Latest news with #GoverningCouncil
Irish Examiner
20 hours ago
- Business
- Irish Examiner
Pause in ECB rate cuts anticipated amid uncertainty and steady inflation
The Governing Council of the European Central Bank will meet this week, with a pause in rate reductions largely anticipated after seven consecutive cuts in response to falling inflation. Policymakers will gather in Frankfurt on Thursday to consider the performance of the 20-country eurozone amid tariff threats from US President Donald Trump and ongoing political turmoil. After a total eight quarter-point moves that have brought the deposit rate to 2%, ECB President Christine Lagarde said last month that the cutting cycle is nearing its end, with the bank's deposit facility now at 2%. Inflation across the eurozone crept up marginally in June, rising to the ECB's target of 2%, up from 1.9% a month earlier, as energy and industrial goods continued to pull down prices, offsetting quick services inflation. Underlying inflation, a closely watched measure that excludes volatile food and fuel prices, meanwhile held steady at 2.3%, in line with expectations. Policymakers reckon they are well-positioned to sit out the elevated uncertainty, with borrowing costs at neutral levels that neither restrict nor spur economic activity. A key indicator of the influence rates are exerting will arrive on Tuesday with the ECB's quarterly Bank Lending Survey, the first since Trump unveiled his levies in April. Worried about growing risks, banks previously reported tighter credit standards, however, ECB Executive Board member Isabel Schnabel has said the last poll revealed a stimulative effect as lower borrowing costs boosted demand for mortgages. Speaking on the upcoming decision, Daragh Cassidy on said: "After seven consecutive rate cuts, and eight in total since last June, it's almost a given that the ECB will keep rates on hold at its next meeting. "Inflation is now pretty much bang on target at 2%. And with the ECB's key policy rate also at 2%, it's close to the level that's considered neutral for the Eurozone economy. "However, one further rate cut later in the year is still on the cards, probably in September. But the impact of Trump's tariffs on the Eurozone and global economy is creating huge uncertainty and making the outlook incredibly hard to forecast. "If the tariffs drag down Eurozone growth, or trigger a recession, the ECB could be forced to cut rates even further. We just don't know at this stage how it's going to all play out. But for now, the ECB is likely to keep rates on hold and adopt a 'wait-and-see' approach."
Yahoo
4 days ago
- Business
- Yahoo
ECB Won't Flinch Yet in the Shadow of Trump's Trade War
(Bloomberg) -- The European Central Bank is likely to stare down the economic danger posed by US President Donald Trump's tariffs by opting to leave a potential cut in borrowing costs for another day. The Dutch Intersection Is Coming to Save Your Life Why the Federal Reserve's Building Renovation Costs $2.5 Billion Milan Corruption Probe Casts Shadow Over Property Boom Mumbai Facelift Is Inspired by 200-Year-Old New York Blueprint How San Jose's Mayor Is Working to Build an AI Capital In their final decision before a seven-week summer break, policymakers on Thursday will probably keep the interest rate unchanged at 2%, pushing off a response to Trump's threatened tariffs of 30% until they materialize and their impact can be better assessed. With many officials likely to use the interlude for a long holiday, the temptation to restate that inflation is at target, and to postpone worrying about the economic outlook until new quarterly forecasts are compiled for the Sept. 10-11 meeting, may seem appropriate. What policymakers do know, however, is that trouble is lurking. Aside from concerns about tariffs, the euro has strengthened, damping the outlook for prices and threatening to further squeeze exporters. Meanwhile, another political crisis in France may be brewing over its bloated public finances. Given that backdrop, the ECB Governing Council could acknowledge among themselves that the chance of another rate cut in September is growing, even if they stick with their well-worn 'meeting-by-meeting' approach to decision making. In that vein, President Christine Lagarde, in her opening statement to reporters on Thursday, is likely to restate that risks to growth are 'tilted to the downside,' Morgan Stanley economists wrote in a preview titled 'Ready for the Beach.' What Bloomberg Economics Says: 'We expect the Governing Council's language after the July 24 meeting to be similar to the wording in June, leaving open the possibility of additional cuts without committing to them.' —David Powell, senior euro-area economist. For full analysis, click here Economic reports in the coming week will inform their deliberations. They include the ECB's own bank lending survey, due on Tuesday, consumer confidence on Wednesday, and purchasing manager indexes from across the region and other major economies, set for release on Thursday, hours before the outcome of the ECB deliberations. Other key indicators such as Germany's closely-watched Ifo business confidence and Italian economic sentiment will follow on Friday. Elsewhere, inflation numbers from Japan to Brazil and testimony by the UK central bank chief are among the things in store for investors. Click here for what happened in the past week, and below is our wrap of what's coming up in the global economy. US and Canada The US economic data calendar is relatively light and highlighted by a pair of housing market reports. On Wednesday, June data from the National Association of Realtors are projected to show a third month of scant change in sales of previously owned homes. Contract closings have been hovering near an annualized rate of 4 million, just above last year's level that was the weakest since 2010. Meanwhile, economists expect a government report on Thursday to show new-home sales recovered a bit in June after posting the biggest monthly decline since 2022. The pace of contract signings on new houses has largely trended