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ECB Braces for ‘More Volatile' Inflation After Reaching 2%

ECB Braces for ‘More Volatile' Inflation After Reaching 2%

Bloomberg01-07-2025
I'm Craig Stirling, a senior editor in Frankfurt. Today we're looking at the inflation outlook for policymakers meeting at the European Central Bank's retreat in Portugal. Send us feedback and tips to ecodaily@bloomberg.net. And if you aren't yet signed up to receive this newsletter, you can do so here.
In 11 years of European Central Bank retreats to the Portuguese resort of Sintra, euro-region crises have too often been an embarrassing distraction.
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US weekly initial unemployment claims unexpectedly fell -4,000 to a 3-month low of 217,000, showing a stronger labor market than expectations of an increase to 226,000. The US June Chicago Fed national activity index rose +0.06 to -0.10, stronger than expectations of -0.15. The July S&P US manufacturing PMI fell -3.4 to 49.5, weaker than expectations of 52.7 and the lowest level in 7 months. US June new home sales rose +0.6% m/m to 627,000, weaker than expectations of +4.3% m/m to 650,000. Federal funds futures prices are discounting the chances for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and 63% at the following meeting on September 16-17. EUR/USD (^EURUSD) Thursday fell by -0.03%. The euro fell from a 2.5-week high Thursday and turned slightly lower on comments from ECB President Lagarde, who said the economic risks to the Eurozone are tilted to the downside and a stronger euro could dampen inflation more than expected. The euro initially moved higher Thursday on hopes that a trade deal between the EU and US was close. Also, signs of strength in the Eurozone economy boosted the euro after the Eurozone July S&P manufacturing PMI rose to a 3-year high and the July S&P composite PMI rose to an 11-month high. In addition, the euro garnered support Thursday after the ECB kept interest rates unchanged and said the Eurozone economy has so far proven resilient. The Eurozone July S&P manufacturing PMI rose +0.3 to a 3-year high of 49.8, right on expectations. The Eurozone July S&P composite PMI rose +0.4 to an 11-month high of 51.0, stronger than expectations of +0.1 to 50.7. Eurozone June new car registrations fell -7.3% y/y to 1.010 million units, the largest decline in 10 months. The German Aug GfK consumer confidence index unexpectedly fell -1.2 to a 4-month low of -21.5, weaker than expectations of an increase to -19.3. As expected, the ECB kept the deposit facility rate unchanged at 2.00%. 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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on

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