Vai al contenuto

The focus is shifting to Frankfurt

Picture of François Christen

François Christen

Chief Economist

Despite persisting inflation, weaker economic conditions should prompt the ECB to adopt a cautious stance.

Original article published in French on agefi.com

The vacations are over for the ECB’s Governing Council, due to reconvene on Thursday. The outcome of the meeting is uncertain, as the Bloomberg poll shows. A slim majority is in favor of the status quo, but a minority of almost 40% of those polled expect all three key interest rates to be raised by 0.25% (which would take the deposit rate to 4%).

Whatever happens, the statement and Christine Lagarde’s remarks at the press conference will emphasize the need to restore price stability. Far from being under control, inflation is still running above the ECB’s 2% target. A further increase in euro interest rates is therefore likely, but it is possible that the central bank will grant itself a pause to gain a better grasp of inflationary dynamics and take stock of the concrete effects of the deterioration in the business climate observed over the summer.

Ahead of the ECB’s decision, the euro interest rate structure shifted upward. The yield on the 10-year German “Bund” has risen back above 2.6%, while that on the 2-year “Schatz” is around 3.1%. The sharp inversion of the euro yield curve foreshadows the end of the rate hike cycle in the near future, and a change of course by the ECB as early as 2024.

In the USA, the dollar yield curve has started to rise again, taking the yield on the 10-year T-Note to around 4.3%. The upturn in the ISM services index (54.5 in August after 52.7 in July) reflects a strengthening of activity and ongoing inflationary pressures (the price sub-index rose to 58). The decline in jobless claims (216,000 according to the latest weekly reading, the lowest since February) continues to reflect a tight labor market, in contradiction with the latest employment report.

The week ahead promises to be an eventful one. Wednesday’s inflation figures will be the main focus of attention. A moderate rise in consumer prices, confirming the trend seen in June and July, would reassure investors that the cycle of interest rate hikes led by the Federal Reserve is over. We are not, however, sheltered from an unpleasant surprise that could add fuel to the fire of the FOMC’s hawks.

We’ll also be keeping an eye on retail sales and industrial production, both of which surprised on the upside in July and rekindled hopes of a “soft landing” for the USA. The emergence of signs of moderation should prompt the central bank to adopt a more cautious wait-and-see stance, which could last several months before leading to an easing of monetary conditions during 2024.

Macro

Neither too hot nor too cold, but precarious

Wall Street's enthusiasm following the publication of satisfactory inflation figures is overdone.
Per saperne di più →
Macro

Caramba, another miss (except in Switzerland)!

After a sharp correction in December, bonds have delivered disappointing annual returns in 2024.
Per saperne di più →
Corporate

Happy Holidays 2024

✨ Christmas magic is in the air! It's that time of year again when we feel like kids, full of joy and wonder when unwrapping ...
Per saperne di più →
Macro

Goldilocks extends its holiday in the USA

A mild labour market and friendly central bankers reinforce the prevailing optimism.
Per saperne di più →
Corporate Social Responsibility

Sustainability and accomplishment

Sustainability is also a significant component of achievement, as the role of organisations is no longer limited to the search for profitability. The desire to ...
Per saperne di più →
Corporate

Le banche private Gonet & Cie SA e ONE swiss bank SA uniscono le loro forze e creano un attore di primo piano in Svizzera

Gonet & Cie SA e ONE swiss bank SA hanno il piacere di annunciare la loro fusione, che punta a dare vita a un operatore ...
Per saperne di più →
Macro

The “red wave” sparks enthusiasm

Donald Trump's return to the White House, however, entails several risks for bond investors.
Per saperne di più →
Macro

The hawks are sleepy, the vigilantes are waking up

The Federal Reserve's dovish stance and the prospect of a Donald Trump victory undermine bonds.
Per saperne di più →
Corporate Social Responsibility

Sustainability and integrity

At a time when the risk of greenwashing is coming under increasing scrutiny from supervisory authorities, particularly in the financial sector, there is no denying ...
Per saperne di più →
Macro

Economic data validate Fed’s plans

Defying predictions of any sort of landing, the US economy continues to fly at high altitude.
Per saperne di più →