Daily update
Daily update
- There is a strong consensus about today’s ECB policy rate decision. A total of 53 out of 55 surveyed economists expect a 0.25% rate cut, and ECB Chief Economist Lane has practically promised an easing (chief economists are, of course, never wrong). The idea this year has been that most major central banks would follow inflation lower. Eurozone inflation is lower. Rate cuts are not stimulatory, but stabilizing (keeping the real interest rate steady).
- The uncertainty is not today’s move, but what happens next. Ideally the signal would be a steady rhythm of rate reductions—a quarter point a quarter, reflecting ongoing disinflation (as evidenced in yesterday’s producer price data). The risk is that ECB President Lagarde introduces deliberate uncertainty. Investors will focus on the press conference, and the subsequent “clarifying” statements from other ECB members.
- US April trade data is not normally a market moving number, but it has some relevance. For one thing, trade has become a political football, with US companies and consumers being taxed for daring to buy things made overseas. It also hints at domestic demand patterns.
- Europe offers retail sales figures—not very timely information. European consumers’ preference for southern European holidays over German-made cars is also not properly reflected in these figures.
