Latest news with #IsabelSchnabel
France 24
21-07-2025
- Business
- France 24
ECB expected to hold rates as Trump tariff uncertainty lingers
The 26 members of the ECB's governing council will meet just over a week before an August 1 deadline set by US President Donald Trump for the imposition of his government's punitive tariffs. Trump has threatened to triple a basic tariff on imports from the EU to 30 percent if Brussels does not cut a deal by the end of the month, casting uncertainty over the future of transatlantic trade. But the ECB was expected to hold tight on rates instead of preempting the outcome of negotiations, pausing a series of cuts that goes back to September. The central bank has reduced its benchmark rate a total of eight times since June last year and at each of its last seven meetings, bringing it down to two percent. The rapid reduction in rates has come as eurozone inflation has fallen back towards the ECB's two-percent target from the double-digit highs seen in 2022. In June, eurozone inflation sat exactly on the ECB's target and was forecast by officials at the central bank to even out at two percent for the year. 'More clarity' The ECB would "almost certainly leave interest rates unchanged" at the conclusion of its monetary policy meeting on Thursday, analysts from Italian bank UniCredit said in a note. "The central bank will now want to have more clarity on the trade outlook before it considers adjusting its policy further," they said. Despite the murky outlook, the ECB was in a "good place" to deal with what comes next, executive board member Isabel Schnabel told financial news service Econostream Media this month. And with the euro area economy showing some signs of life despite Trump's threats on tariffs, "the bar for another rate cut is very high", she said. Euro area factory output has grown four months in a row and the bloc's manufacturing PMI -- a survey-based measure of manufacturer's overall health -- rose in June to its highest level since August 2022. The improving picture painted by recent indicators could, however, be shattered were Trump to follow through with additional tariffs on top of steep existing levies on auto manufacturers, steel and aluminium. Euro strength The sabre-rattling from the Oval Office over trade -- and Trump's repeated attacks on the US Federal Reserve's independence -- have otherwise had the impact of weakening the dollar against the euro. Were the euro to rise much further it would make matters "much more complicated", ECB Vice President Luis de Guindos told Bloomberg TV this month. A stronger single currency brought with it the risk of undershooting the ECB's inflation target by making imports cheaper and cooling the economy, while making European exports more expensive. Already, the ECB's forecasts published last month predict inflation to fall to 1.6 percent in 2026, before recovering to two percent the following year. A strong euro meant rate cuts later in the year were a matter of "when and by how much and not if", ING bank analyst Carsten Brzeski said. The question would get "more attention" at forthcoming ECB gatherings, Brzeski said, but the uncertainty over US tariffs argued in favour a "wait-and-see approach". Trump had upped the threatened level of tariffs on EU exports to the United States since the ECB's last meeting but where they would land after August 1 was uncertain. With the EU locked in talks with Washington to avoid higher tariffs, the necessary "clarity is unlikely to emerge by next Thursday", UniCredit analysts said. A pause was likely before another cut later in the year, perhaps already in September, the first meeting after the summer, they said. © 2025 AFP
Business Times
18-07-2025
- Business
- Business Times
ECB may wait until December to make final rate cut: survey
[FRANKFURT] The European Central Bank (ECB) can delay its final interest-rate cut until December without investors concluding in the meantime that easing is over, a Bloomberg survey of economists showed. A majority continues to expect the last quarter-point reduction in the deposit rate, to 1.75 per cent, will come in September after a pause next week. At the same time, half of the respondents think the ECB can sit out three meetings before traders assume borrowing costs are at their floor. That's longer than before, due to uncertainty over trade. This month's timeout has been well flagged by officials led by President Christine Lagarde, who sees the ECB in a 'good place' to navigate any challenges to economic growth and inflation that may arise. But there's less of a consensus beyond the summer. While Executive Board member Isabel Schnabel considers the bar for another cut to be 'very high', Finland's Olli Rehn and France's Francois Villeroy de Galhau fret that price gains will fall short of 2 per cent, particularly if the euro strengthens more against the US dollar. July's decision 'should be relatively straightforward, with most Governing Council members likely to back rates being on hold', said Fabio Balboni, senior euro-zone economist at HSBC. 'While some will see this as a pause, others will see it as the end of the cutting cycle. This could generate some discussions about the rates path beyond July.' About a quarter of survey participants reckon the ECB is already done lowering rates. Almost half predict a last move in September, while 21 per cent see it arriving in December. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up That's the month when Mariano Valderrama, Intermoney's chief economist, forecasts the first hike. While his call for a rate increase is the earliest, roughly one in five respondents expect one before the end of 2026. Whichever path policymakers choose will depend largely on trade talks between Brussels and Washington. After the European Union signalled it was close to a deal, US President Donald Trump threatened tariffs of 30 per cent. 