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☆ Euro zone core inflation slows unexpectedly in April, blurring the picture for rate hikes
▼ + stars: | 2023-05-02 | by ( Silvia Amaro | ) www.cnbc.com time to read: +2 min

Headline inflation came in at 7% for last month, according to Eurostat, after it dropped to 6.9% in March. At the same time, core inflation, which excludes food and energy prices, stood at 5.6% in April — from 5.7% in March. Analysts polled by Reuters had estimated a figure of 7% for headline inflation and 5.7% for core. Rather than providing some clarity on how much the central bank might raise rates by, the latest numbers have blurred the picture somewhat. Market players have been debating whether the central bank will hike Thursday by 50 or 25 basis points.

☆ Euro zone economy ekes out 0.1% growth in first quarter, misses expectations as Germany stagnates
▼ + stars: | 2023-04-28 | by ( Jenni Reid | ) www.cnbc.com time to read: +3 min

The print came in below analyst expectations, with a Reuters poll of economists previously forecasting quarterly growth of 0.2%. The economy expanded by 1.3% on an annual basis, just missing an outlook of 1.4%. Earlier this month, statistics agency Eurostat had revised down its fourth-quarter 2022 gross domestic product estimate for the euro zone from 0.1% quarterly growth to zero, following 0.4% expansion in the third quarter. The slight first-quarter growth signal comes as economic performance contends with persistently high inflation. Irish GDP was a notable weak spot, declining by 2.7% on the previous quarter, while Portugal's economy grew by 1.6%.

Persons: Arne Dedert, Carsten Brzeski, Destatis, Emmanuel Macron's Organizations: Getty, Eurostat, ING, European Central Bank, Deutsche Bank, ECB Locations: Frankfurt, Ukraine, Germany, Europe

"The German economy remained stuck in the mud at the start of 2023, only barely avoiding recession," Pantheon Macroeconomics' chief eurozone economist Claus Vistesen said. The German economy shrank by a revised 0.5% in the fourth quarter of 2022 compared with the previous three months, reviving fears of a technical recession, defined as two consecutive quarters of contraction. "A gradual recovery is underway, despite a persistently difficult environment," German Economy Minister Robert Habeck said in the presentation of the forecasts. "The recent renaissance in industrial production could very well carry the economy through the second quarter," ING's global head of macro Carsten Brzeski said. "However, we are afraid that looking into the second half of the year, the German economy will continue its flirtation with recession."

☆ German industrial output rises more than expected in February
▼ + stars: | 2023-04-06 | by ( ) www.reuters.com time to read: +1 min

BERLIN, April 6 (Reuters) - German industrial production rose significantly more than expected in February due in part to vehicle manufacturing, increasing 2.0% on the previous month, the federal statistical office said on Thursday. "Despite the strong rebound, industrial production is still slightly below its pre-pandemic level." Industrial output is expected to increase further in the coming months. Pantheon Macroeconomics forecasts that industrial production will post a 3.0% quarter-on-quarter expansion in the first quarter, comfortably reversing the 0.5% decline in the fourth quarter. Year-on-year, industrial production rose 0.6% in February.

☆ Analysis: Grievances mount in Europe with future wealth in doubt
▼ + stars: | 2023-04-04 | by ( Mark John | ) www.reuters.com time to read: +5 min

That year-old conflict, the COVID-19 pandemic and an inflation-fuelled cost of living crisis have now brought things to a head. While many low-income U.S. workers discovered that post-lockdown labour shortages gave them leverage to negotiate solid wage increases, European workers initially prioritised job security over higher pay. Meanwhile the bump in corporate profits and shareholder gains started to aggravate a sense of inequality. The other option - allowing debt to rise further - looks tricky: European Union limits on deficits that were suspended after the pandemic will re-apply from 2024. The Macron and Scholz governments are seeking ways to allay the grievances, with Macron in particular suffering damage to his already weak personal popularity.

