Archive

July 01, 2025
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EA: Calm At The Inflation Target

  • An unsurprising achievement of the 2% target might urge a celebration at the ECB, but it does not demand policy action. Energy price declines can’t be relied upon to repeat.
  • The early consensus forecast was surprised on the upside, but raised by last week’s releases in France and Spain. So, while reassuring, this outcome is not dovish.
  • We expect inflation to stay close to the target, whereas the ECB forecasts a substantial drop below it, while calling policy well-positioned. We still see no more rate cuts.

By Philip Rush

June 18, 2025
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EA Inflation Predictably Near The Target

  • Disinflationary news from May’s flash inflation release was confirmed in the final print, although a rebound in some underlying inflation measures damped the initial signal.
  • Resurgent oil prices could rapidly reverse the dovish space expanded by past falls. Our forecast bumps around the target through 2026 and 2027, settling at 2%.
  • Other forecasts are a little lower and only suffer a slight bias to be exceeded. The ECB can remain reassured by an outlook close to 2% without cuts, and not deliver any more.

By Philip Rush

June 18, 2025
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UK Course-Corrected CPI Stays High

  • UK inflation unsurprisingly slowed in May as a correction to vehicle excise duty knocked 0.1pp from the rate, reversing all the upside to our above-consensus April forecast.
  • Services inflation aligns with the BoE’s forecast from its May forecast, where MPC members were biased towards slowing their easing. Underlying rates remain too high.
  • Inflation keeps trending above the consensus, cumulating a 1pp error since rate cuts began, but aligning with our forecast from 1yr and 2yrs ago. We remain hawkish.

By Philip Rush

June 16, 2025
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Euro Area Wage Costs Closer To Target

  • Non-wage labour costs rebounded in Q1, damping the overall slowdown to a surprisingly modest extent after the crash in negotiated wage growth revealed in May.
  • Unit labour cost growth has encouragingly slowed below 3%, with the latest impulse only 0.6% q-o-q. Any further easing here could encourage monetary easing to resume.
  • Stability at a low unemployment rate still suggests the policy setting is close to neutral, so we doubt disinflationary pressures will mount further and forecast no more rate cuts.

By Philip Rush

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