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Business Recorder
02-07-2025
- Business
- Business Recorder
ECB should keep rates at 2% unless new shocks hit, IMF says
SINTRA: The European Central Bank should keep its deposit rate at the current 2% level unless new shocks materially change the inflation outlook, Alfred Kammer, head of the IMF's European Department, said on Wednesday. The ECB has cut rates by two percentage points since June 2024 but signalled a pause for this month, even if financial investors still see another cut to 1.75% later this year. 'Risks around euro zone inflation are two-sided,' Kammer told Reuters on the sidelines of the ECB Forum on Central Banking in Sintra, Portugal. 'This is why we think the ECB should stay the course and not move away from a 2% deposit rate unless there is a shock that materially changes the inflation outlook. Right now we don't see anything of such magnitude.' ECB will keep doing all is needed to meet inflation goal, Nagel says Part of the reason why the IMF is taking a different view than markets is because it anticipates higher inflation next year than the ECB. The ECB projects price growth falling below its 2% target for 18 months from the third quarter, bottoming out at 1.4% in early 2026. 'For next year, we see inflation at 1.9%, which is above the ECB's own projections, partly because we take a different view on energy prices,' Kammer said. While most ECB policymakers see inflation risks balanced, there is an increasing group, including Finland's Olli Rehn, Belgium's Pierre Wunsch and Portugal's Mario Centeno, who have all warned about the risk of inflation falling too low.
Miami Herald
02-07-2025
- Business
- Miami Herald
Federal Reserve chair sends strong message on July interest rate cut
Don't hold your breath, but… Federal Reserve Chair Jerome Powell on July 1 told a global audience of world bankers, economists, and academics what could prompt a long-awaited U.S. interest rate cut later this month. Don't miss the move: Subscribe to TheStreet's free daily newsletter+ Speaking on a panel with four other central bank leaders at the Sintra Conference in Portugal, Powell outlined the requirements that are needed for the Federal Open Meeting Committee to cut the Federal Funds Rate at its next meeting on July 29-30. Related: Morgan Stanley predicts next Federal Reserve interest rate cut As the last rate cut was in December 2024, the politically independent Fed has been under mounting pressure from President Donald Trump to slash rates to put "TRILLIONS" of dollars back into the hands of consumers, businesses, and investors. Powell has defended the FOMC's universal decision to hold the Federal Funds Rate steady at 4.25% - 4.50% in June, despite describing the U.S. economy as "stable." The reason: expected inflation bubbling up prices this summer from President Trump's tariffs, which are external sales taxes on imported goods and services. The U.S. tariff rates are currently the highest the nation has seen in nine decades. The funds rate is tied to the cost of borrowing money, impacting all aspects of the American economy. Interest rates on mortgages, credit cards, auto loans, and a host of other loans and investment vehicles are straining wallets and portfolios. The FOMC's "wait-and-see" approach to the funds rate was in keeping, Powell said, with the Fed's dual mandate of prudent monetary policy. This requires the central bank to regulate the U.S. money supply by keeping inflation in check and the unemployment rate stable. Related: Top economist sends sobering tariff, interest rate forecast Some Fed and market analysts were forecasting the next probable rate cut of .25% could come at the September FOMC meeting. Then Fed Governors Christopher Waller and Michelle Bowman, both Trump appointees, separately said late last month that a funds rate cut could come as early as the July meeting, providing tariff inflation proved to be transitory and the jobs numbers didn't weaken. Other economists, including Powell during testimony last week on Capitol Hill, and Fed officials were not as aggressive. Morgan Stanley Chief U.S. Economist Michael T. Gapen said in a note to analysts that he did not expect to see a rate cut at all this year. The Sintra Conference is formally known as the ECB Forum on Central Banking. It is the European Central Bank's flagship annual meeting held each summer in Sintra, Portugal. This year's theme: "Adapting to Change: Macroeconomic Shifts and Policy Responses." Powell noted that a "solid majority of central banks later this year" will begin to reduce interest rates later this year. As for a July cut in the United States, Powell responded "I really can't say." He added that the Fed will be "carefully watching the labor market" over the remaining four 2025 meetings. The Bureau of Labor Statistics releases its June jobs report on Thursday, July 3. Related: Fed Chair Powell sends surprise message on interest rate cuts to Congress So how does Powell expect to look back on 2025? "It's clearly an important year,'' Powell said, drawing laughter from the audience and fellow panelists. "There's a lot going on…with trade, and I think I'm hopeful that we'll look back on it as a [successful] year." The panel moderator, Bloomberg anchor Francine Lacqua, then addressed the elephant in the room: "You get attacked by the president a lot on a personal basis. Does it make your job harder?" -More Federal Reserve: Fed interest rate cut decision resets forecasts for the rest of this yearFederal Reserve prepares strong message on long-term interest ratesFed official revamps interest-rate cut forecast for this year "I'm very focused on just doing my job," Powell responded. "I mean, there are things that matter…using our tools to achieve the goals that Congress has given us, maximum employment, price stability, financial stability, what we focus on 100%," . European Central Bank President Christine Lagarde supported Powell's nonpolitical independence. "I think I speak for myself, but I speak for all colleagues on the panel. I think we would do exactly the same thing as our colleague Jay Powell does," she said. On June 30, President Trump sent Powell a hand-written note demanding a 1% rate cut. This came the same day Treasury Secretary Scott Bessent stoked the flames around the topic of Powell's successor, with himself as a potential candidate. Powell's term as chair is up in May 2026, and his separate term as a member of the Fed's Board of Governors expires in January 2028. Despite the president making aggressive demands for months, Powell has said he won't resign as chair. Related: Fed official sends strong message on interest rate cuts The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
