ECB reduces the deposit rate to 2.0 %
At its session yesterday, the ECB council decided to reduce all of its three key interest rates by a quarter percentage. This corresponded to the unanimous expectation of the banking economists surveyed by Reuters. The ECB attachment rate now amounts to 2 %. According to its own statements, the ECB has arrived in the neutral area of its monetary policy – it apparently wanted to go there. First of all, the central bankers in the Frankfurt Skytower should take a break. The time is likely to be chosen. Nobody knows whether US customs policy will lead to deeper faults in growth and inflation, or whether at the end applies: Taco – Trump Always Chickens Out! This should probably be clearer after the summer break. However, according to today’s knowledge, US politics will leave significant scratches in the economic image of the euro area. We therefore expect the ECB to reduce its key interest rates by a quarter percentage again. Then she would have exhausted the currently maximum scope of monetary policy. For further steps, it would need a harder slump in the economy. This cannot be ruled out, but today the scenario was with the lower probability. And only a surprising increase in inflation is likely to arrange for the ECB to raise its key interest rates soon.
US economy is not indestructible
In economic terms, Donald Trump started his presidential office. The US economic output decreased in the first quarter with an annual rate of 0.2 %. The real estate mogul, of course, blamed his predecessor Joe Biden’s fault for this false start. In the past few weeks, however, there was an impression that, despite the chaos emitted by the White House, the US economy did not get to its knees, the US economy was practically indestructible. Despite the break-in of many mood indicators in March and April, the US economy created just under 200 thousand new bodies. The GDPnow model of the Federal Reserve Bank of Atlanta even predicted a US growth rate of a whopping 4.6 % for the second quarter. In view of this, there was concern whether our US growth forecast of 1.0 % may be too pessimistic for 2025. However, the latest news gave our economic skepticism again. In May, US automotive sales fell by a good 9 % in the month comparison and the US shopping manager index for the services slipped under the expansion threshold. In addition, the anecdotal reports from the districts of the US Federal Reserve, the so-called “Beige Book”, show that the US economy has easily declined. This is in the striking contradiction to the forecast of the GdPnow model of the Fed Atlanta. The report of the US Ministry of Labor this afternoon could show how the US economy is really. According to the survey of the private personnel service company ADP, the US private economy created only 37 thousand new bodies in May. Since there is also hardly any changed employment in the “Beige Book”, we expect the US Ministry of Labor to report an employment increase of less than 100 thousand.
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