Archive

November 19, 2024
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EA Inflation Doesn’t Need A 50bp Cut

  • October's final Euro area inflation print confirmed its surprisingly steep rise to 2% y-o-y. Strength was not only broad across countries but components with median rates rising.
  • Underlying inflation pressures were broadly above expectations and target-consistent levels. Upwardly revised labour cost growth won’t help sustain 2% HICP inflation.
  • Confirmed price and wage inflation strength adds to hawkish GDP and unemployment news, curbing the case for 50bp to remain less likely than the dovish market hopes.

By Philip Rush

November 13, 2024
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US CPI Keeps December Cut Alive

  • US inflation’s unsurprising October print should reassure market expectations for a December rate cut after pricing became overextended by post-election exuberance.
  • Although the seasonally adjusted rates annualised above the target again, unadjusted rates are trending at dovishly subdued levels, with no headline exceptions since April.
  • These numbers are arguably old news but don’t discourage a December cut. The shocks from Trump policies won’t hit until 2025 and pre-empting them seems too presumptive.

By Philip Rush

October 31, 2024
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EA Reflation Squeezes Out 50bps

  • September’s disinflationary Euro area news broadly unwound in October, with the HICP rate’s surprising rise to 2% y-o-y adding to hawkish GDP and unemployment news.
  • Co-movement in inflation and activity surprises reinforces the hawkish signal’s strength, especially as the news was broad-based across countries and core measures.
  • The case for a 50bp cut in December has evaporated before forming in the data. A 25bp cut remains likely before resilience urges a more gradual and limited easing cycle.

By Philip Rush

October 17, 2024
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EA Disinflates Enough For October Cut

  • Euro area headline and services inflation were trimmed in the final prints for October, reinforcing the disinflationary imperative in the ECB’s decision to cut rates again.
  • The news on underlying inflation was mixed between countries and measures. Things broadly remain close to target-consistent levels but need not stay like that.
  • We remain concerned about potential over-extrapolation and focus on disinflationary data points, although that seems unlikely to change in time to block a December cut.

By Philip Rush

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