'The development in trade negotiations between the EU and the US is the most important thing to watch, as this can tip the current balance between domestic strength and foreign demand,' said Julie Ioffe, European macro strategist at TD Securities. With an agreement unlikely by the time the ECB meets next week, the Governing Council will be 'unable to signal whether an additional cut is necessary or if the terminal rate has been reached'. The main challenge, said SEB's Jussi Hiljanen, is to 'avoid guiding markets either towards or away from another rate cut'. Traders see a less than 50 per cent chance of a decrease in September. A reduction is almost fully priced by year-end. In September and December, policymakers can consult fresh economic forecasts for the 20-nation euro zone. Last month, the ECB predicted inflation will settle at 2 per cent in 2027 after averaging just 1.6 per cent next year. Analysts see risks to June's projections as largely balanced. They are equally divided on whether over- or undershooting the inflation target is likelier. 'Downside risks are probably greater near term; upside risks for inflation may be greater by the medium term,' said Dennis Shen, an economist with Scope Ratings. He argues that cheap goods from China and other nations hit by US tariffs would probably damp price pressures if they are redirected to Europe, with the euro's ascent also having a disinflationary impact. Even after paring some gains, the single currency is up almost 12 per cent against the US dollar this year, trading near US$1.16. ECB vice-president Luis de Guindos told Bloomberg this month that US$1.20, a level not seen in more than four years, is where the economy may run into trouble. Poll respondents appear to have a higher pain threshold. Only about a quarter share Guindos's view, with the rest citing levels as high as US$1.35. Many said the pace of appreciation is as if not more important than the exchange rate itself in determining downside risks to prices. There are upside dangers, too, however. 'Increased public spending risks keeping core inflation above target levels,' said Sylvain Broyer, an economist at S&P Global Ratings. 'The ECB should not assume core inflation will easily return to and remain at its target in the coming years.' BLOOMBERG
Zawya
11-07-2025
- Business
- Zawya
ECB's Schnabel sets bar 'very high' for rate cut as economy holds up
FRANKFURT - The hurdle for another interest rate cut by the European Central Bank is "very high" as the euro zone economy is holding up better than expected despite uncertainty over trade, ECB board member Isabel Schnabel said in an interview published on Friday. Having halved its policy rate in just a year, the ECB has signalled it will now stay put and see how the economy copes with a simmering global trade war stoked by U.S. President Donald Trump. Schnabel expressed a clear preference for keeping rates steady as inflation was moored at ECB's 2% target, the euro zone economy was proving resilient and more government spending in Germany was brightening the outlook. "Inflation is projected to be at 2% and inflation expectations are well anchored," Schnabel told financial newswire Econostream. "In view of this, our interest rates are also in a good place, and the bar for another rate cut is very high." The ECB cut its policy rate to 2% last month - a level that Schnabel said was "becoming accommodative". The ECB's official range for the neutral rate, which is neither accommodative nor restrictive, is 1.75% to 2.25%. She said she would only back a cut if she saw "signs of a material deviation of inflation" from 2% and spoke against "fine-tuning" the rate in response to data such as swings in oil prices. The ECB's chief economist Philip Lane also said recently that the central bank would react to "material" changes in the euro zone's inflation outlook and ignore "tiny" ones. Striking a different tone to some of her colleagues, Schnabel played down recent strength in the euro's exchange rate, saying its "pass-through" to inflation would be limited and it reflected an improved economic outlook. "It seems that the uncertainty is weighing less on economic activity than we thought, and on top of that, we're expecting a large fiscal impulse that will further support the economy," she said. "So overall, the risks to the growth outlook in the euro area are now more balanced." She argued tariffs would prove inflationary over the medium term because of higher costs and less efficient supply chains, "which are not included in our standard projection models". (Reporting by Francesco Canepa. Editing by Alison Williams and Mark Potter)
Wall Street Journal
11-07-2025
- Business
- Wall Street Journal
ECB's Bar for Another Rate Cut Is High, Schnabel Says
The European Central Bank should refrain from lowering interest rates again after inflation in the 20-nation currency area hit the 2% target in June, rate setter Isabel Schnabel said Friday. 'Our interest rates are also in a good place, and the bar for another rate cut is very high,' Schnabel said in an interview with Econostream Media.
Bloomberg
11-07-2025
- Business
- Bloomberg
ECB's Schnabel Calls Bar for Another Cut Very High: Econostream
European Central Bank Executive Board member Isabel Schnabel said there'd have to be a major downward shift in inflation to justify another reduction in borrowing costs. In an interview with Econostream, Schnabel said interest rates are 'in a good place,' with disinflation proceeding broadly as expected and the 20-nation economy proving resilient.
