Archive

January 25, 2024
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ECB Cuts Are Too Premature To Discuss

  • The ECB not only maintained its policy rates as expected but almost repeated its December announcement verbatim. It is not falling in line behind market pricing.
  • Discussion of rate cuts was considered premature. Low unemployment is recognised, as is the risk of excessive wage growth, so it needs to see more evidence before cutting.
  • A first cut in June is probably the ECB’s working assumption. However, some global economic resilience amid higher neutral rates still delays our forecast to Q3.

By Philip Rush

January 24, 2024
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Global Policy Isn't Squeezing That Tight

  • Surprising strength was broadly experienced across the flash PMIs for January. Demand growth is rebounding rather than slowing, prolonging inflationary excess demand.
  • Unemployment rates should rise with below-potential growth, but they broadly remain below their pre-pandemic levels and have mostly stopped falling rather than risen.
  • The failure of tight labour markets to loosen suggests global policy isn’t set far above a neutral level. That should postpone cuts and limit their future extent.

By Philip Rush

January 23, 2024
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Outlook 2024: Europe At A Crossroads

  • Suggestions that June’s European Parliament elections are ‘make or break’ for the EU are probably overstated. But the outcome of what is arguably the second most consequential election of 2024 is still potentially pivotal for EU reform and enlargement prospects.

By Alastair Newton

January 17, 2024
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EA: Trend To Target Ready To Resume

  • The final EA HICP inflation print confirmed the flash rise to 2.9% for Dec-23. Energy price base effects, primarily related to a German subsidy scheme, were responsible.
  • Underlying inflation measures continued to slow, although their monthly impulse stayed close to a 2% annualised pace, consistent with converging towards the target.
  • Our EA inflation forecast is close to the consensus, but we share the ECB’s concern that wage settlements could stoke a renewed overshoot, which delays rate cuts to Q3.

By Philip Rush

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