Latest news with #JackAllen-Reynolds
CNBC
2 days ago
- Business
- CNBC
The European Central Bank is almost guaranteed to cut rates. Here's what could happen next
The European Central Bank is all but guaranteed to trim its key interest rate on Thursday. Markets were last pricing in an around 99% chance of a 25-basis-point cut, according to LSEG data. That would take the deposit facility rate to 2% — half of the mid-2023 high of 4%. But Europe faces a highly uncertain economic outlook, raising the question of what the ECB could do beyond Thursday's meeting. Inflation is now hovering around the central bank's 2% target again, with flash data on Tuesday showing consumer prices in the euro zone rose just 1.9% in May. Meanwhile, economic growth has still been sluggish: the gross domestic product in the euro zone grew by 0.3% in the first quarter of 2025, according to the latest estimate. The bloc faces many unknowns, both at home and abroad. That includes U.S. President Donald Trump's tariff agenda — widely regarded as having a negative impact on growth — and potential retaliatory moves from the European Union, as well as how the EU's major rearmament plans and Germany's big fiscal shift could play out. Here's what analysts say about the central bank's potential next steps, and what they might mean for consumers. Analysts and economists are widely expecting more interest rate cuts from the ECB later in the year, but aren't counting on the bank to give a strong indication of where exactly rates could be headed. Tuesday's inflation figures increased chances that, after this week, the next rate trim could come as soon as July, said Jack Allen-Reynolds, deputy chief euro zone economist. Others struck a more cautious tone, with Barclays economists suggesting in a note last week that rate cuts are on the horizon but won't be implemented as soon. "We believe the ECB will remain non-committal on its policy path and continue to follow a meeting-by-meeting approach to maintain flexibility and optionality in policy calibration," they said. They're also expecting more rate cuts from the ECB, forecasting two more 25-basis-point reductions in September and December — meaning the ECB would hold rates steady over the summer months. Elsewhere, a BofA Global Research report published earlier this week said the ECB was now "running out of reasons not to go below 2%," echoing the suggestion of further rate cuts on the horizon. But, it noted, the ECB is unlikely to give hints about just how low it could go. "We expect some acknowledgment that door is open to move rates below 2%, but a very explicit signal is unlikely. Uncertainty on tariffs will give the Governing Council enough cover to not pre-commit to more," the report said. Crucially, the ECB will also publish its latest staff projections this week, highlighting what it expects for inflation and economic growth. That comes after the Organisation for Economic Co-operation and Development's latest Economic Outlook report, which forecast 1% growth and 2.2% inflation for the euro area this year. For consumers, more ECB rate cuts would mainly affect borrowing and savings rates. Exactly how it plays out for them depends on what type of products they hold, and how long the rates on them are set for, Bas van Geffen, senior macro strategist at RaboResearch, told CNBC. For example, he said, a 10-year fixed mortgage and a demand deposit would be affected in different ways. "The interest rate on short-term deposits tends to follow the deposit rate quite closely," he said. "A week after the ECB meeting, the policy rate goes into effect. So, if the ECB cuts the deposit rate Thursday, banks will receive 0.25% lower interest on their deposits with the central bank. This may cause them to lower the interest rate they pay on savings accounts as well," van Geffen explained. Products with fixed longer-term rates have a more complicated relationship with central bank interest rates, he said, as they're not only determined by the current policy rate — which often changes — but also by future expectations. "The market has long been expecting the ECB to cut rates this week. So, that may already be included in long-term interest rates to some extent. That also means that these long-term rates do not necessarily change after this week's policy decision," van Geffen said.
Qatar Tribune
3 days ago
- Business
- Qatar Tribune
Eurozone inflation slows to 1.9% in May, below ECB target
Agencies Eurozone inflation eased in May to its lowest level in eight months, official data showed on Tuesday, falling back below the target of 2% set by the European Central Bank (ECB), further raising expectations for another interest rate cut this week. Year-over-year consumer price increases in the single currency area slowed more than predicted by analysts for FactSet to 1.9%, down from 2.2% in April, the EU's official statistics agency said. Core inflation, which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the ECB, also eased more than expected to 2.3% in May, down from 2.7% a month earlier. The ECB is expected to deliver its seventh-straight interest rate cut Thursday as the United States' volatile trade policies hang over the sluggish eurozone economy. 'This won't have much of a bearing on Thursday's ECB decision, which already looked almost certain to be a 25 basis point cut,' said Jack Allen-Reynolds, deputy chief eurozone economist at U.K.-based investment research group Capital Economics. 'But May's inflation data strengthens the case for another cut at the following meeting in July,' he said. Eurozone inflation is at its lowest point since September last year, when it stood at 1.7%. The slowdown in inflation was thanks to prices for services easing to 3.2% from 4.0% in April, Eurostat said. The ECB closely monitors the sector as it is highly correlated to wage growth. The ECB fears that a vicious cycle between rising wages and prices would make it more difficult to tackle inflation. In energy, the rate was negative 3.6%, unchanged from the month before. Food-price inflation accelerated, however, to 3.3% last month from 3.0% in April. Inflation has sharply dropped from the record peak of 10.6% in October 2022 after Russia's invasion of Ukraine sent energy prices sky-high. Capital Economics' Allen-Reynolds said he expected inflation to fall further in the months ahead, 'leaving the headline rate comfortably below 2% in the second half of the year.' 'Subdued oil prices and a stronger euro will drag down energy inflation and lead to cheaper production inputs and imports. Decelerating wage growth will bring the long-awaited cooling in the sticky services category,' said Riccardo Marcelli Fabiani, senior economist at Oxford Economics. Consumer price rises in Europe's two economic powerhouses, Germany and France, slowed in May to 2.1% and 0.6%, respectively. While the eurozone economy expanded by 0.3% over the January-March period from the previous quarter, U.S. President Donald Trump's erratic trade policy, including the potential for steep tariffs, has hurt the region's economic outlook. Trump has put a 50% duty on EU goods on ice until July 9 as the two sides chase an agreement, but a 10% levy remains, alongside 25% tariffs on steel, aluminum and auto imports. Trump now also plans to raise duties on steel and aluminum to 50%.