sideways for the better part of two years. The housing market has struggled to gain traction as elevated mortgage interest rates and affordability constraints keep many potential buyers sidelined. Other reports include Friday's release of June durable goods orders, preceded by S&P Global's July manufacturing and services surveys on Thursday. Fed policymakers are in a blackout period ahead of their July 29-30 meeting, although Chair Jerome Powell on Tuesday gives welcoming remarks at a conference focused on capital frameworks for large banks. For more, read Bloomberg Economics' full Week Ahead for the US Further north, the Bank of Canada's business and consumer surveys for the second quarter will offer fresh insight into inflation expectations and investment plans. Retail data for May and a flash estimate for June are likely to show slumping sales as consumers pull back after a tariff-driven rush to buy cars earlier in the year. Two fiscal monitors from the federal government may contain more details about retaliatory tariff revenues collected to date. Asia Asia's data docket offers a broad cross-section of economic signals, from trade in South Korea to inflation indicators in Japan, Singapore and New Zealand. The figures will help clarify how the region's economies are responding to trade-related uncertainties. South Korea opens the week on Monday with 20-day trade data, an early indicator for July exports. Next follows consumer confidence on Wednesday and retail sales during the week, offering a read on household conditions after the Bank of Korea held rates steady this month. Also on Monday, China will release loan prime rates, which are expected to be kept steady for a second month in July, taking a cue from the People's Bank of China. Australia takes the spotlight on Tuesday with minutes from the Reserve Bank's July policy meeting, at which it shocked investors by keeping rates on hold at 3.85%. The minutes may offer a clearer sense of how close policymakers are to resuming their easing cycle. RBA Governor Michele Bullock is gives a speech on Thursday. On Tuesday, Taiwan is set to publish export orders for June, along with employment data. India's July PMIs, due Thursday, will indicate the resilience of both manufacturing and services activity. Japan closes out the week on Friday with a full slate of data, including Tokyo CPI, department store sales and factory activity. The inflation reading will offer an early steer on national price trends, while the other releases will help assess how well domestic demand and production are holding up. New Zealand reports second-quarter inflation on Monday, while Singapore publishes its price gauges on Wednesday and industrial production data on Friday. Thailand has car sales and customs trade balance figures during the week. For more, read Bloomberg Economics' full Week Ahead for Asia Europe, Middle East, Africa The UK will release public finance data on Tuesday at a time when its economic woes and fiscal position are very much in focus. With unemployment at a four-year high and growth faltering, PMI numbers on Thursday and retail sales on Friday may also draw attention. Britain's exposure to market stress may be a topic when Bank of England Governor Andrew Bailey and colleagues testify on financial stability to lawmakers on Tuesday. Their report on the matter earlier this month highlighted how UK bonds risk being hit by a wave of forced selling by highly leveraged hedge funds. Consumer-price numbers are among the highlights elsewhere. Data on Wednesday from South Africa will likely show inflation quickened to 3.1% in June from 2.8%, due to higher meat prices. Iceland's equivalent numbers are published the following day. For more, read Bloomberg Economics' full Week Ahead for EMEA Aside from the ECB, other rate decisions are scheduled across the wider region: Nigerian policymakers will probably leave their key rate unchanged at 27.5% for a third straight meeting on Tuesday, as inflation at 22.2% remains elevated and both core and food price growth have started accelerating again. Hungary's central bank is expected to keep borrowing costs on hold for a 10th consecutive month the same day, despite a sluggish economy, after inflation accelerated in June. The Ukrainian central bank is set to decide on policy two days later. Officials in Kyiv have kept the main rate at 15.5% since a hike in March. Turkish policymakers are expected to resume cutting borrowing costs on Thursday after reversing course in the face of political turbulence in March. The central bank is forecast to cut the key rate to 43.5% from 46%. The Bank of Russia has indicated it's likely to lower borrowing costs when policymakers meet on Friday, possibly by more than the 100 basis points reduction it announced in June that brought the key rate to 20% from a record high 21%. Latin America Argentina on Monday posts May GDP-proxy data. Economic activity in April jumped 1.9% from March and 7.7% a year earlier as President Javier Milei loosened some currency controls, part of a $20 billion agreement with the International Monetary Fund. Analysts surveyed by Bloomberg last month marked up their year-on-year forecasts for Argentina's second- and third-quarter output, to 8% and 4.2% respectively. Mexico, Latin America's No. 2 economy, takes center stage at mid-week, offering up economic activity data along with the mid-month consumer prices report. The May GDP-proxy print on Tuesday comes on the heels of April's better-than-expected readings, and after the economy flirted with a technical recession earlier in the year. A proliferation of headwinds — not least of which are US tariff and trade policies — has many analysts forecasting a shallow second-quarter slump, though. After a string of uncomfortably warm inflation readings, Mexico's June prints ticked down as supply shocks cooled. Against the backdrop of forecasts for modest disinflation, the central bank has signaled that it's likely to slow the pace of its easing cycle. Closing out the week, Brazil's mid-month inflation report will likely see a third straight lower reading under the weight of the highest borrowing costs in nearly two decades. Inflation expectations for 2025 have begun to come down, but remain above the central bank's target to the forecast horizon. For more, read Bloomberg Economics' full Week Ahead for Latin America --With assistance from Beril Akman, Mark Evans, Vince Golle, Tony Halpin, Erik Hertzberg, Robert Jameson, Swati Pandey and Monique Vanek. A Rebel Army Is Building a Rare-Earth Empire on China's Border How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All What the Tough Job Market for New College Grads Says About the Economy Godzilla Conquered Japan. Now Its Owner Plots a Global Takeover How Taylor Swift Turned a Glitter Freckle Maker Into a Sensation ©2025 Bloomberg L.P. 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
