Archive

June 18, 2025
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EA Inflation Predictably Near The Target

  • Disinflationary news from May’s flash inflation release was confirmed in the final print, although a rebound in some underlying inflation measures damped the initial signal.
  • Resurgent oil prices could rapidly reverse the dovish space expanded by past falls. Our forecast bumps around the target through 2026 and 2027, settling at 2%.
  • Other forecasts are a little lower and only suffer a slight bias to be exceeded. The ECB can remain reassured by an outlook close to 2% without cuts, and not deliver any more.

By Philip Rush

June 16, 2025
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Euro Area Wage Costs Closer To Target

  • Non-wage labour costs rebounded in Q1, damping the overall slowdown to a surprisingly modest extent after the crash in negotiated wage growth revealed in May.
  • Unit labour cost growth has encouragingly slowed below 3%, with the latest impulse only 0.6% q-o-q. Any further easing here could encourage monetary easing to resume.
  • Stability at a low unemployment rate still suggests the policy setting is close to neutral, so we doubt disinflationary pressures will mount further and forecast no more rate cuts.

By Philip Rush

June 11, 2025
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US Consumer Pricing Still Ignores Tariffs

  • Another downside surprise in headline US inflation reflected the lack of pass-through from tariff increases, with headline and core rates of only 0.1% m-o-m in May.
  • Commodities, less food, energy and car prices stalled as airfares and apparel fell again. But services (ex-shelter) inflation stayed too high to be consistent with the target.
  • Low headline rates raise dovish political pressure and the risk of a cut, but the tight labour market should encourage the Fed to keep rolling potential cuts later.

By Philip Rush

June 03, 2025
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EA: May Be Disinflation’s Return

  • Negative payback in services inflation dragged the headline EA rate down to 1.92% in the May flash. Although only 7bps low on the day, releases last week had cut 0.1pp.
  • Inflation now looks set to spend a few months below the target rather than at or even above it, as had seemed likely until recently. This is not because of re-rooted imports.
  • Euro appreciation and low energy prices have expanded the ECB’s room to cut rates, but we still see June as the final one amid tight labour markets and peers backing away.

By Philip Rush

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