ECB: Bloomberg Sources Offer A Slightly More Hawkish Take Than Reuters
Bloomberg sources suggest a higher bar to rate cuts than an earlier Reuters sources piece which said “sources on the ECB's Governing Council said the debate on a rate cut was not over just yet, although policymakers probably won't have enough information by their next meeting in October 29 to make a proper assessment." The Bloomberg piece appears more in keeping with Lagarde’s rhetoric from today’s press conference. ERZ6 sees a minor downtick but holds off earlier lows with help from that Reuters report.
- "European Central Bank policymakers are convinced that no further interest-rate cuts are needed to deliver 2% inflation, despite new economic projections pointing to an undershoot over the next two years, according to people familiar with their thinking.
- While a reduction at October’s meeting can be virtually ruled out, December will be an opportunity to reassess as fresh quarterly forecasts will include 2028, the people said."
- See the full Bloomberg report here.
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ECB: Excess Liquidity Ticks Up But Longer-Term Downtrend Intact
Eurozone excess liquidity increased by E1.711bln during the w/c August 4 (weekly average) after a E14.899bln decrease in the previous week, bringing the measure to E2.661trn as of last Friday, August 8. Despite the slight increase this time, excess liquidity is continuing its longer-term downtrend, down by 45% from the series' high of E4.748trn in November 2022.
- The long-term decline since the peak has mostly been driven by a roll-off of the ECB's TLTROs (with the TLTRO III programme starting in 2019 with three-year maturities and with the final maturity in Dec 2024) as well as of the ECB's Monetary Policy Positions (MPPs), which are standing at a current E3.924trn combined.
- Amongst the MPPs, the ECB envisages a further average monthly roll-off of around E13.4bln of the PEPP through Dec-26 and of around E28.6bln of the APP through Jul-26 (respective f'cast horizons).
US: Senate HELP Committee Chair Cassidy Appears Open To Antoni At BLS
Samantha Handler at Punchbowl reports that Senator Bill Cassidy (R-LA) has acknowledged that President Donald Trump's removal of former Bureau of Labor Statistics Commissioner, Erica McEntarfer, was "understandable". Cassidy chairs the Senate Health, Education, Labor, and Pensions (HELP) Committee, which has jurisdiction over the nomination of EJ Antoni to replace McEntarfer at the BLS.
- Cassidy's spokesperson said in a statement: "BLS's years-long failure to produce reliable data - especially when that data has broad market-moving implications - is unacceptable. We need a BLS Commissioner committed to producing accurate, unbiased economic information to the American people. Chairman Cassidy looks forward to meeting with Dr. Antoni to dicuss how he will accomplish this."
- In the last hour or so, Fox Business published an interview with Antoni, conducted before Trump announced his nomination, in which he suggested the possibility of suspending the bureau's monthly jobs report. See: US: BLS Commissioner Nominee Antoni Suggests Suspending Monthly Payrolls Report
- The HELP Committee has an 11-10 Republican balance of power, meaning moderate Republican committee member Susan Collins (R-ME) is likely to be the crucial vote on advancing Antoni's nomination to a full Senate vote. Collins, an institutionalist, theoretically has the power to delay Antoni's nomination, subject to assurances that the BLS will maintain critical data releases.
- When lawmakers return from recess on September 2, time on the Senate floor will be limited as Senators must also address FY26 funding, pending exec branch nominations, and the nomination of Stephen Miran to temporarily fill the vacant Fed seat.
US DATA: Increased Share Of CPI Basket Growing >3% Y/Y
- Whilst core goods inflation undershot expectations for a further acceleration in M/M terms, a still solid monthly clip compared to 2024 levels (0.21% M/M in July after 0.20% in June vs -0.06% M/M averaged in 2024) is starting to see an increased share of items growing in excess of 3% Y/Y.
- We calculate 24% of core goods items increased >3% Y/Y in July after 18% in June to take it further away from recent lows of 13-14% through Oct-Jan. It's the highest share since Feb 2024.
- Context is important though, as it’s above the 18.5% averaged in 2019 and 12% averaged through 2015-19 but still of course far below the highs of 75% seen in late 2022.
- The core services equivalent meanwhile increased for a third consecutive month to 62% having recently bottomed at 50% in April. It averaged 38% in 2019 and 34% in 2015-19 for a longer pre-pandemic period.
