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HomeLatest NewsAnalysts are confident of rate cuts this June but doubt their intensity.

Analysts are confident of rate cuts this June but doubt their intensity.

Date: July 12, 2024 Time: 17:20:48

Analysts from management companies and private banks expect a change in the course of the monetary policy of the European Central Bank (ECB) for next June, anticipating rate cuts by the Federal Reserve (Fed). However, some experts doubt the intensity of these cuts after the latest US indicators have shown the resistance of inflation.

Konstantin Veit, portfolio manager at asset management giant PIMCO, agrees with the forecasts for rate cuts in Europe starting in June, but points out that these will be implemented “with caution.” Specifically, Veit advances that it is likely that the supervisor will carry out the reductions “in the conventional steps of 25 basis points.”

The expert has published a comment on the last meeting of the institution, in which he points out that “the risks probably point to fewer cuts”, for reasons that include the rigidity of inflation in services or the resistance of the labor market. . He also cites “the ECB’s easing of financial conditions and risk management considerations” to explain the more comical declines.

The ECB decided last Thursday to maintain interest rates for the fifth consecutive time at 4.5%, although it already spoke of possible cuts in these, if the indicators remain on the expected path. The decision of the European organization came a day after inflation in the US rose again in March to reach 3.5%, which according to experts complicates and may delay the decision on possible rate cuts by the Federal Reserve. (Fed).

“We expected the Fed to begin relaxing its restrictive stance in June since last October, but now we have delayed our expectation of the first cut to July,” said David Page, head of macroeconomic research at Axa Investment Managers after knowing the US price data.

Alexander Batten, Fixed Income fund manager at Columbia Threadneedle Investments, also estimates that the recent upward surprises in inflation in the US have cast doubt on whether the Fed will begin a relaxation cycle this year. The president of the ECB, Christine Lagarde, marked the distance with the Fed in the press conference after the ECB’s decision and highlighted that the agency’s decisions will depend on the data and not on the Fed’s steps.

The path of cuts

Analysts remain confident that the ECB will begin rate cuts in June, although they are more cautious about the next steps. In this sense, Bank of America experts expect the ECB to begin the cuts in June, but they doubt what the next cuts will be after this due to the risks that exist in the long-term market.

“The June decision refers to a cut in June, no more than that, at least for now and until services inflation has gone down a lot. It does not depend on the Fed, but the US (and China, and Japan) has an indirect impact. Oil will create noise, but as long as we get to 2025, they will be able to tolerate the bumps,” says Rubén Segura-Cayuela, chief economist for Europe at Bank of America. For her part, Sandra Rhouma, the European economist on AllianceBernstein’s fixed income team, believes that in the current situation, the risks lean towards fewer cuts in 2024.

“My baseline scenario for four cuts this year, for a total of 100 basis points of easing, remains unchanged, but it is worth highlighting the risks around it. March inflation data for the eurozone confirmed the trend disinflationary, but at the same time the persistence of inflation in services was shown,” he adds.

Some experts consider that although the first step of the ECB will go ahead of the US organization, the rest of the way it will be accompanied. Max Stainton, senior global macro strategist at Fidelity International, believes that although the supervisor’s intention to start the cut cycle in June is already set, he believes that the path beyond this starting point will continue to depend on the path of the Booking. Federal.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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