Archive

September 02, 2025
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EA: Defying Disinflationary Narratives

  • Dovish hopes for EA disinflation continue to be disappointed by resilient outcomes. The rise to 2.1% in August amid sticky core pressures is opposite to the dovish narrative.
  • Euro appreciation’s disinflationary shock is being offset by domestic resilience, which was most surprising in Northern Europe. Our errors were relatively small and balanced.
  • Ongoing upside surprises have defied recent consensus expectations of a drift down to 1.8%. The ECB faces broad upside news that should reassure it against cutting again.

By Philip Rush

August 28, 2025
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ECB Easing Transmits Need To Hold Rates

  • ECB rate cuts are stimulating a trend rise in lending growth to levels consistent with no change in policy, as the monetary transmission mechanism delivers the easing.
  • Activity surveys are less bullish, but reflect stagnant supply-side potential that can’t be fixed by stimulating demand, which would merely stoke the inflation problem.
  • Potentially inappropriate Fed easing does not raise peer pressure like fundamental US weakness would. Domestic news dominates and supports our ECB call for no change.

By Philip Rush

August 20, 2025
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EA: Sticky Inflation Survives Euro’s Surge

  • Inflation’s surprise stickiness at 2% was confirmed in the Euro area’s final print, with pressures broad based and slightly above a target-consistent pace in most countries.
  • There has been little progress in inflation’s latent trend or our persistence-weighted measure, despite the Euro’s substantial and sustained appreciation.
  • Without dovish second-round effects, the ECB can look through a potential slowing in headline inflation to a tight labour market and persistent pressures, then not cut rates.

By Philip Rush

August 19, 2025
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EA: Re-Balance Of Payments

  • An end to the Euro’s bullish trend is now revealed to have coincided with a reversal of two critical supports. Frontloaded export levels have normalised without payback.
  • International portfolio investment into the EA during April fully unwound between May and June, revealing no investor appetite to hold higher allocations to EA assets.
  • The Euro is not benefiting from a structural shift towards it, so we doubt the bullish trend will resume. Belated payback in goods inventories could also eventually weigh.

By Philip Rush

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