Archive

August 01, 2025
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EA: Sticky Summer Inflation

  • The ECB’s victory party can continue for another month, as inflation proved surprisingly sticky at the target. But the hangover is disappointing, amid broad-based upside news.
  • Two-thirds of national outcomes exceeded our expectations, with a slight skew higher, and pressures concentrated in services. Seasonal travel parts would be payback-prone.
  • Another upside surprise to the ECB’s forecast makes the profile likely to shift higher in September. The news is the opposite of what is needed for another rate cut.

By Philip Rush

July 31, 2025
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ECB Job Tightened By Jobs

  • The EA labour market proved tighter than the ECB expected in Q2 as the unemployment rate held at a downwardly revised 6.2%. That is hawkish news to its neutral stance.
  • Most countries still face falling unemployment, suggesting monetary conditions were slightly loose, and avoiding pressure to lower underlying inflation further.
  • A hawkish domestic surprise should keep the ECB on hold, especially with the US trade policy risk fading. Passthrough of past cuts may mean the ECB needs to hike later.

By Philip Rush

July 30, 2025
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Activity’s Tariff Hangover In Q2

  • GDP growth broadly beat expectations again in Q2 on both sides of the tariff disruption. Euro area growth slowed by less, while the US rebounded vigorously.
  • Temporal distortions to demand didn’t open up slack as European supply growth stays stagnant. Surveys suggest it won’t appear in Q3 either as demand growth rebounds.
  • Underlying US GDP growth may have slowed, but the extent is modest and questionable. Rolling resilience should keep delaying rate cuts, preventing them from occurring.

By Philip Rush

July 24, 2025
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ECB: Watching the Good Place

  • The ECB kept its description of the policy setting as in a good place, and wants to watch the news in the next few months. Lagarde refused to emphasise September’s meeting.
  • Euro strength is depressing inflation below target in the near-term forecasts, but the ECB remains relaxed about this. It sees the outlook as broadly unchanged since June.
  • We still see rolling resilience in the economy and doubt US trade policy will break it. More rate cuts are inappropriate without demand destruction, so we don’t expect any.

By Philip Rush

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