{"id":2583,"date":"2008-05-07T09:13:26","date_gmt":"2008-05-07T09:13:26","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=2583"},"modified":"2025-03-27T15:48:38","modified_gmt":"2025-03-27T15:48:38","slug":"ecb-rate-cut-pushed-back-as-inflation-overshoot-extends","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=2583","title":{"rendered":"ECB rate cut pushed back as inflation overshoot extends"},"content":{"rendered":"<p>Earlier in the year I suggested the ECB would be in a position to cut rates by May (for example <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2008\/2\/6\/ecb-ometer-turning-more-dovish.html\">here<\/a>). While the economy has slowed as expected, the forecast has been undermined by a further rise in headline inflation, mainly due to soaring food and energy prices. <\/p>\n<p>My ECB-ometer forecasts an &ldquo;average interest rate recommendation&rdquo; of the 21 Governing Council members of -0.01% at this week&rsquo;s meeting. This is well above the -0.125% threshold for a cut and up from -0.05% in April. The increase over the last month reflects a fall in the euro and improved credit market conditions, which have offset further weakness in business surveys and a slowdown in money supply growth. <\/p>\n<p>The chart presents the ECB-ometer&rsquo;s output in terms of the probability of a rate change. (<a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2008\/4\/3\/ecb-ometer-update-easing-bias-still-warranted-despite-higher.html\">Previous posts<\/a> have shown the average interest rate recommendation.) The chances of a rate cut are estimated to have fallen from 40% in March to below 10% this month. <\/p>\n<p>While the model has become less dovish, it continues to suggest a slight easing bias is warranted by incoming data. This is at odds with the policy statement issued after last month&rsquo;s meeting and raises the possibility that ECB President Trichet will be less hawkish in his remarks tomorrow. <\/p>\n<p>Activity data should deteriorate further over coming months but recent energy price strength will delay a retreat in headline inflation. I am pencilling in a rate cut in the third quarter but it currently looks far from certain. <\/p>\n<p><span class=\"full-image-float-none\"><img decoding=\"async\" style=\"width: 500px; height: 300px\" alt=\"ECB_Repo_Rate_Probabilities.jpg\" src=\"\/storage\/ECB_Repo_Rate_Probabilities.jpg\" \/><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Earlier in the year I suggested the ECB would be in a position to cut rates by May (for example here). While the economy has slowed as expected, the forecast has been undermined by a further rise in headline inflation, mainly due to soaring food and energy prices. My ECB-ometer forecasts an &ldquo;average interest rate [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2583","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2583","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2583"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2583\/revisions"}],"predecessor-version":[{"id":4892,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2583\/revisions\/4892"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2583"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2583"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2583"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}