Latest news with #Euro-area
Irish Examiner
3 days ago
- Business
- Irish Examiner
Economists warn ECB to avoid delaying last two rate cuts
The European Central Bank will lower interest rates twice more, according to a Bloomberg survey, but respondents warned it shouldn't wait too long between those moves or investors will conclude that its easing campaign is already over. Respondents predict quarter-point reductions on June 5 and at September's meeting, when new quarterly forecasts should shed more light on the effects of US President Donald Trump's reordering of global trade. That would bring the deposit rate to 1.75%, where the poll sees it settling through the end of 2026. With inflation near 2%, Belgium's Pierre Wunsch and Greece's Yannis Stournaras — who hail from either end of the hawk-dove spectrum — have each discussed the merits of pausing soon. As well as buying time to digest the jolts from Trump's tariffs, a timeout would signal ECB loosening is approaching an end, without formally committing. 'Further easing is still on the cards this year but most likely not before autumn,' said Nerijus Maciulis, chief economist at Swedbank. After June's cut, 'the Governing Council will have a full three months to assess the impact of changes in US trade policy.' Sitting out one or more meetings before continuing to trim borrowing costs would risk communication challenges for President Christine Lagarde that grow with time, the poll showed. Almost 30% of analysts say the ECB can hold just once before markets conclude rates are at a floor. A quarter reckon it can afford a pause stretching for two meetings. The ECB is wary of confusing investors. An account of its last policy meeting revealed that officials saw the need 'to be a beacon of stability' and not cause 'more surprises in an already volatile environment, which might amplify market turbulence.' Asked at which point the ECB would acknowledge that it's finished lowering rates, most survey respondents said it won't. 'The ECB wants to keep all options open,' said Ulrike Kastens, a senior economist at DWS International. 'Although the disinflationary trend is well on track in the short term, the ECB is likely to reiterate that the medium-term outlook for inflation is uncertain.' A stronger euro, cheaper oil and softer economic growth — consequences of the trade uncertainty — suggest inflation will reach the ECB's target sooner than previously thought. But risks including supply-chain disruptions and retaliatory tariffs by the European Union could revive price pressures down the line. Euro-area consumers are showing signs of concern. Their expectations for inflation over the next 12 months ticked higher in both March and April. Analysts predict the ECB's new outlook next week will largely confirm the one presented in March, with weaker inflation this year and slower growth in 2026. But they also warn the forecasts won't fully account for the trade mess the euro zone could find itself in. 'The biggest challenge will be how to deal with ongoing tariff uncertainty,' ING's Carsten Brzeski said. 'The ECB needs to wait until the end of the 90-day pause before it can incorporate tariffs into its projections. This means that, for now, only the disinflationary impact from a stronger euro and lower oil prices will dominate the rate decision.' The alternative outcomes that the ECB will publish alongside its baseline may help determine the best course of action. But the fact that such scenarios are being prepared at all — having not been used since the pandemic and Russia's attack on Ukraine — underscore the ever-changing backdrop with which policymakers are grappling. 'After several months in which ECB policy has been very predictable, the summer could present bigger challenges,' said Fabio Balboni, a senior euro-zone economist at HSBC. 'An increasing divergence seems to emerge within the Council on what's next.' In addition to rates, some officials want to discuss the implications of quantitative tightening as maturing bonds roll off the ECB's balance sheet. Executive Board member Piero Cipollone has said rate cuts, which ease financing conditions, should 'compensate' for QT. Only about a quarter of respondents share his concern and say the ECB should halt the policy — either immediately or once reductions in borrowing costs are over. Traders are betting on at least one more cut this year beyond June, fully pricing it will arrive by October with a 30% chance of further reduction by December. A quarter of economists, however, see next week's rate move as the end of the line. 'The ECB will need to send a message that balances the baseline that the cutting cycle is essentially done, while keeping its options open for any negative shocks that may materialize,' said Bas van Geffen, senior macro strategist at Rabobank. 'That's a tightrope to walk, with the markets pricing further cuts and still biased to look for lower rates.' Bloomberg.