☆ German inflation expected to ease significantly in March
▼ + stars: | 2023-03-30 | by ( ) www.reuters.com time to read: +2 min

BERLIN, March 30 (Reuters) - Inflation is expected to ease significantly in Germany in March on the back of lower energy prices, preliminary data from six economically key states in the country showed on Thursday. The inflation rate in Brandenburg and Baden-Wuerttemberg fell to 7.8% year-on-year. In February, inflation rates for the six states had been between 8.3% and 9.2%. "It will directly raise inflation as local authorities will have to hike rubbish administrative fees and health insurers raise contribution rates to pay for the higher costs." While headline inflation slackens, core inflation - excluding energy and food - is expected to remain high.

☆ European Central Bank faces ‘unenviable choice’ on interest rates due to banking woes
▼ + stars: | 2023-03-16 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

London CNN —As recently as 24 hours ago, the European Central Bank (ECB) was widely expected to hike interest rates by half a percentage point Thursday in its fight against inflation. The lender has now agreed a $53 billion loan from Switzerland’s central bank saying it was a “decisive action to pre-emptively strengthen its liquidity.”The move seems to have reassured investors for now, with European bank stocks rebounding Thursday. Although European banks are judged to be well-capitalized, analysts say the events of the past week could lead them to adopt a more cautious approach to lending. ET, “is a test of the conundrum facing central banks,” said Adam Hoyes, an economist at Capital Economics. The ECB and other central banks will be weighing inflationary pressures against the risk of adding further stress to markets.

The Greens in particular, but also the SPD, want to invest more in the transition to a low-carbon economy. The FDP on other hand, seeks a return to solid public finances after signing off on hundreds of billions of euros of exceptional expenditure during the pandemic and energy crisis. German coalition disputes are also spilling over into European Union policymaking, sparking irritation among partners. Proportional representation, for example, means coalition governments are the norm, which can slow down decision-making. However singling out just one minister could could result in that minister's party exiting the coalition, he said.

Markets have ramped up bets on further rate increases after the ECB has already tightened monetary policy by 3 percentage points since July. ECB President Christine Lagarde reckons a 50 basis points (bps) rate hike "is very, very likely". "The ECB is prioritising getting policy rates as high as needed and nothing else is as important," Pictet Wealth Management's head of macroeconomic research Frederik Ducrozet, said. Signs of economic resilience suggest ECB growth forecasts, also out on Thursday, could be revised upwards for 2023. Falling energy prices and a stronger euro, up around 6% in trade-weighted terms from August lows, suggest headline inflation forecasts could be revised lower.

☆ ECB deposit rate to peak at 3.75% or higher as inflation stays sticky: Reuters poll
▼ + stars: | 2023-03-10 | by ( Jonathan Cable | ) www.reuters.com time to read: +3 min

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. All 60 economists polled by Reuters March 7-9 believed her and said the bank's deposit rate would rise 50 basis points to 3.00% on Thursday. Medians in the poll showed the euro zone's central bank adding 25 basis points at the following three meetings in May, June and July to give a terminal deposit rate of 3.75%, higher than the 3.25% peak expected in a February poll. While the median showed the deposit rate peaking at 3.75% it was a view held by only 19 of 60 economists surveyed. There is now only a 34% chance of a recession within the coming year, the poll found, down from 50% in a January poll.

Despite relief measures, energy prices in February were 19.1% higher on the year, while food prices were 21.8% higher, it said. The first one was driven by energy prices and the second one by material inputs, which are not ebbing. While energy prices were keeping headline inflation high, wage growth will show its impact in core inflation, which will remain stubbornly high, Brzeski said. "Hence, a stepdown to a 25bp pace of hikes could be delayed, which would also push the terminal rate higher." "The interest rate step announced for March will not be the last," Nagel said in a speech.

☆ Germany home prices to sink nearly 6% this year
▼ + stars: | 2023-02-28 | by ( Indradip Ghosh | ) www.reuters.com time to read: +3 min

Twin pressures from a high inflation-induced cost of living crisis alongside fast-rising interest rates have forced many Germans to forgo dreams of owning a home and instead continue in rented accommodation. With the European Central Bank expected to hike interest rates at least twice more in coming months and inflation still running around 9%, that trend is unlikely to reverse soon. Average home prices in Germany, Europe's biggest economy, are forecast to decline 5.8% this year and 2.5% next year, according to the Feb. 16-27 poll of 12 property experts. Rental prices were expected to increase 3.5% this year and next and 4.0% in 2025, the latest Reuters survey showed. A strong majority, 10 of 12, said affordability in the urban home rental market would worsen over the next two years.