France 24
3 days ago
- Business
- France 24
Eurozone inflation slows sharply in May
Year-on-year consumer price increases in the single currency area slowed more than predicted by analysts for FactSet to 1.9 percent, down from 2.2 percent in April, the EU's official statistics agency said. Core inflation -- which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the ECB -- also eased more than expected to 2.3 percent in May, down from 2.7 percent a month earlier. The ECB is expected to deliver its seventh-straight interest rate cut Thursday as the United States' volatile trade policies hang over the sluggish eurozone economy. "This won't have much of a bearing on Thursday's ECB decision, which already looked almost certain to be a 25 basis point cut," said Jack Allen-Reynolds, deputy chief eurozone economist at UK-based investment research group Capital Economics. "But May's inflation data strengthen the case for another cut at the following meeting in July," he said. Eurozone inflation is at its lowest point since September last year, when it stood at 1.7 percent. The slowdown in inflation was thanks to prices for services easing to 3.2 percent from 4.0 percent in April, Eurostat said. The ECB closely monitors the sector as it is highly correlated to wage growth. The ECB fears that a vicious cycle between rising wages and prices would make it more difficult to tackle inflation. In energy, the rate was negative 3.6 percent, unchanged from the month before. Food-price inflation accelerated, however, to 3.3 percent last month from 3.0 percent in April. Further drops Inflation has sharply dropped from the record peak of 10.6 percent in October 2022 after Russia's invasion of Ukraine sent energy prices sky-high. Capital Economics' Allen-Reynolds said he expected inflation to fall further in the months ahead, "leaving the headline rate comfortably below two percent in the second half of the year". "Subdued oil prices and a stronger euro will drag down energy inflation and lead to cheaper production inputs and imports. Decelerating wage growth will bring the long-awaited cooling in the sticky services category," said Riccardo Marcelli Fabiani, senior economist at Oxford Economics. Consumer price rises in Europe's two economic powerhouses, Germany and France, slowed in May to 2.1 percent and 0.6 percent, respectively. While the eurozone economy expanded by 0.3 percent over the January-March period from the previous quarter, US President Donald Trump's erratic trade policy, including the potential for steep tariffs, has hurt the region's economic outlook. Trump has put a 50-percent duty on EU goods on ice until July 9 as the two sides chase an agreement but a 10-percent levy remains, alongside 25-percent tariffs on steel, aluminium and auto imports.
Hindustan Times
3 days ago
- Business
- Hindustan Times
Eurozone inflation slows sharply in May
Inflation in the eurozone eased in May to its lowest level in eight months, back below the European Central Bank's two-percent target, further raising expectations for another interest rate cut this week. Year-on-year consumer price increases in the single currency area slowed more than predicted by analysts for FactSet to 1.9 percent, down from 2.2 percent in April, the EU's official statistics agency said. Core inflation which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the ECB also eased more than expected to 2.3 percent in May, down from 2.7 percent a month earlier. The ECB is expected to deliver its seventh-straight interest rate cut Thursday as the United States' volatile trade policies hang over the sluggish eurozone economy. "This won't have much of a bearing on Thursday's ECB decision, which already looked almost certain to be a 25 basis point cut," said Jack Allen-Reynolds, deputy chief eurozone economist at UK-based investment research group Capital Economics. "But May's inflation data strengthen the case for another cut at the following meeting in July," he said. Eurozone inflation is at its lowest point since September last year, when it stood at 1.7 percent. The slowdown in inflation was thanks to prices for services easing to 3.2 percent from 4.0 percent in April, Eurostat said. The ECB closely monitors the sector as it is highly correlated to wage growth. The ECB fears that a vicious cycle between rising wages and prices would make it more difficult to tackle inflation. In energy, the rate was negative 3.6 percent, unchanged from the month before. Food-price inflation accelerated, however, to 3.3 percent last month from 3.0 percent in April. Inflation has sharply dropped from the record peak of 10.6 percent in October 2022 after Russia's invasion of Ukraine sent energy prices sky-high. Capital Economics' Allen-Reynolds said he expected inflation to fall further in the months ahead, "leaving the headline rate comfortably below two percent in the second half of the year". "Subdued oil prices and a stronger euro will drag down energy inflation and lead to cheaper production inputs and imports. Decelerating wage growth will bring the long-awaited cooling in the sticky services category," said Riccardo Marcelli Fabiani, senior economist at Oxford Economics. Consumer price rises in Europe's two economic powerhouses, Germany and France, slowed in May to 2.1 percent and 0.6 percent, respectively. While the eurozone economy expanded by 0.3 percent over the January-March period from the previous quarter, US President Donald Trump's erratic trade policy, including the potential for steep tariffs, has hurt the region's economic outlook. Trump has put a 50-percent duty on EU goods on ice until July 9 as the two sides chase an agreement but a 10-percent levy remains, alongside 25-percent tariffs on steel, aluminium and auto imports. Trump now plans to raise duties on steel and aluminium to 50 percent. raz/ec/lth