Yahoo
3 days ago
- Business
- Yahoo
Economists Warn ECB to Avoid Delaying Over Last Two Rate Cuts
(Bloomberg) -- Supply Lines is a daily newsletter that tracks global trade. Sign up here. NYC Congestion Toll Brings In $216 Million in First Four Months The Economic Benefits of Paying Workers to Move Now With Colorful Blocks, Tirana's Pyramid Represents a Changing Albania NY Wins Order Against US Funding Freeze in Congestion Fight NY Congestion Pricing Is Likely to Stay Until Year End During Court Case The European Central Bank will lower interest rates twice more, according to a Bloomberg survey, but respondents warned it shouldn't wait too long between those moves or investors will conclude that its easing campaign is already over. Respondents predict quarter-point reductions on June 5 and at September's meeting, when new quarterly forecasts should shed more light on the effects of US President Donald Trump's reordering of global trade. That would bring the deposit rate to 1.75%, where the poll sees it settling through the end of 2026. With inflation near 2%, Belgium's Pierre Wunsch and Greece's Yannis Stournaras — who hail from either end of the hawk-dove spectrum — have each discussed the merits of pausing soon. As well as buying time to digest the jolts from Trump's tariffs, a timeout would signal ECB loosening is approaching an end, without formally committing. 'Further easing is still on the cards this year but most likely not before autumn,' said Nerijus Maciulis, chief economist at Swedbank. After June's cut, 'the Governing Council will have a full three months to assess the impact of changes in US trade policy.' Sitting out one or more meetings before continuing to trim borrowing costs would risk communication challenges for President Christine Lagarde that grow with time, the poll showed. Almost 30% of analysts say the ECB can hold just once before markets conclude rates are at a floor. A quarter reckon it can afford a pause stretching for two meetings. The ECB is wary of confusing investors. An account of its last policy meeting revealed that officials saw the need 'to be a beacon of stability' and not cause 'more surprises in an already volatile environment, which might amplify market turbulence.' Asked at which point the ECB would acknowledge that it's finished lowering rates, most survey respondents said it won't. 'The ECB wants to keep all options open,' said Ulrike Kastens, a senior economist at DWS International. 'Although the disinflationary trend is well on track in the short term, the ECB is likely to reiterate that the medium-term outlook for inflation is uncertain.' A stronger euro, cheaper oil and softer economic growth — consequences of the trade uncertainty — suggest inflation will reach the ECB's target sooner than previously thought. But risks including supply-chain disruptions and retaliatory tariffs by the European Union could revive price pressures down the line. Euro-area consumers are showing signs of concern. Their expectations for inflation over the next 12 months ticked higher in both March and April. Analysts predict the ECB's new outlook next week will largely confirm the one presented in March, with weaker inflation this year and slower growth in 2026. But they also warn the forecasts won't fully account for the trade mess the euro zone could find itself in. 'The biggest challenge will be how to deal with ongoing tariff uncertainty,' ING's Carsten Brzeski said. 'The ECB needs to wait until the end of the 90-day pause before it can incorporate tariffs into its projections. This means that, for now, only the disinflationary impact from a stronger euro and lower oil prices will dominate the rate decision.' The alternative outcomes that the ECB will publish alongside its baseline may help determine the best course of action. But the fact that such scenarios are being prepared at all — having not been used since the pandemic and Russia's attack on Ukraine — underscore the ever-changing backdrop with which policymakers are grappling. 'After several months in which ECB policy has been very predictable, the summer could present bigger challenges,' said Fabio Balboni, a senior euro-zone economist at HSBC. 'An increasing divergence seems to emerge within the Council on what's next.' In addition to rates, some officials want to discuss the implications of quantitative tightening as maturing bonds roll off the ECB's balance sheet. Executive Board member Piero Cipollone has said rate cuts, which ease financing conditions, should 'compensate' for QT. Only about a quarter of respondents share his concern and say the ECB should halt the policy — either immediately or once reductions in borrowing costs are over. Traders are betting on at least one more cut this year beyond June, fully pricing it will arrive by October with a 30% chance of further reduction by December. A quarter of economists, however, see next week's rate move as the end of the line. 'The ECB will need to send a message that balances the baseline that the cutting cycle is essentially done, while keeping its options open for any negative shocks that may materialize,' said Bas van Geffen, senior macro strategist at Rabobank. 'That's a tightrope to walk, with the markets pricing further cuts and still biased to look for lower rates.' YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Inside the First Stargate AI Data Center How Coach Handbags Became a Gen Z Status Symbol ©2025 Bloomberg L.P.