☆ Economic data suggests 'Europe is not out of the woods yet,' strategist says
▼ + stars: | 2023-02-21 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailEconomic data suggests 'Europe is not out of the woods yet,' strategist saysCarsten Brzeski, global head of macro at ING, discusses the latest economic data, including flash PMI figures, and the outlook for European economies.

☆ German industrial output falls more than expected in December
▼ + stars: | 2023-02-07 | by ( ) www.reuters.com time to read: +2 min

Summary Industrial production fell 3.1% on month, 0.7% decline expectedProduction in energy-intensive sectors fell 6.1%Economic slowdown in winter expected to be mild - ministryBERLIN, Feb 7 (Reuters) - German industrial production fell more than expected in December, driven by a plunge in output from energy-intensive sectors, the federal statistics office said on Tuesday. The drop was more severe in energy-intensive industrial sectors, where production decreased by 6.1% in December compared with November. "MISERABLE END TO 2022"For 2022 as a whole, German industrial production was 0.6% lower in calendar-adjusted terms than in 2021 and down 5.0% from the pre-pandemic year of 2019. According to Pantheon's estimates, German industrial production fell by 0.7% in the fourth quarter. While industrial production fell in December, German industrial orders rose by 3.2%, beating forecasts and posting the biggest increase in more than a year thanks to strong domestic and eurozone demand, data showed on Monday.

ECB President Christine Lagarde, speaking in Davos recently, stressed the need for monetary policy to "stay the course." "There were questions recently about why markets don't understand what the ECB will do next," said ING's Brzeski. With updated ECB projections not out until March, Lagarde is likely to be pressed on how the ECB views core inflation, which strips out volatile food and energy prices. The ECB targets headline inflation at 2%, but officials are focused on a core measure. Reuters Graphics5/ Is the ECB more upbeat on the growth outlook?

"That would be a problem for any central bank." TUG OF WARLagarde's commitment also puzzled ECB-watchers because the central bank had previously said it wouldn't make such public predictions - known as forward guidance - anymore, but instead take each decision based on incoming data. This of course leads to a tug of war between the ECB and the markets on the narrative," he added. ING's Brzeski said the ECB lacked a clear thought-leader on its Governing Council who could steer markets like Lagarde's predecessor, Mario Draghi. "The cacophony of diverging voices and the lack of clarity on who is the leading voice keeps hurting the ECB," Brzeski said.

☆ Euro zone inflation rate slides to 9.2% as energy price surge cools
▼ + stars: | 2023-01-06 | by ( Silvia Amaro | ) www.cnbc.com time to read: +3 min

Inflation in Europe has been impacted by higher energy prices and supply shortages. Inflation in the euro zone dropped for a second consecutive month in December, but analysts do not expect it to spark a change in tone from the European Central Bank. It follows November's headline inflation rate of 10.1%, which represented the first slight contraction in prices since June 2021. At the time, the central bank forecast an average inflation rate of 8.4% for 2022, 6.3% for 2023 and 3.4% for 2024. Carsten Brzeski, global head of macro at ING Germany, said these numbers "are not a relief, yet, only a reminder that euro zone inflation is still mainly an energy price phenomenon."

☆ ECB to raise deposit rate by 50 bps on Dec 15 as bloc enters winter recession: Reuters poll
▼ + stars: | 2022-12-09 | by ( Jonathan Cable | ) www.reuters.com time to read: +4 min

According to the Dec. 5-8 Reuters poll, banks will earn 2.00% on deposits after policymakers meet on Thursday, the most since 2009. The refinancing rate will also move up by 50 basis points, to 2.50%. When it last met in late October, the Governing Council topped up key rates by 75 basis points. The U.S. Federal Reserve is also widely expected to downshift to a 50 basis point move following four consecutive 75 basis point increases at the conclusion of its policy meeting on Wednesday, the day before the ECB decision. Findings in the poll agreed and showed inflation would top out this quarter, at 10.3%, and then decline.

