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5 days ago
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ECB to hold rates until at least December on stable economic outlook- Reuters poll
By Indradip Ghosh BENGALURU (Reuters) -The European Central Bank will hold interest rates at 2.00% in September according to a majority of economists polled by Reuters, with the euro zone's economic outlook broadly unchanged after the EU agreed a trade deal with the United States. Expectations have shifted from the previous poll in July when the majority of economists had forecast another rate cut next month. Now policymakers are seen waiting until December if they opt to cut rates one more time, but there is no longer a majority consensus for where the deposit rate will be by end-year. While most respondents said the 15% U.S. tariff on EU goods could weigh on growth and dampen price pressures, upcoming fiscal support, particularly from Germany, and reduced uncertainty are seen keeping the bloc on a steady growth path. Inflation is already at the ECB's target of 2%, providing additional assurance for policymakers. The central bank held rates last month, after a cumulative 200 basis point reduction since June 2024. The steady economic outlook is in contrast to the United States, where the jobs market is weakening, inflation is ticking higher and the Federal Reserve, which has held rates steady all year, faces growing doubts over its future independence from political interference. A majority of economists, 46 of 72, in the August 11-14 poll expect the ECB's Governing Council to leave interest rates unchanged next month. "Many of the GC members, whether they be hawks or doves, have been saying they don't need to do anything right now," said George Buckley, chief European economist at Nomura. "We've got a combination of rates that are neutral, growth at trend and inflation moving to the target or staying roughly around it." The 2% deposit rate is the midpoint of the ECB's estimated neutral rate range of 1.75% to 2.25% which neither stimulates nor restricts economic growth. Last month, nearly 60% of economists said there would be one more rate cut by year-end. Now just 47%, 34 of 72, expect one more cut, likely in December, while 31 forecast no further reduction and seven saw two additional 25 basis point cuts. "We are in a world in which tariffs are pretty much disinflationary. Certainly, this contributes to further risks the ECB could cut rates, but it's not necessarily bad enough for them to do it," said Fabio Balboni, senior European economist at HSBC. "We won't have enough new information by (September)...if I have to give a time for a possible further rate cut, maybe more likely December or even the start of next year." Inflation will average around 2% at least until 2027, according to poll medians, an outlook stable since June. The euro zone economy is forecast to grow 1.1% this year, 1.2% in 2026 and 1.4% in 2027, also broadly unchanged since June. "The (trade) deal was pretty much close to our base case," said Chris Scicluna, head of economic research at Daiwa Capital Markets. "Businesses have a little bit more certainty in terms of planning investments going forward." (Other stories from the Reuters global economic poll)
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25-07-2025
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Bank of Canada to hold rates steady on July 30, but cut two more times in 2025- Reuters poll
By Indradip Ghosh and Mumal Rathore BENGALURU (Reuters) -The Bank of Canada will hold its overnight interest rate steady at 2.75% on July 30 for the third consecutive meeting thanks to a recent rise in inflation and a fall in unemployment, according to a Reuters poll of economists that still found many expect at least two more cuts this year. The Canadian central bank has cut rates by a total of 225 basis points since June 2024, but has been on hold since March as policymakers await news on where a confusing barrage of U.S. tariff threats will eventually settle. The trade outcome is crucial to the outlook, given that more than 80% of Canada's exports go to its southern neighbour. Hefty import duties on goods ranging from steel and aluminium to automobiles have already dampened Canadian business and household sentiment. A recent threat from U.S. President Donald Trump to impose an across-the-board 35% tariff on goods not covered by the existing free trade agreement between Canada, the U.S. and Mexico has led to further confusion. That lack of clarity, combined with recent data on inflation and jobs, will keep the BoC on the sidelines next week, according to all 28 economists in the July 21-25 Reuters survey. "In response to unexpectedly positive data and renewed trade tensions ... we expect the Bank to continue to hold rates," wrote James Knightley, chief international economist at ING. "Nonetheless, with the risks skewed toward more economic weakness, we think risks are towards two, rather than just one, rate cut before the end of the year." Nearly two-thirds of the economists surveyed, 18 of 28, forecast that the BoC would cut its policy rate by 25 basis points in September to 2.50%. While there was no clear consensus on where that rate would be by the end of 2025, more than 60% of the economists - 17 - predicted at least two more reductions this year, including five who predicted three. Canada's economy, which shrank 0.1% in April after growing at an annualised pace of 2.2% in the first quarter, is expected to have contracted 0.5% in the second quarter, according to the median forecast in the poll. It is forecast to stagnate this quarter before expanding 0.8% in the fourth quarter, with the economy forecast to grow an average 1.3% this year and in 2026. Nearly half of the forecasters - 10 of 21 - expect the economy to enter a technical recession, defined as two consecutive quarters of contraction, at some point this year. Businesses remain cautious and are keeping hiring and investment under check, the latest BoC survey showed earlier this week. Demand in the housing market, a pillar of the economy and household wealth, has remained weak despite falling interest rates and house prices. "Interest rates don't appear to be low enough to stimulate housing activity, and business capital spending is likely to be muted until it's clear the Canada-U.S.-Mexico trade deal will be renewed," said Avery Shenfeld, chief economist at CIBC Capital Markets. "So barring a much better outcome for trade talks than we currently expect, we see the BoC cutting rates two more times over the balance of the year." Canadian inflation, which rose to 1.9% last month, is expected to average around 2% - the midpoint of the BoC's 1%-3% target - through at least 2027, though core price pressures are likely to remain elevated, median forecasts in the poll showed. (Other stories from the Reuters global economic poll) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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25-07-2025
