The ECB cuts rates by 25 bp, but alters its statement to no longer say that policy is restrictive. But they warn that "trade tensions" are "likely to have a tightening effect." So are they saying policy is tight -- given the environment -- or aren't they? Like the Fed, it's deer in the headlights.
ECB and Euro Area Economy Monitor
ECB and Euro Area Economy Monitor
Thursday, March 6, 2025
The good news from the ECB is that they expect inflation slightly below target next year. The bad news is that they are downgrading growth expectations. With one more 25 bp rate cut today, they say policy is "meaningfully less restrictive," which implies it is still restrictive. No mention in the statement of tariffs specifically -- only the code-phrase "rising uncertainty." Fair enough.
ECB and Euro Area Economy Monitor
Thursday, January 30, 2025
Another rate cut from the ECB while the Fed stands pat. Remarkably, the ECB believes now that it will hit its 2% inflation target this year, even as the Fed continues to defer its estimates of when ultimate victory will be achieved. Of course neither central bank has any idea what causes or cures inflation. They just extrapolate the last couple months of data, to be frank about it. Europe's last couple months look better than the US's. So that's that.
ECB and Euro Area Economy Monitor
Thursday, December 12, 2024
The ECB lowers rates 25 bp, and drops the word "restriction" from the statement. Are they saying they are done normalizing policy at 3%? We doubt that.
ECB and Euro Area Economy Monitor
Thursday, October 17, 2024
Another cut from the ECB, and an acknowledgement that "the disinflationary process is well on track." However, unlike the Fed, the ECB is worried about "recent downside surprises in indicators of economic activity."
ECB and Euro Area Economy Monitor
Thursday, September 12, 2024
The ECB greases the skids for next week's FOMC with another 25 bp rate cut. But part of their rational is a downgrade of growth expectations. At next week's FOMC, the Fed should imitate the former but not the latter.
ECB and Euro Area Economy Monitor
Thursday, July 18, 2024
The ECB leaves rates unchanged, following the first cut at the prior meeting. No change, really, in the Council's inflation outlook, except for this new and most bizarre theory of inflation: "the inflationary impact of high wage growth has been buffered by profits." One can only gasp when one imagines the discussion in the Council meeting when such baseless theories were bandied about in competition with each other to arrive at today's non-decision.
ECB and Euro Area Economy Monitor
Thursday, June 6, 2024
You think the Fed is bad? The ECB just cut rates for the first time this cycle, "based on an updated assessment" which -- wait for it -- revises upward, yes, upward, staff projections of inflation for this year and next. No recession fears or anything else cited as an explanation. We'll see how LaGarde dances around this in the press conference. By the way, there's no particular record of the ECB being a leading indicator of what the Fed will do -- but if you are looking for Fed rate cuts, hard to see how this hurts.
ECB and Euro Area Economy Monitor
Thursday, April 11, 2024
Euro area inflation peaked after US inflation, and has come down further and faster. But like the US, it seems stuck above target so far this year. Nevertheless, the ECB statement language doesn't seem worried about it one little bit. Still signaling rate cuts are coming (not saying when, though).
ECB and Euro Area Economy Monitor
Thursday, March 7, 2024
The good news is that the ECB is lowering all its inflation forecasts. The bad news is they still believe price pressures persist thanks to "strong growth in wages." They now say "financing conditions are restrictive." Time to increase expectations for rate cuts.