ECB: ABN AMRO See ECB Holding At 2.00% Going Forward
ABN AMRO expect the ECB to remain on hold at 2.00% going forward. They had previously expected another 50bp of rate cuts this cycle.
- “Our view that there would be further rate cuts was based on the outlook for a prolonged period of below-target inflation, which could potentially be extended by further declines in oil prices, euro strength and global goods price disinflation. However, the recent communication from the Governing Council suggests it is happy to look through this on the basis that inflation will eventually return to target during 2027”
- “Although the ECB’s inflation projection factored in a 25bp rate cut (as it was based on market rate expectations at the time), we doubt the Governing Council is minded to fine tune to that degree”.
- “In addition, even if the period of disinflation proves more prolonged that it currently expects, it will probably continue see inflation back to target over the medium term. The exception is if there were to be a significant growth shock, which sees the economy weakening for a more significant period than the ECB currently projects”
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FRANCE: RN Leader Bardella Indicates Censure Is Likely Via X
Jordan Bardella via X
@J_Bardella
The abolition of two public holidays, which are otherwise as meaningful as Easter Monday and May 8, is a direct attack on our history, our roots, and the France of work. No National Rally (RN) MP will accept this measure, which is provocative.
CANADA: Firm CPI Report Firmly Closes Door To July BOC Cut
If there was any lingering chance remaining of a BOC cut on July 30, it was very likely eliminated on the stronger-than-anticipated price pressures evident in the June CPI report.
- July pricing is now under 8% for a 25bp cut, vs 16% prior to CPI and having fallen from a little over 30% before Friday's strong labour market report. Further BOC easing by year-end is no longer seen, with just 17bp through the December meeting (23bp pre-CPI, 30bp pre-labour data).
- The main takeaway was the slightly-higher-than-expected print for the BOC's preferred inflation metric: with the trim / median average finishing Q2 averaging 3.05%, higher than the 2.95% "forecast" by the BOC in its April projections (its two tariff scenarios were 2.9% or 3.0%). For the quarter, Y/Y trim averaged 3.03% and median 3.07%.
- The underlying details by category and breadth of inflation pressures, which we'll look at separately, won't haave offered the BOC more comfort either.
- In short, June didn't see a major upside miss on the major core metrics, but when combined with the upside "miss" in headline CPI (a below-BOC target 1.8% Y/Y in Q2, but vs 1.5% in April's BOC projections), the apparent acceleration in inflation momentum, and the more solid-than-expected activity/labour market data, there's almost no reason for the BOC to contemplate a cut until at least the following meeting in September.
- The bigger question now is whether there will be further cuts at all.
FRANCE: Bayrou Plans Tax On Small Parcels
"*BAYROU: PLANS TAX ON SMALL PARCELS AMID UNFAIR COMPETITION" Bloomberg
- This was reported as a possibility back in April, where Bloomberg ran headlines suggesting France was considering "small-parcel fees as flows from China surge".
- In today's announcement, Bayrou cites the need to "protect our businesses and our producers from the tide of unfair competition that is assailing them." (via Le Parisien)
Additionally from earlier: "*BAYROU: WILL CREATE NEW TAX FOR HIGHEST EARNERS" Bloomberg