Business Times
5 days ago
- 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
Reuters
14-07-2025
- Business
- Reuters
Exclusive: Tariff threat complicates ECB's July decision but won't derail pause to rate cuts, sources say
FRANKFURT, July 14 (Reuters) - U.S. President Donald Trump's threatened 30% tariff on European Union imports is complicating the European Central Bank's decision-making but is unlikely to derail plans for a pause in rate cuts next week, five ECB policymakers told Reuters. The ECB signalled after its June meeting that it was likely to keep interest rates unchanged on July 23-24. But the 30% duty floated by Trump is steeper than the ECB had anticipated even under the most negative of three scenarios for the euro zone economy it released last month. That means the ECB has been forced to come up with new estimates and policymakers to contemplate a more negative outcome than they thought possible in June, said the five sources, all members of the ECB's Governing Council. They said governors remain reluctant to act on the basis of what is still a threat, however, especially given the sometimes contradictory statements made by Trump's administration since his first announcement of global tariffs in April. Any discussion about rate cuts is therefore likely to be kept for the ECB's September meeting, the sources said. Trump said on Sunday that his tariffs would kick in on August 1, and the European Commission has also paused its countermeasures until that date. Market economists have largely said they think it unlikely that Trump will follow through with his tariff threat because of the damage it would cause to the U.S. economy in terms of higher inflation and lower growth. But should the 30% levy be imposed, they expect the ECB to cut interest rates in response. Barclays analysts predicted a lowering of the ECB's deposit rate to just 1% by next March from 2% now if the U.S. imposes an average tariff rate on EU goods of 35%, which they estimated would subtract 0.7 percentage points from euro zone growth. The ECB's latest macroeconomic projections, released in June, pointed to a gradual recovery in the euro zone economy in coming years, with inflation hovering around its 2% target. Those projections assumed as their baseline a 10% tariff on EU good exports to the U.S., which would put euro zone economic growth at 0.9% this year, 1.1% next year and 1.3% in 2027. But forecasts under an alternative scenario released at the same time showed that a 20% U.S. tariff would curb growth by 1 percentage point over the same period and also pull down inflation to 1.8% in 2027, from 2.0% in the baseline scenario.
Yahoo
14-07-2025
- Business
- Yahoo
Exclusive-Tariff threat complicates ECB's July decision but won't derail pause to rate cuts, sources say
By Francesco Canepa and Balazs Koranyi FRANKFURT (Reuters) -U.S. President Donald Trump's threatened 30% tariff on European Union imports is complicating the European Central Bank's decision-making but is unlikely to derail plans for a pause in rate cuts next week, five ECB policymakers told Reuters. The ECB signalled after its June meeting that it was likely to keep interest rates unchanged on July 23-24. But the 30% duty floated by Trump is steeper than the ECB had anticipated even under the most negative of three scenarios for the euro zone economy it released last month. That means the ECB has been forced to come up with new estimates and policymakers to contemplate a more negative outcome than they thought possible in June, said the five sources, all members of the ECB's Governing Council. They said governors remain reluctant to act on the basis of what is still a threat, however, especially given the sometimes contradictory statements made by Trump's administration since his first announcement of global tariffs in April. Any discussion about rate cuts is therefore likely to be kept for the ECB's September meeting, the sources said. Trump said on Sunday that his tariffs would kick in on August 1, and the European Commission has also paused its countermeasures until that date. Market economists have largely said they think it unlikely that Trump will follow through with his tariff threat because of the damage it would cause to the U.S. economy in terms of higher inflation and lower growth. But should the 30% levy be imposed, they expect the ECB to cut interest rates in response. Barclays analysts predicted a lowering of the ECB's deposit rate to just 1% by next March from 2% now if the U.S. imposes an average tariff rate on EU goods of 35%, which they estimated would subtract 0.7 percentage points from euro zone growth. The ECB's latest macroeconomic projections, released in June, pointed to a gradual recovery in the euro zone economy in coming years, with inflation hovering around its 2% target. Those projections assumed as their baseline a 10% tariff on EU good exports to the U.S., which would put euro zone economic growth at 0.9% this year, 1.1% next year and 1.3% in 2027. But forecasts under an alternative scenario released at the same time showed that a 20% U.S. tariff would curb growth by 1 percentage point over the same period and also pull down inflation to 1.8% in 2027, from 2.0% in the baseline scenario. 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
