ECB: Lagarde Summary: Growth Risks More Balanced, Disinflationary Process Over
The main takeaways from ECB President Lagarde’s press conference was that risks to economic growth are perceived to have become more balanced and that the disinflationary process is over. As cautioned following the initial publication of the rate decision statement showing a surprise 0.1pp downward revision to headline and core inflation in 2027, Lagarde was keen to stress the broadly unchanged inflation outlook and no desire for fine tuning policy.
- Risks to economic growth have become more balanced, while recent trade agreements have reduced uncertainty. A renewed worsening of trade relations could further dampen exports and drag down investment and consumption.
- If you walk back to June, we had a highly uncertain situation. But a deal has been documented since and a result of that, I think that two things have clearly moved out of our radar screen when it comes to downside risk; i) the risk of European retaliation and ii) broader uncertainty.
- The disinflationary process is over. We continue to be in a good place. Inflation is where we want it to be, at 2/2.1%, and the medium-term outlook on target. The domestic economy is showing resilience, the labour market is solid and risks are more balanced. But when I say that we are in a good place I'm not saying that we're on a pre-determined path.
- I never want to over stretch the general agreement in the room, but we had a unanimous decision by the GC today to leave all three interest rates unchanged.
- When asked about 1.9% inflation forecast for 2027 being below 2% for the second year in a row, Lagarde said it’s a “big” 1.9% and that as clearly indicated, the ECB won’t necessarily react to minimal deviations from target if it’s forecast to remain minimum and not long-lasting.
- The pushing back of fine-tuning was reiterated by saying many Governing Council members don’t want to overengineer policy.
- Regarding her July press conference which markets viewed as hawkish: In my July communication I expressed exactly what was felt by a very large majority of my governors around the table. And I think I've repeatedly said that we continue to be in a good place which does not mean that we are on a pre-determined path.
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US: Trump on Tariffs and Goldman Sachs
Donald J. Trump
@realDonaldTrump
Trillions of Dollars are being taken in on Tariffs, which has been incredible for our Country, its Stock Market, its General Wealth, and just about everything else. It has been proven, that even at this late stage, Tariffs have not caused Inflation, or any other problems for Country, other than massive amounts of CASH pouring into our Treasury’s coffers. Also, it has been shown that, for the most part, Consumers aren’t even paying these Tariffs, it is mostly Companies and Governments, many of them Foreign, picking up the tabs. But David Solomon and Goldman Sachs refuse to give credit where credit is due. They made a bad prediction a long time ago on both the Market repercussion and the Tariffs themselves, and they were wrong, just like they are wrong about so much else. I think that David should go out and get himself a new Economist or, maybe, he ought to just focus on being a DJ, and not bother running a major Financial Institution.
FED: Fed Gov Nominee Miran: No Tariff Inflation; Service Disinflation Imminent
Fed Governor nominee (and current CEA head) Miran on CNBC says he "just can't comment on current monetary policy at the moment" due to his impending Senate nomination. However he reiterates his view that there's little to no evidence of tariffs translating into stronger inflation, and he also makes the case that domestic services inflation will pull back "profoundly" due to reduced net immigration.
- "At the aggregate level, when you look holistically across the inflation data, there's just no evidence of [tariffs] whatsoever."
- "If you look at core... two of the strongest categories this month in terms of inflation were used cars and airfares. And neither of those have anything to do with tariffs. We don't import used cars from from abroad in large scale. And airfares are on domestic services... we've been doing a lot of thinking about just how much of this inflation is due to the illegal immigration that's occurred... Our calculations are that the massive in surge of renters into an only sluggishly adjusting housing supply probably boosted rents by about 4-5%. And that's a significant contribution to overall inflation at a time when the housing stock adjusts only slowly... we think that there's a very strong reason for thinking of very profound service disinflation coming up in the near future, as net migration has come to zero because the President's strong border policies."
- On the BLS jobs data, he says there's an element of "noise, uncertainty" that has "increased in recent years", including the birth-death model. "So this is a degradation in the quality of the statistics that has occurred. And I think the President is dead right when he says, we need to fix this. We need to make these statistics reliable. We need to make them believable. We need to make them credible. And I'm really delighted we're shaping up to be able to do."
- He says that re economic surveys, the BLS should consider "incentive schemes to drive response rates higher. I think that we can start thinking about ways to optimize the collection system, optimize the survey system, optimize the timing of responses. I think that we should be thinking critically about these questions."
BUNDS: German 10yr Yield is eyeing the July high
- This is the biggest single move in German Yields since the US NFP, the 10yr Yield could be set to test 2.769%, this was the July high, and highest printed level since late March.
Today reference 129.09:
- 2.769% = 128.88 (not far).