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US economic data quality a worry, authorities not acting urgently enough, experts say
By Sarupya Ganguly and Indradip Ghosh BENGALURU (Reuters) -Risks to the quality of official U.S. economic data - long seen as the gold standard - are worrying 89 of 100 top policy experts polled by Reuters, with most also concerned that the authorities are not addressing the issue urgently enough. A decline in official survey participation rates and recent deep staff cuts at statistical agencies risk undermining the reliability of data that policymakers, companies and even households rely on to make decisions. The U.S. Bureau of Labor Statistics, the principal agency for labor market and inflation data has, like other government departments, been hit by firings, resignations, early retirement and hiring freezes as part of a White House cost-cutting push. Federal Reserve Chair Jerome Powell, who has held interest rates steady all year while keeping a close eye on whether President Donald Trump's tariffs have added to already-elevated price pressures, last month warned cutbacks could degrade key economic surveys. Most economists in a July 11-24 Reuters poll, 89 of 100, said they were concerned about the quality of official U.S. economic data, including 41 who said they were "very concerned". Survey respondents, who included Nobel Laureates, former policymakers, academics from top U.S. universities, and economists from major banks, consultancies and think tanks, were mainly worried about future data releases. "I can't help but worry some deadlines are going to be missed and undetected biases or other errors are going to start creeping into some of these reports just because of the reduction in staff," Erica Groshen, BLS commissioner from 2013-2017, told Reuters. "Another very big risk is all of the current administration's changes will make civil service employees more like political appointees .... I can't name any senator or congressperson who is a champion for federal statistics and has made supporting these agencies an important part of their agenda going forward." When Trump took office in January, the federal civilian workforce was 2.3 million. It was nearly 260,000 civil servants lighter by end-April, according to a Reuters tally. Estimates show BLS headcount is down at least 15%. Partly as a result, the agency is ending the calculation and publication from next month of about 350 components of the Producer Price Index, an indicator of inflation before goods reach the consumer. A BLS spokesperson said in a statement: "Response rates to most federal surveys have been declining for many years .... In addition to outreach efforts focused on encouraging households and businesses to participate in our surveys, BLS is exploring ways to overcome response rate and limited resource challenges." Other agencies, including the Bureau of Economic Analysis and the Census Bureau have had recent cutbacks to budgets and staff, said some sources familiar with the matter. Asked if U.S. authorities were treating the issue of economic data accuracy with sufficient urgency, more than 80% of respondents, 71 of 87, said "no". Some 70%, 63 of 90, also said U.S. government agencies did not have enough resources to maintain the collection and release of high-quality economic data. "Budget cuts are coming at a time when it's getting harder and harder to run surveys. You have to sample more people and chase people down, and that's a labor-intensive effort," said Ethan Harris, former head of global economic research at Bank of America. "People take statistical agencies for granted. So they're easy to cut because there's no lobby or special interest group that's powerful enough to protect them. I don't see any improvement going forward." More than two-thirds of those polled, 66 of 98, also said they were worried that deteriorating statistics would hurt Fed policymaking. A similar proportion of economists in a separate recent Reuters survey published this week said they were also concerned about the Fed's independence from political influence amid Trump's public attacks on Fed chief Powell. "Major statistical agency ... budgets are not adequate to support ongoing production of the wide range of high-quality statistics they have traditionally released," said Karen Dynan, professor at Harvard University and former U.S. assistant secretary of the Treasury for economic policy. "Policymakers are not prioritizing the issue enough to ensure the U.S. maintains its status as having the best statistical system in the world." Reuters surveys published this month also showed concerns about the quality of economic data published in Britain and the accuracy of unemployment statistics in India. (Additional reporting by Anant Chandak. Polling by Jaiganesh Mahesh, Renusri K and Aman Kumar Soni. Editing by Ross Finley and Mark Potter) Sign in to access your portfolio
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08-07-2025
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Quality of UK economic data concerning, quick fix unlikely, say economists: Reuters poll
