US CPI Inflation Report In Spotlight, ECB To Decide On Rates
The European Central Bank’s (ECB) interest rate decision and the US CPI inflation data will likely be the focus of economists for the rest of this week. In other news, the UK’s economic growth remained flat in July according to a report released earlier in the morning.
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ECB Interest Rate Decision
The Eurozone’s central bank governing board will convene on Thursday to decide on interest rates. Just a few days before the Federal Reserve rate decision, the ECB is forecast to reduce its interest rates by 25 basis points, continuing to unwind its monetary policy.
Berenberg Bank’s economists cited in a CNBC report said that “the rate cut this Thursday should be largely uncontroversial. Virtually all recent ECB speakers have confirmed that they would like to lower rates. Even Bundesbank President Joachim Nagel, usually considered to be among the hawks on the ECB Council, has indicated that he would support a cut unless the evidence aligns against it.”
Market analysts note that the euro bloc’s inflation fell to a 3-year low coming in at 2.2% on an annualised basis in August but core inflation remained at 2.8% above the ECB’s target. Economists suggest that the ECB may pause interest rate cuts in October.
US CPI Inflation August 2024 Report
Later today, the US Bureau of Labour Statistics (BLS) will publish the Consumer Price Index (CPI) inflation data for the month of August. The US CPI inflation is forecast to rise 2.6% on a yearly basis in August, slightly lower than July’s 2.9% increase. The Core CPI inflation, which excludes volatile food and energy prices, is forecast to remain steady at 3.2% on an annualised basis.
The US inflation August report will be one of the last major economic releases just a week before the Federal Reserve’s Sept. 17-18 monetary policy meeting. ING economists suggest that today’s report could justify a rate cut next week writing that “consensus expects the core CPI for August to come in at 0.2% MoM, which would be a good number for the Fed to commence its easing cycle. Only a few economists forecast a 0.1% or 0.3% reading on Bloomberg, reflecting high confidence in the estimate.”
UK Economy Stagnates In July
A report by the Office for National Statistics (ONS) showed that the UK’s economy growth remained flat in July although economists had expected a 0.2% GDP expansion. However, the economy grew by 0.5% in the three months to July.
The ONS report noted: “July’s monthly services growth was led by computer programmers and health, which recovered from strike action in June. These gains were partially offset by falls for advertising companies, architects and engineers. Manufacturing fell, overall, with a particularly poor month for car and machinery firms, while construction also declined.”
Commenting on the GDP report, economists at the Confederation of British Industry (CBI) said that “the figures suggest the UK’s recovery remains on track, though growth over the second half of the year will probably be a bit slower than in recent quarters. Ahead of what promises to be a difficult budget next month, the government is treading a narrow path to put the public finances on a sustainable footing while maintaining the confidence of business and investors in the recovery.”
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