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Analysts said that the European Central Bank’s senior officials delivered a much-anticipated speech at the annual central bank governors’ summit in Jackson Hole, Wyoming on Saturday (August 24), but the speech failed to provide important guidance on the future path of the European Central Bank’s interest rates.
Carsten Brzeski, global head of macro research at ABN Amro, called ECB chief economist Philip Lane’s speech “very balanced”, highlighting the dangers of cutting rates too soon and maintaining unnecessarily tight monetary policy.
“(The speech) came with no guidance or pre-commitments, and if anything, it was a little tougher,” Brzeski told European Events on Monday.
Lane, who is responsible for presenting and proposing policy decisions to the ECB’s rate-setting Governing Council, warned meeting participants that the ECB’s return to its 2% inflation target was “not certain”.
However, he also stressed that keeping interest rates “too high and for too long” could lead to below-target inflation and weak growth across the eurozone.
Ryan’s comments come a day before another highly anticipated speech by Federal Reserve Chairman Jerome Powell. explain The time has come for the Fed to start cutting interest rates.
Claus Westerson, chief eurozone economist at Pantheon Macroeconomics, said the Fed’s increasing pre-commitment to cut interest rates – The weaker-than-expected U.S. employment data released earlier this month – It is unlikely to affect future ECB policy.
“The ECB had been expected to cut rates in September and now the Fed is also expected to cut rates. So in a way, this is the Fed joining the ECB, not the other way around,” Vestersen told Euractiv.
Markets currently expect the ECB to cut interest rates two or three times this year, with the first cut coming next month.
The European Central Bank is one of the oldest major central banks This year’s rate cutin June it cut its benchmark interest rate from a historic high of 4% to the current 3.75%.
Analysts surveyed by Bloomberg expect overall inflation to rise in August. – Preliminary estimates will be released on Friday (August 30) – It fell to 2.2%, down from 2.6% last month and well below the peak of 10.6% in October 2022.
Salary data unclear?
Data last week reinforced expectations for a rate cut next month, with data showing Negotiating a wage increase Eurozone GDP growth fell to 3.6% in the second quarter from 4.7% in the first quarter.
ECB policymakers The central bank has long warned that rising labor costs could put upward pressure on inflation, while suggesting that slower wage growth could hasten the easing of monetary policy.
Expectations of loose policy minute The ECB held its July meeting last week, describing September as “a good time to reassess the level of monetary policy constraints”.
“Of all the data (released last week), the most interesting was certainly the big fall in negotiated wage growth,” Westerson said.
He added: “It’s certainly a much bigger drop than we expected” and probably also a bigger drop than the “market consensus was expecting.”
However, Brzeski said some data released last week showed inflation was “stronger than expected.”
he lead Increase sales price expectations In the much-watched Business surveys and underlying wage growth in Germany, Europe’s largest economy, rose, excluding the base effect of a one-off inflation compensation program.
“I think the market is currently underestimating a little bit the upward pressure on inflation and its impact on the ECB’s decision-making,” Brzeski said.
“I still think the (ECB) will cut rates in September. My only comment is that the size of the cut is less clear than the market is currently pricing in.”
Eurozone shows signs of stagflation
Brzeski also pointed out that the eurozone economy currently has some “stagflation characteristics”, with inflation slightly above the target. Weak growth Covers most of the single currency area.
“My question now is: How will the ECB respond to this trend towards more stagflation?” he said.
Brzeski added that the ECB could try to “squeeze out the last bits of inflation” or allow inflation to hover between 2% and 3% to avoid hurting economic growth.
“It’s hard to see where the ECB stands in this debate,” the analyst said.
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