Market betting has been swinging between a 50- and a 75- basis-point increase when policymakers meet on Dec. 15. "It's extremely exciting but predicting the ECB for a market participant has become impossible," Carsten Brzeski, global head of macro at ING, said. That saves it from more painful changes of tack after ECB President Christine Lagarde went from all but ruling-out rate hikes this year to presiding over the steepest tightening cycle in the euro's history. But Lane said in a blog post on Friday it may "overstate" how persistent inflation may be. "Inflation is being driven by factors they can't control," he added, citing energy prices, geopolitical tensions and supply-chain disruptions as some of them.

☆ German home prices to fall 3.5% next year as buyers feel the pinch
▼ + stars: | 2022-11-21 | by ( Jonathan Cable | ) www.reuters.com time to read: +2 min

LONDON, Nov 21 (Reuters) - German house prices will fall 3.5% next year as the cost of living crisis and rising borrowing costs hits consumers, but the chances of an outright crash are low, according to a Reuters poll of property market experts. Average house prices in Germany will fall 3.5% in 2023 the Nov. 8-18 poll of 12 market watchers predicted, a sharp turnaround from the 0.5% increase predicted in an August poll. In 2024 they will fall 0.5% but then rise 1.0% in 2025. Still, the median response when asked how much prices would fall from peak to trough was 10.0%, with the steepest drop given as 17.5%. (For other stories from the Reuters quarterly housing market polls:)Reporting by Jonathan Cable; Polling by Sujith Pai and Aditi Verma; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

☆ Analysis: Top central bankers fear breaking economy if they raise rates too fast
▼ + stars: | 2022-10-28 | by ( Francesco Canepa | ) www.reuters.com time to read: +4 min

STUBBORNLY HIGHBut stubbornly high inflation is making central bankers' job incredibly tricky. While there is nothing central bankers can do about present inflation rates, the mere optics of runaway prices made a "pivot" more difficult to justify. This requires an extraordinary balancing act by central bankers: persuading the market that they are serious about bringing down inflation without choking the economy. "The Fed needs to open a path towards smaller interest rate hikes without sounding too dovish," Christian Scherrmann, U.S. economist at DWS, said. The change of tone was minimal but it was enough for investors to start pricing in smaller hikes further down the road.

☆ European Central Bank raises rates by three quarters of a point and promises more to come
▼ + stars: | 2022-10-27 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

London CNN Business —The European Central Bank hiked interest rates by three quarters of a percentage point on Thursday, promising further hikes to come as it tackles rising inflation. The central bank has now hiked rates at three consecutive meetings by a combined 2 percentage points in a bid to get control of inflation even as a recession looms. “Inflation remains far too high and will stay above the target for an extended period,” the ECB said in a statement. An energy crisis, sparked by Russia’s invasion of Ukraine, has weighed heavily on sectors such as manufacturing. With today’s rate hike, the ECB has come very close to the point at which normal could become restrictive,” he wrote in a research note.

But the rate decision is likely to be the easy part of Thursday's meeting. The ECB's rate decision is due out at 1315 GMT, followed by Lagarde's news conference at 1345 GMT. Having borrowed at zero or even negative rates, banks can now simply park this cash back at the ECB for a positive, risk-free return, which rises with each deposit rate hike. The ECB would also be justified on monetary policy grounds to act, as abundant liquidity is keeping interest rates too low - money market rates are still slightly below the central bank's deposit rate. The bank is likely to decide to change the bank loan terms, but the devil will be in the detail as only imperfect options are available to it.

REUTERS/StaffLONDON, Oct 25 (Reuters) - European stocks rose in early trading on Tuesday, as investors took confidence from signs that the U.S. Federal Reserve could slow down its rate increases, although concern about China's economy still weighed on Asian markets. European stock indexes opened higher, with the STOXX 600 up 0.4% at 0809 GMT (.STOXX). Economists polled by Reuters said that the central bank should not pause until inflation falls to around half its current level. Some better-than-expected earnings results also supported European stock market sentiment, with Swiss bank UBS (UBSG.S) among those beating market expectations. The European Central Bank meets on Thursday and is set to raise rates by 75 basis points.

☆ Brzeski: The UK's tax cut reversal with change the outlook for growth
▼ + stars: | 2022-10-18 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailBrzeski: The UK's tax cut reversal with change the outlook for growthCarsten Brzeski, Global Head of Macro at ING Bank, joins Worldwide Exchange to discuss the ongoing UK fiscal crisis.

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