Archive

June 09, 2025
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Trade Avoidance Easing Shocks

  • China’s crashing exports to the US partly reflect avoidance measures, including rerouting through other countries and marking down import prices to subsidiaries.
  • Exports to the EU and UK are only trending slightly higher, making little difference to disinflation. ASEAN countries, and especially Vietnam, are seeing trade surge again.
  • The US may clamp down on avoidance measures that have eased the shock so far. It could make a painful example of one to encourage concessions from all trade partners.

By Philip Rush

June 05, 2025
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ECB: Policy Well-Positioned Already

  • The ECB’s 25bp cut took rates to a level that it considers well-positioned for the current outlook, thereby removing the presumption in favour of further easing.
  • Lower headline inflation forecasts are already embedded in that judgement, with the temporary role of energy and FX recognised. Downside risks preserve some dovish bias.
  • We still see this rate cut as the final one amid tight labour markets that preserve excessive underlying inflationary pressure. Market pricing should be less dovish.

By Philip Rush

June 04, 2025
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US vs EU: Mutually Assured Destruction?

  • The consensus over Section 899 is that it is about leverage and deterrence, and that it is unlikely ever to be fully deployed, given the damage it would do to the US itself. However, what if the EU, in particular, calls Mr Trump’s bluff and/or it is intended even in part as a revenue-raising measure?

By Alastair Newton

June 03, 2025
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EA: May Be Disinflation’s Return

  • Negative payback in services inflation dragged the headline EA rate down to 1.92% in the May flash. Although only 7bps low on the day, releases last week had cut 0.1pp.
  • Inflation now looks set to spend a few months below the target rather than at or even above it, as had seemed likely until recently. This is not because of re-rooted imports.
  • Euro appreciation and low energy prices have expanded the ECB’s room to cut rates, but we still see June as the final one amid tight labour markets and peers backing away.

By Philip Rush

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