01-07-2025
- Business
- Yahoo
Lagarde says ECB 'will not rest' as eurozone inflation hits 2% in June
Annual inflation in the eurozone edged back to 2% in June, marking the first rise seen since January and reinforcing the European Central Bank's (ECB) cautious stance as it navigates the final leg of its disinflation campaign. According to a flash estimate from Eurostat released on Tuesday, consumer prices rose by 2% year-on-year, up from 1.9% in May, in line with economists' expectations. On a monthly basis, inflation accelerated to 0.3%, from a flat reading the previous month. Core inflation — which excludes volatile items such as food and energy — remained steady at 2.3% annually and rose 0.4% on the month, highlighting persistent underlying price pressures, particularly in services. Services inflation, a key focus for the ECB, rose to 3.3% in June from 3.2% in May, and jumped by 0.7% month-on-month, suggesting lingering demand-driven inflationary dynamics as the summer begins. Among the main inflation components, energy prices remained at -2.7%, though this marked a moderation from May's -3.6%. Food, alcohol and tobacco inflation slowed marginally to 3.1%, while non-energy industrial goods posted a 0.5% annual increase. At the country level, Estonia recorded the highest annual inflation rate at 5.2%, followed by Slovakia (4.6%) and Croatia (4.4%). France (0.8%) and Cyprus (0.5%) had the lowest rates. Monthly inflation was strongest in Greece, up 1.3%, while Finland was the only member state to record a price contraction at -0.2%. Speaking at the ECB Forum on Central Banking in Sintra, Portugal, ECB President Christine Lagarde reaffirmed the central bank's commitment to price stability. 'Much of the policy challenge over the last few years has involved stabilising inflation while facing fundamental uncertainty about the economy,' Lagarde said in her keynote address on Monday. Inflation, she noted, had peaked higher than in previous soft-landing episodes, but also decelerated more rapidly. Growth, while muted, remained within the historical range, and the labour market proved "exceptionally benign". Related Eurozone inflation falls below ECB 2% target in May: Rate cut in sight ECB lowers rates for the eighth time as trade tensions threaten growth Yet the path ahead remains fraught with uncertainty. Lagarde pointed to unresolved questions around the evolving dynamics of wages, profits and productivity, and warned that potential supply-side shocks could still derail progress. 'It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed,' she said. 'Our work is not done, and we need to remain vigilant.' Echoing football legend Sir Bobby Robson, Lagarde concluded: 'We will not rest until the match is won and inflation is back at 2%.' The euro held firm at $1.18, its highest level since September 2021, and is poised for a tenth consecutive session of gains — a streak not seen since 2003. The single currency has gained almost 14% year-to-date, on pace for its strongest year in more than two decades. Equity markets showed mild weakness in mid-morning trading. The Euro Stoxx 50 index fell 0.15%, weighed down by declines in Saint-Gobain (-1.7%), Deutsche Bank (-1.6%) and Mercedes-Benz (-1.4%). On the upside, Adidas and LVMH gained 2.7% and 2.4%, respectively. National indices also slipped, with Germany's DAX down 0.2%, France's CAC 40 off 0.4% and Italy's FTSE MIB retreating 0.6%.
Yahoo
01-07-2025
- Business
- Yahoo
Fed's Müller says ECB can wait before further rate changes
-- The European Central Bank (ECB) can afford to take time before considering additional interest rate changes, according to Estonian policymaker Madis Müller, who suggested the bank may not need to ease much more in the current cycle. Speaking Tuesday at the ECB Forum on Central Banking in Sintra, Portugal, Müller told Reuters that "it makes sense for policy to stay on hold for a while." "It's reasonable not to change rates in July," Müller stated. "While it's too early to discuss the autumn, it's also reasonable to assume that we should not go much lower during the current cycle, unless the euro area economy will turn out to be much weaker than we expect." Several factors support the ECB's patient approach. Inflation has essentially reached the bank's 2% target, economic growth is recovering, and interest rates are no longer hampering growth. The outlook could change significantly due to trade negotiations with the United States and potential increases in military and infrastructure spending, particularly in Germany. These factors suggest policymakers should wait until the situation becomes clearer. Müller noted that risks around inflation are now broadly balanced – an unusual situation for the ECB, which has spent the past decade fighting either too-low or exceptionally high inflation. The euro's rapid appreciation could potentially affect price growth and exporters' profitability. The currency was trading just above 1.18 against the dollar on Tuesday, its highest level since autumn 2021 and well above the 1.02 seen in early 2025. Despite this rise, Müller expressed little concern. "The euro exchange rate against the dollar is well within the historical range," he said. "The appreciation this year has indeed been quick but we're not at a level where I am particularly concerned." Related articles Fed's Müller says ECB can wait before further rate changes EU reportedly willing to accept universal 10% tariff but with sector exemptions Powell seen as 'lame duck' Fed Chair as his replacement could be added soon 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
Bloomberg
01-07-2025
- Business
- Bloomberg
ECB's Lagarde on Inflation: ‘Target Reached' But Not Mission Accomplished
European Central Bank President Christine Lagarde said on inflation, 'I'm not saying mission accomplished, but I say target reached.' Lagarde noted the central bank has reached its 2% target on inflation, but must remain vigilant as it faces a lot of uncertainty. Lagarde spoke Tuesday at the ECB Forum on Central Banking in Sintra, Portugal. (Source: Bloomberg)