Yahoo
19-05-2025
- Business
- Yahoo
Euro-Area Inflation to Fall Below 2% on US Tariffs, EU Predicts
(Bloomberg) -- How a Highway Became San Francisco's Newest Park America, 'Nation of Porches' Maryland's Credit Rating Gets Downgraded as Governor Blames Trump NJ Transit Train Engineers Strike, Disrupting Travel to NYC NYC Commuters Brace for Chaos as NJ Transit Strike Looms Euro-area inflation will fall below the European Central Bank's target next year because of fallout from US trade policies, according to the European Commission. Consumer-price growth will slow to the 2% goal by the middle of this year and average only 1.7% in 2026, the EU's executive arm said in its spring forecast released on Monday. Downward pressures including lower energy costs, the diversion of Chinese goods and a stronger euro are having a 'clearly negative' impact, the commission said. Economic expansion is seen picking up to 1.4% next year from 0.9% in 2025, a slightly more optimistic view compared to the last ECB forecast in March and the International Monetary Fund's global outlook in April. Brussels officials see uncertainty weighing on domestic demand, but labor markets staying robust. 'Inflation is declining faster than previously forecast and is on track to reach the 2% target this year,' European Economy Commissioner Valdis Dombrovskis said. 'But we cannot be complacent. The risks to the outlook remain tilted to the downside, so the EU must take decisive action to boost our competitiveness.' The ECB will present its own set of quarterly forecasts alongside its next rate decision on June 5. Investors are expecting another reduction in borrowing costs, with many policymakers sharing the view that US tariffs will put downward pressure on prices. Uncertainty about how policies evolve is high. Most euro-zone exports to America are subject to a 10% tariff during a 90-day negotiation period. The EU is seeking to secure favorable terms in these talks, but it has also prepared a list of products to hit with counter-levies should discussions fail. The EU's forecasts assume that US tariffs remain at 10%, with higher duties on some products and exemptions on others, and used a cut-off date of April 30 for other inputs. Some de-escalation between the US and China was expected, but with duties remaining at a higher level than what was announced on May 12. The two nations agreed to temporarily slash tariffs to allow for talks after previously raising them to prohibitive levels. The tensions have raised the threat that a large amount of Chinese products get rerouted to the euro zone, intensifying competition and driving down prices. 'Given the magnitude of these flows, this is set to markedly increase competitive pressures in consumer goods markets across the EU,' the commission said. Together with the appreciation of the euro, this should push goods inflation down to close to 0% in the euro area, it said. Services costs have remained more elevated, mostly due to robust wage growth. It's expected to slow 'only gradually' to 2.5% toward the end of 2026. The situation presents a challenge to the ECB, which has to weigh the disinflationary impacts from tariffs in the short term against the longer-term effect from disrupted supply chains and higher fiscal spending in Europe. Many policymakers are wary of taking interests much lower and into territory where they'd boost economic activity. When the ECB presents new forecasts next month, it will produce different scenarios to capture various possible trajectories on how US tariff policy will evolve. Germany, the region's biggest economy, won't see any economic growth this year before rebounding to a 1.1% pace in 2026, the forecasts show. Austria is the only country in the EU predicted to suffer a contraction in 2025. The commission expects the euro zone's collective debt burden to rise to 91% of gross domestic product next year from 89% in 2024. That doesn't include some of the higher defense spending made possible by a relaxation of the bloc's fiscal rules because the national plans weren't concrete enough. --With assistance from Jorge Valero, Michal Kubala, Marton Eder and Harumi Ichikura. Why Apple Still Hasn't Cracked AI Microsoft's CEO on How AI Will Remake Every Company, Including His Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race As Nuclear Power Makes a Comeback, South Korea Emerges a Winner ©2025 Bloomberg L.P.
Bloomberg
02-05-2025
- Business
- Bloomberg
Euro-Zone Inflation Holds Above Target as ECB Weighs Cuts
Euro-area inflation unexpectedly held steady and an underlying measure jumped in an awkward report for officials weighing how to respond to the economic hit from US tariffs. Consumer prices rose 2.2% in April from a year ago, the same pace as in March, Eurostat said Friday. Economists had expected a slowdown to 2.1% in a Bloomberg survey.
Bloomberg
14-04-2025
- Business
- Bloomberg
Stocks Advance as Trump Pauses Tech Levies
Good morning. European futures gain on optimism over a US pause to consumer tech tariffs. Euro-area inflation expectations dip slightly. And central London has lost 11,000 workers. Listen to the day's top stories. European stock futures rose after Donald Trump paused additional import duties on consumer electronics, though he later said the US will place those goods in a different 'tariff bucket.' Check our markets wrap here.
