A hawkish cut? As expected, ECB cuts rates by 25bps despite higher inflation projections for 2024 and 2025.
Main rate now at 4.25%, Deposit rate now at 3.75. ECB not pre-committing to any particular rate path. ECB to follow data-dependent, meeting-by-meeting approach. The main surprise of the day is inflation forecasts being revised slightly upwards for 2024 (2.5% vs. 2.3%) and 2025 (2.2% vs. 2%), suggesting that the ECB will maintain a restrictive stance, keeping key rates above the neutral rate for the next 12 to 18 months. Bond yields have slightly increased across maturities without significant weakness in peripheral rates. The market is now pricing in fewer than two rate cuts for the remainder of the year, aligning with expectations of one rate cut per quarter. Source: Bloomberg, HolgerZ
Productivity shortfall against the US is one thing, but Germany falling behind France is remarkable. What happened?
Source: Bloomberg, Michel A.Arouet
Germany has the shortest average working hours of any advanced economy, with the annual figure falling 30% in the past 50 years and now a quarter below US levels, per FT.
Source: unusual_whales, FT
German 10y yields jump to 2.64%, highest since Nov, following a somewhat hotter inflation report.
German Harmonized CPI rose to 2.8% in May YoY from 2.4% in Apr, above the 2.7% median estimate in a BBG poll of economists. German national CPI rose to 2.4% from 2.2% as expected. Source: Bloomberg, HolgerZ
Germany's inflation rose to 2.4% in May from 2.2% in April while Core CPI remains unchanged at 3%.
Uptick was driven by base effects related to the introduction of a cheap public-transportation ticket (so-called 49€ ticket), which pushed prices down 12 months ago. But also food price inflation quickened (for a 2nd month). Source: HolgerZ, Bloomberg
Deflationary forces are intensifying again in germany.
Producer prices fell by 3.3% YoY in April. In March, the decline was 2.9%. PPI is a good leading indicator for CPI. Source: Bloomberg, HolgerZ
The issue with europe:
1) Over-regulation; 2) Too much bureaucracy: 3) Lack of hashtag#innovation. As shown below, Tech champions are lacking. Source: Bloomberg
Germans already work much less than others, but German unions and some left politicians are seriously requesting move to four days workweek without pay cut
Source: FT, Michel A.Arouet
