reports
- Dirk Schumacher
ECB April meeting: Baseline of June cut confirmed
As widely expected, policy rates were left unchanged at the ECB’s April meeting. Assuming no material change in the inflation outlook , the ECB things that it “would be appropriate” to ease policy in June . A likely delay in Fed rate cuts does not worry the ECB too much, though the development of the exchange rate will be one input to watch for the June inflation projections. We continue to expect a rate cut by June.
- Dirk Schumacher
- Dirk Schumacher
ECB preview: not quite there yet
We expect the ECB to remain on hold in April despite a further decline in headline inflation to 2.4% in March. Rather we expect the ECB to reiterate its long-held view that it would need to see further evidence that wage pressure is moderating . The continuing stickiness of services inflation is likely to be stressed in this context . That said, we also expect the ECB to provide some hints that the baseline scenario remains consistent with a start of the cutting cycle by June...
- Dirk Schumacher
- Dirk Schumacher
- Dirk Schumacher
Euro area : Are structural factors behind weaker exports?
The euro area has been stagnating now for mo re than one year. One factor holding back the economy is weakness in export growth : exports have been trending down for five quarters now. This weakness is partially simply a correct ion of prior very strong export growth. The volume of exports is now broadly back to its long-term trend. But there is also evidence that export growth is undershooting its fundamental drivers . G iven the relative robustness of global growth, euro area exports shou...
- Dirk Schumacher
The ECB’s new operational framework: excess liquidity remains key
The ECB’s published e arlier this week changes to its operational framework , that is the mechanism through which it implements it s monetary policy. The Deposit Facility Rate is now officially the ECB’s policy rate, reflecting the intended policy stance. Because of this, the ECB will ensure that there is a sufficient amount of excess central bank reserves in the system to keep the overnight rate close to the DFR. For the time being, liquidity will be provided mainly via short-term and 3...
- Dirk Schumacher
Euro area: Will services price inflation remain sticky?
Services price inflation has been sticky over the last couple of months, diverging from the disinflationary dynamics seen in other price categories. A moderation in wage pressure and lagged effects from lower energy prices should also lead to lower price pressure in the services sector and we forecast services inflation to decline to around 2.5% by the middle of this year. One risk factor for this scenario is continuing supply constraints in the services sector that could imply further “s...
- Dirk Schumacher
ECB March meeting: warming up to a rate cut
The ECB, as widely expected, left its policy rates unchanged . The downward revision of the inflation path , as well as comments made by President Lagarde during the press conference made clear that the ECB is moving towards a rate cut. However, in order to feel “sufficiently confident“ to start eas ing , the ECB still needs to see more data and Lagarde hinted strongly at the June meeting at the point when this would be the case . We continue to expect the first rate cut to take plac...
- Dirk Schumacher
ECB March meeting: opening the door for a rate cut
The ECB’s March meeting will mark the start of the “official” discussion about the timing of the first rate cut. Unlike in previous meetings, the question of the timing of a rate cut will be now on the agenda. The updated staff projections are likely to show a downward revision of inflation for this year, reenforc ing the signal that the ECB is moving closer to a rate cut. No immediate actions, however, will follow from this discussion at this point and t he ECB will stress again...
- Dirk Schumacher
- Jesus Castillo
- Nathalie Dezeure
- Dirk Schumacher
Euro area: Inflation, wages and the ECB. How will it all end?
Euro area i nflation continues to trend low er and has been now below 3% for four months running. The ECB, however, remains reluctant to declare victory and demand s more evidence that the battle has been won , before starting to ease its policy stance. That reluctance is understandable. For one , the decline in inflation is not evenly distributed across the different price categories and services inflation remains sticky. Most importantly , wage growth looks too strong to allow a f...
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