policy Rate Reversal Warnings

  • Rate hikes are unlikely to resume unless forthcoming cuts prove premature. Cutting outside recessionary regimes has historically been prone to reversals to higher peaks.
  • 1998’s cuts followed a shock that failed to prove recessionary. Fed cuts in 1967 sowed the seeds of a severe inflation problem. Both cutting cycles were more than reversed.
  • Independent ECB hikes in 2008 and 2012 were rapidly proven policy mistakes. The BoE’s single 2005 cut was also wrong. Hopes that 2024 is benignly like 1989 may be misplaced.

By Philip Rush

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