Archive

September 02, 2025
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EA: Defying Disinflationary Narratives

  • Dovish hopes for EA disinflation continue to be disappointed by resilient outcomes. The rise to 2.1% in August amid sticky core pressures is opposite to the dovish narrative.
  • Euro appreciation’s disinflationary shock is being offset by domestic resilience, which was most surprising in Northern Europe. Our errors were relatively small and balanced.
  • Ongoing upside surprises have defied recent consensus expectations of a drift down to 1.8%. The ECB faces broad upside news that should reassure it against cutting again.

By Philip Rush

August 28, 2025
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ECB Easing Transmits Need To Hold Rates

  • ECB rate cuts are stimulating a trend rise in lending growth to levels consistent with no change in policy, as the monetary transmission mechanism delivers the easing.
  • Activity surveys are less bullish, but reflect stagnant supply-side potential that can’t be fixed by stimulating demand, which would merely stoke the inflation problem.
  • Potentially inappropriate Fed easing does not raise peer pressure like fundamental US weakness would. Domestic news dominates and supports our ECB call for no change.

By Philip Rush

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