April 17, 2025

ECB: Cutting In Shadow of Shocks
- The ECB’s seventh 25bp deposit rate cut to 2.25% risks becoming stimulative, but the shock from US trade policy seen through market moves demanded a response.
- Central bankers are no more aware of the trade policy outlook than markets, but they are more aware of the potential inflationary effects and limits to effective easing.
- Time will reveal the tariffs and impact, allowing the agile ECB to tackle this rather than just the shadow it has cast on anticipatory market pricing. We still expect a June cut.
By Philip Rush
April 16, 2025

UK: Price War Dents Spring Inflation
- A supermarket price war hit food prices, slowing UK CPI inflation below the headline consensus again. Upside news in clothing was offset by downside in game prices.
- Repeating 2008’s experience would drive a game price rebound, but the food effect is more likely to persist. The median inflationary impulse should also rebound soon.
- Unit wage costs remain inconsistent with the target, while energy and water utility bills will drive a massive jump in April. We still forecast a final 25bp BoE rate cut in May.
By Philip Rush
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