ECB's Bar for Another Rate Cut Is High, Schnabel Says
'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.
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Powell's Caution on Tariff-Driven Inflation Is Right
President Donald Trump has taken to routinely maligning Federal Reserve Chair Jerome Powell as 'too late' because interest rates have been on hold at 4.25%-4.5% since he took office. On Tuesday alone, he characteristically took to social media to demand three percentage points of rate cuts — something that is never going to happen outside of a recession. Trump's needling aside, the latest inflation data show that Powell's wait-and-see approach is the exact right tack for today's economic outlook. The Bureau of Labor Statistics said Tuesday that the core consumer price index rose 0.2% in June from a month earlier, a slightly encouraging surprise that leaves the year-over-year rate at 2.9%. But the reading remains well above the Fed's 2% target 1, and the details of the report show that tariffs are starting to fan higher prices and that larger effects might start to feed through over the next couple of months.
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2 reasons why the stock market could hit 10,000 points by December
Yesterday (14 July), the FTSE 100 traded above 9,000 points. Despite some investor concerns about the health of the UK economy, I think there are several reasons why the main UK stock market can push higher in the coming months. In fact, I'm not ruling out a move to 10,000 points by the end of the year. Here's why. I still feel that some people get confused by assigning too much importance on how the economy is performing when it comes to the FTSE 100. Most of the large-cap stocks within the index are international. They choose to be headquartered in the UK, or listed here. This doesn't mean that the UK market is the largest for the company, or even that it generates any meaningful revenue on our shores. Although I'm not particularly optimistic about the UK economy going forward, I remain upbeat globally. The US is performing very well, despite concerns about tariffs. China is showing signs of recovery. The European Central Bank committee is nearing completion of its interest rate cuts, as it believes inflation is now under control. This bodes well for international companies to grow their earnings this year. It should filter down to higher share prices, driving the index up. On the other hand, a weakening UK economy should cause the British pound to depreciate. It could trade down to 1.20 against the US dollar, which would reflect an 11% fall. Given that most FTSE 100 companies are net exporters, this would provide a boost of a similar amount to their earnings when they are repatriated back to the UK. In theory, an 11% increase in the earnings for the index could push the price up. An 11% move would tally 10,000 points. The current price-to-earnings (P/E) ratio for the FTSE 100 is 16.5. When I compare this to the S&P 500 at 29.9, it appears to be a bargain. If I assume the aggregate earnings per share for the FTSE 100 remains the same but the P/E ratio rises by 11% to 18.3, this would put the index at 10,000 points. Even at that level, it still would be valued lower than the US, so I don't feel it's an unrealistic expectation. At a stock level, there are undervalued companies that could shine and act to help push the index higher. For example, Kingfisher (LSE:KGF) has experienced a modest 3% share price rally in the past year. Yet, with a price-to-earnings ratio of 13.55, it's below the index average. The retailing, DIY, and home improvement stock is also a way off its 52-week highs. However, quarterly results from May showed strong UK and Ireland revenue growth of 6.1% compared to the same period last year. I think the stock can climb over the coming year. Further interest rate cuts are expected to lead to higher demand for properties, driven by lower mortgage rates. By extension, this creates more demand for home improvement projects. One risk is France, where stores have been underperforming. The business can't just rely on the UK market to cover the shortfall going forward. Yet on balance, I think it's a stock to consider as part of a broader move higher in the FTSE 100. The post 2 reasons why the stock market could hit 10,000 points by December appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025