July 18, 2024
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ECB: September Cut Not Yet Determined

  • The ECB unanimously held its policy rates in July, as widely expected after June’s cut, and refused to pre-commit to any outcome in September.
  • Its policy will depend on the data in the weeks and months ahead, with some policymakers likely to firm up their positions before September’s highlighted meeting.
  • We still expect another cut in September, encouraged by the Fed and BoE also easing policy. However, their premature steps could swiftly require reversals in 2025.

By Philip Rush

July 18, 2024
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UK: Slow Slackening Progress for Pay

  • The UK unemployment rate remained at 4.4% in May as the H1 increases are grinding to a halt in a similar pattern to 2023. Underlying changes are also becoming more neutral.
  • Weekly vacancies data have rebounded to March levels while redundancies remain low and monthly pay growth is consistently annualising above 5%.
  • The dovish BoE can welcome a renewed slowing in the headline wage growth rate despite current levels remaining inconsistent with the inflation target.

By Philip Rush

July 17, 2024
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EA Inflation Stable Enough for the ECB

  • The final EA inflation print confirmed the flash at 2.52% in June, with services refusing to slow from 4.1%. Median inflation rates broadly rebounded, stabilising the 3mma.
  • Divergences between member states’ underlying pressures are balancing slightly above a target-consistent pace. The ECB is unlikely to be concerned about that.
  • Stability in the ECB’s medium-term forecast seems sufficient for it to cut again in September. Tight labour markets may yet renew pressures and pause cuts later.

By Philip Rush

July 17, 2024
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UK Discounts Soften Stronger Services

  • UK inflation was broadly unchanged and close to expectations in June, although resilient services price strength was offset by temporary weakness in goods again.
  • Seasonal goods discounting is unsustainable disinflation. Underlying pressures remain too high, and their persistence keeps raising consensus forecasts.
  • An August BoE rate cut remains most likely, albeit less than before. It can point to the headline rate matching its forecast and lean on its expectation that things will improve.

By Philip Rush