Gulf Today
01-04-2025
- Business
- Gulf Today
Eurozone inflation eases as US trade tariff threat looms
Inflation in the eurozone slowed further in March, official data showed on Tuesday, indicating possible breathing room for policymakers despite the threat of turbulence from US trade tariffs. Inflation in the single currency area reached 2.2 per cent, calmed by an easing of energy tariffs and prices in the services sector, the EU's Eurostat statistics agency said. That was down slightly from the 2.3 per cent figure for February, bringing the rate close to the European Central Bank's two-percent target. Inflation has gradually eased since a peak in October 2022 following Russia's invasion of Ukraine, which sent energy prices soaring. The European Central Bank has pivoted from hiking interest rates to tackle inflation, to lowering them to boost the eurozone's floundering economy. Last month it lowered its benchmark deposit rate by a quarter of a percentage point to 2.5 per cent, but its head Christine Lagarde warned of risks from US tariff threats and massive German spending plans. In March inflation in prices for services eased to 3.4 per cent from 3.7 per cent in February, Eurostat said. In energy, the rate was negative 0.7 per cent, from 0.2 per cent the month before. Food-price inflation accelerated slightly however. The key measure of underlying inflation − stripping out the effect of volatile energy and food prices − also eased, from 2.6 to 2.4 per cent. Economist Jack Allen-Reynolds at investment research group Capital Economics said the March fall in inflation 'strengthens the case for the ECB to cut interest rates at the meeting on 17th April', again by a quarter-point. Trade tensions threat - Economists warn that US President Donald Trump's announcement of sweeping trade tariffs on other countries risks driving inflation up again and curbing growth. Trump is scheduled to unveil his latest wave of tariffs on Wednesday but has not indicated their full size or scope. He introduced 25-percent tariffs on imported steel and aluminium last month and has vowed duties of the same size on vehicles shipped to the United States from Wednesday. ING bank economist Bert Colijn said the new inflation figures could justify a new rate reduction in spite of the high uncertainty created by the tariff threat. Lagarde, however, cautioned on Monday that it was too soon to declare victory in the fight against inflation. 'Unfortunately we are facing a lot of uncertainty,' she told French radio station France Inter, warning that the threat of new tariffs 'leads to changes'. The eurozone inflation data 'gives the central bank additional room to prioritize growth without abandoning its inflation mandate,' said Daniela Sabin Hathorn, senior market analyst at in a note. However, concerns over the economic impact from the trade tensions 'may encourage the ECB to stay on a gradual but steady path toward monetary easing', she added. Global commodity trading house Gunvor said on Tuesday its earnings fell in 2024 as energy markets normalised from the extreme conditions that enabled trading houses to make record earnings in previous years. Gunvor's net profits after tax reached $729 million in 2024, down from $1.25 billion the previous year. That marks the second year of decreases in a row, and is just above the $726 million net profit the company made in 2021. 'The result reflects a return to more normalized energy markets compared with the previous two years, which featured significant volatility related to the global pandemic, the energy crisis, and international conflicts that had roiled energy markets,' Gunvor said. Profit fell despite a rise in revenue and traded volumes. Gunvor's traded volumes leapt to 232 million metric tonnes in 2024, up from 177 million last year. And the firm's revenue rose by around 7% on the year to $136 billion. Despite two years of lower net profit, Gunvor's 2024 result is its forth highest and above pre-pandemic levels. The world's major commodity trading houses, including Gunvor and its peers Trafigura and Vitol saw weaker 2024 results after bumper earnings in 2022-2023, when they took advantage of market dislocations across commodity markets created by the COVID pandemic, Russia's war in Ukraine and Europe's energy crisis. 'We are experts in tackling disruptive things. It's no coincidence that when things are really disruptive, we do well,' Chief Executive Torbjorn Tornqvist said at an industry event in Switzerland last week. Gunvor said its energy transition and shipping businesses had helped to balance the performance of its sectors operating in the 'stabilized' crude oil and refined products markets.' It added that its profit was impaired last year by the mothballing of its Rotterdam refinery, which it announced in December. Reuters