By Indradip Ghosh BENGALURU (Reuters) -A clear majority of economists polled by Reuters are concerned about the quality of official British economic data, the backbone of monetary and fiscal policy decisions, and have doubts over how quickly they can be fixed. Facing criticism over unreliable economic data, Britain's Office for National Statistics announced measures last week to address the issue, including splitting its leadership structure and investing 10 million pounds ($14 million) over the next two years. But a Reuters poll published on Thursday showed reservations among analysts over how quickly the problems, primarily involving labour market data, can be fixed. The Labour Force Survey has seen a plunge in response rates since the COVID-19 pandemic, casting doubts over its results. The ONS also said last month that April consumer price inflation, which the Bank of England targets, was overstated by 0.1 percentage point. The British agency isn't alone. There are some concerns about the reliability of U.S. inflation data released by the Bureau of Labor Statistics as it faces a staffing crunch. The BoE, like other central banks, needs to be sure about inflationary pressures from the jobs market to set its policy. Governor Andrew Bailey recently described the data shortcomings as a "substantial" problem for policymakers. Inaccurate economic data also make it difficult for economists to produce forecasts, as historical data play a key role in that process. Nearly 85% of economists, 21 of 25, in a June 25-July 3 Reuters poll said they were concerned about the quality of official UK economic statistics, including 40%, or 10, who said they were very concerned. Only four said they were unconcerned. "Producing economic statistics is not an easy task, but the ONS has managed to let the quality slip of some fairly important statistics over the years," said James Rossiter, head of global macro strategy at TD Securities, one of the gilt-edged market makers (GEMMs) - primary dealers in UK government bonds. "The fact the agency was so slow to come to terms with the quality decline ... makes the institution's data less trustworthy than their peers in other developed economies." Rossiter said the big risk was that policymakers were left grappling with the true state of the economy against a volatile global backdrop. Worries about economic data could also hurt investor confidence, which is already low over erratic U.S. trade policies and ongoing geopolitical conflicts. Concerns have eased somewhat following the ONS's pledge to "restore quality and confidence" in its data, but a turnaround will take time. "There are clearly issues with UK labour market data which we are aware of and working with or around ... There isn't necessarily a quick fix here," said Cathal Kennedy, senior UK economist at RBC Capital Markets, also a GEMM. "The best way the ONS can rebuild confidence is to continue being transparent and open about the steps it is taking to improve its services. Some refocus on core/key areas is also likely to be beneficial." ($1 = 0.7320 pounds) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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10-06-2025
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Fed to keep rates on hold at least until September as inflation risks linger: Reuters poll
By Indradip Ghosh BENGALURU (Reuters) -The U.S. Federal Reserve will keep interest rates on hold for at least another couple of months, according to most economists polled by Reuters, as risks linger that inflation may resurge due to President Donald Trump's tariff policies. With most trade negotiations incomplete as the July 9 deadline for a 90-day pause on tariffs announced in April approaches, forecasters have been reluctant to change their already fragile economic outlook. Rising concerns about U.S. debt and a deluge of bond issuance fuelled by a sweeping tax cut bill passed by the House of Representatives, but not the Senate, are not helping. Data on Friday showed no signs of significant stress building in the labor market, suggesting the Fed is in no hurry to cut interest rates any time soon. All but two of the 105 economists in the June 5-10 Reuters poll predicted the Federal Open Market Committee would keep the fed funds rate unchanged at its June 17-18 meeting in a 4.25%-4.50% range, where it has been since the start of the year. Around 55% of economists - 59 of 105 - said the Fed would resume cutting next quarter, most likely in September and in line with interest rate futures pricing. That outlook has not changed from last month. "As long as the labor market looks fine, we expect the FOMC to continue to stay on hold, and use rhetoric to bolster their inflation-fighting credibility. Until there is a cost, why signal otherwise?" said Jonathan Pingle, chief U.S. economist at UBS. "At the moment 'grey area' seems more 'charcoal'... the Committee is facing a substantial amount of uncertainty." Inflation expectations have remained elevated on predictions of high U.S. trade barriers. The administration has recently raised aluminum and steel tariffs to 50% from 25%. U.S. officials are currently engaged in trade talks with top Chinese officials in London, looking to secure a breakthrough. In the meantime, consumers are expecting price pressures to surge in coming years, while economists predict inflation to remain well above the Fed's 2% target until at least 2027. A significant 42% minority of poll participants - 44 of 105 - expect the FOMC to resume cutting rates in the fourth quarter of 2025 or later, with 20 predicting no cuts this year. "High tariffs are here to stay, and they will produce elevated inflation that is sustained well into 2026," said James Egelhof, chief U.S. economist at BNP Paribas. "The Fed will see little need to cut... the lesson we have from history is, if inflation becomes entrenched in the economy, it can be very hard and very costly to remove." There was no clear consensus on where the rate would be by end-2025, but about 80% of economists - 85 of 105 - predicted the fed funds rate in a 3.75%-4.00% range or higher. Trump called for a full percentage point reduction to 3.25%-3.50% immediately on Friday. The president's signature bill making its way through Congress is expected to add $2.4 trillion to an already enormous $36.2 trillion debt pile, making a rate cut more unlikely. "With more fiscal stimulus coming out of the tax and spending bill, the Fed sees less of a case for supporting the economy with lower interest rates," said Bill Adams, chief economist at Comerica Bank. "The fiscal policy looks set to push the deficit (higher)... exerting continued upward pressure on long-term interest rates that will be a headwind for credit-intensive parts of the economy like the housing market and business capital spending." The economy, which contracted 0.2% last quarter on a widening trade deficit, is forecast to grow just 1.4% this year, a sharp fall from 2.8% in 2024. Next year, it was predicted to expand 1.5%. That outlook was unchanged from May. (Other stories from the Reuters global economic poll)
