ECB may signal next move is still set to be a cut but with vague and cautious guidance
Economy relatively weak with anaemic growth and few hard indicators confirming projections materialising into fact
Inflation remains a concern due to high services prices and weak economy
Services prices stubbornly high despite multi-year wage deals suggesting easing pressures later this year
The European Central Bank (ECB) is expected to keep interest rates unchanged in the upcoming week as inflation remains a concern. According to various sources, including Nordea economist Jan von Gerich and UBS economist Reinhard Cluse, the ECB may signal that its next move is still set to be a cut but with vague and cautious guidance. This comes after the ECB lowered rates last month in what some considered a rushed move.
Services prices remain stubbornly high despite multi-year wage deals pointing to easing pressures later this year. Economists argue that the bigger elephant in the room is the sticky services prices, which are not driven by strong demand but rather by lagging factors such as wages. Multi-year wage deals already struck suggest that more benign numbers should come through eventually.
The economy also remains relatively weak, with a string of surveys pointing to anaemic growth. However, much of this is still just a hope and there have been few hard indicators coming through since the June 6 rate cut to confirm that projections are materialising into fact.
Some argue that the ECB is downplaying risks to its central scenario, which puts inflation back at its 2% target by the end of 2025 even as rates continue to ease. Another uncertainty is just how quickly the U.S. Federal Reserve will cut interest rates, with markets pricing in almost two rate cuts over the rest of the year and a little more than five moves by the end of next year.
The ECB will announce its policy decision on Thursday, followed by a press conference from President Christine Lagarde.
The European Central Bank (ECB) is expected to keep interest rates steady in the upcoming week.
, The manufacturing industries in Europe contracted according to a recent Purchasing Managers' Index.
, The ZEW Index for Germany showed a bigger decline than expected with the outlook for businesses deteriorating.
, Recent inflation data shows a decline in headline inflation, but wage growth remains a concern for the ECB.
, Wage growth has become the main obstacle for the ECB to reach its 2% inflation target.
, The economic trajectory is uncertain and biased to the downside, but the inflationary picture is still not clear.
Accuracy
The economic trajectory is uncertain and biased to the downside, but the inflationary picture is still not clear.
No new quarterly data is available for the ECB’s Governing Council to consider.
Recent inflation data shows a decline in headline inflation, but wage growth remains a concern for the ECB.
Wage growth has become the main obstacle for the ECB to reach its 2% inflation target.
Deception
(100%)
None Found At Time Of
Publication
Fallacies
(85%)
The author makes several statements that contain potential fallacies. Firstly, there is an appeal to authority when Anatoli Annenkov's quotes are used to suggest that the July ECB meeting will be more of a 'stock-taking exercise' than a policy-decision meeting. Secondly, there is an instance of hasty generalization when the author states that 'previous data points to a bumpy recovery in the euro area'. This statement is based on survey data and does not provide enough evidence to make such a definitive claim. Lastly, there are several instances of ambiguous statements regarding inflation dynamics and wage growth, which could be interpreted as an attempt to obfuscate the issue. However, without explicit examples of these fallacies from the article text itself, a score below 85 is not possible.
]Anatoli Annenkov of Societe Generale said in a recent research note[
