July 19, 2024
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HEW: Rate Cuts Not Boxed-In

  • A slew of UK economic data was mostly near expectations, but further services inflation strength settled the balance hawkishly. The ECB preserved flexibility but will likely cut in September, and the BoE would need to reassess old news not to cut in August.
  • The Bank of Canada can respond to rising unemployment and low inflation next week with a likely consecutive rate cut rather than be boxed in by the on-hold Fed. Data highlights include the flash PMIs, US GDP for Q2 and core PCE inflation for June.

By Philip Rush

July 18, 2024
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Bowman - Liquidity, Supervision, and Regulatory Reform

Governor Michelle W. Bowman's speech emphasizes the importance of revisiting and improving the regulatory framework in light of the failures experienced by Silicon Valley Bank, Signature Bank, and First Republic Bank. The speech highlights the need to consider various elements, including bank capital regulation, supervision roles, and potential vulnerabilities from fintech partnerships. Bowman underscores the significance of improving the operational readiness of the Federal Reserve’s tools, particularly the discount window and payment services, to ensure robustness during times of stress. She calls for a pragmatic approach in liquidity reforms, highlighting the interdependencies among various funding sources. The speech also stresses prioritizing core risks in banking supervision to prevent oversight failures and advocates for thoughtful, fact-based regulatory reforms, while emphasizing the value of public discourse and procedural rigor to ensure regulatory effectiveness and long-term resilience of the banking system.

- Positivity: 75
- Uncertainty: 60

July 18, 2024
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ECB: September Cut Not Yet Determined

  • The ECB unanimously held its policy rates in July, as widely expected after June’s cut, and refused to pre-commit to any outcome in September.
  • Its policy will depend on the data in the weeks and months ahead, with some policymakers likely to firm up their positions before September’s highlighted meeting.
  • We still expect another cut in September, encouraged by the Fed and BoE also easing policy. However, their premature steps could swiftly require reversals in 2025.

By Philip Rush

July 18, 2024

ECB Refi Rate 4.25% (consensus 4.25%) in Jul-24

  • The ECB kept key interest rates unchanged in July, following June's rate cuts, to manage persistent inflationary pressures while supporting economic recovery.
  • Future interest rate decisions will be data-driven and flexible, avoiding pre-commitments to specific rate paths and based on ongoing assessments of inflation, economic data, and monetary policy transmission.
  • Economic and financial risks, including geopolitical tensions and global trade dynamics, will influence the ECB's policy adjustments to ensure the stability and effectiveness of monetary policy transmission.