Archive

July 31, 2025
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ECB Job Tightened By Jobs

  • The EA labour market proved tighter than the ECB expected in Q2 as the unemployment rate held at a downwardly revised 6.2%. That is hawkish news to its neutral stance.
  • Most countries still face falling unemployment, suggesting monetary conditions were slightly loose, and avoiding pressure to lower underlying inflation further.
  • A hawkish domestic surprise should keep the ECB on hold, especially with the US trade policy risk fading. Passthrough of past cuts may mean the ECB needs to hike later.

By Philip Rush

July 30, 2025
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Activity’s Tariff Hangover In Q2

  • GDP growth broadly beat expectations again in Q2 on both sides of the tariff disruption. Euro area growth slowed by less, while the US rebounded vigorously.
  • Temporal distortions to demand didn’t open up slack as European supply growth stays stagnant. Surveys suggest it won’t appear in Q3 either as demand growth rebounds.
  • Underlying US GDP growth may have slowed, but the extent is modest and questionable. Rolling resilience should keep delaying rate cuts, preventing them from occurring.

By Philip Rush

July 24, 2025
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ECB: Watching the Good Place

  • The ECB kept its description of the policy setting as in a good place, and wants to watch the news in the next few months. Lagarde refused to emphasise September’s meeting.
  • Euro strength is depressing inflation below target in the near-term forecasts, but the ECB remains relaxed about this. It sees the outlook as broadly unchanged since June.
  • We still see rolling resilience in the economy and doubt US trade policy will break it. More rate cuts are inappropriate without demand destruction, so we don’t expect any.

By Philip Rush

July 08, 2025
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Inconsistently Dovish Pricing

  • Dovish market fears from April have unwound for the Fed, yet deepened for the BoE, despite broadly resilient data and cautious guidance from policymakers reluctant to cut.
  • Equity prices have relied on this resilience to recover, yet expectations for extended rate-cutting cycles imply it breaks. Payrolls only forced half of the gap to close.
  • We expect ongoing resilience to keep rolling market pricing for rate cuts later, with the unnecessary easing ultimately never being delivered by the BoE, Fed, or ECB.

By Philip Rush

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