Archive

November 29, 2024
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ECB Gradualism Secured By Reflation

  • Euro area inflation increased by another 0.3pp in November to 2.3% y-o-y. Headline surprises were small and balanced, but the resilience doesn’t fit dovish pricing.
  • Core and services price inflation rates were little changed at above-target levels. They will likely rise again in December and stay too high throughout 2025.
  • The ECB believes policy is tight and demand is too weak, allowing it to cut again in December. Gradualism is required to avoid over-easing amid ongoing data resilience.

By Philip Rush

November 21, 2024
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EA Wages Are Too Inflationary For 50bp

  • Upwards revisions to Euro area labour costs and a jump in negotiated wage settlements extend cost growth inconsistent with a sustainable return to the 2% inflation target.
  • The ECB hopes this will subside swiftly in 2025, with productivity growth and squeezed profit margins helping contain inflation. But these hopes seem set to be disappointed.
  • Persistent wage pressures should prevent a 50bp rate cut in December and limit further cuts. Less dovish fundamentals feed bullish Euro seasonality, magnified by positioning.

By Philip Rush

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