FRANKFURT – The European Central Bank held interest rates for a third consecutive time Thursday, reiterating that it is happy with the status quo.
As Frederik Ducrozet from Pictet Asset Management noted on X, “The characterisation of the shifts in the balance of risks (less negative on growth; broadly unchanged on inflation) suggests that the bar for cuts remains high.” In other words, there’s plenty of more of the same in the pipeline when it comes to interest rates, which is the sentiment of most analysts.
This is especially true with growth and inflation in acceptable realms. “We are in a good place,” ECB President Christine Lagarde told journalists in Florence, Italy, the site of this month’s rate decision meeting and press conference. “Is it a fixed good place? No, but we will do whatever is needed to stay in a good place.”
But alas Dear Reader, I’ve heard that phrase so often in the past few months that on Thursday it reminded me of a vaunted US TV comedy from last decade: The Good Place. Spoiler alert (insert Morgan Freeman voiceover): It was not the good place. It was Hell.
OK. Maybe this latest decision and the press conference were worth a miss, as predicted by ING’s Carsten Brzeski, and the yawnfest of a presser – with so much talk about the digital euro (a solution without a problem, as one journo noted) – may have given me too much time to think, but how good of a good place is the ECB really in?
For example, Lagarde appeared to be miffed when a journalist had the audacity to suggest that euro area GDP expansion of 0.2% in Q3 announced Thursday was middling. “I would not complain too much about growth at this point in time,” she noted.
Sure, last quarter’s result was double the market estimate of 0.1% – also the rate in Q2 – but that’s the kind of pulse you’d expect when pulling someone out of freezing water. If they are still alive.
Yeah, I’ve said it. The Eurozone economy is on life support.
Doldrums and more
Germany and Italy barely skirted recessions last quarter with sideways moves following contractions in Q2. In other words, the largest and third-largest economies in the Eurozone are stagnating. Good showings from France, Spain, and Portugal came to the rescue for the overall euro area number last quarter.
Fortunately for all involved, Berlin is about to spend up to EUR 1 tn or more on its military, infrastructure, and climate protection, a plan Lagarde cited as a likely boost to euro area growth without noting that Germany would be doing the heavy lifting.
I, as has many a meme-maker, do recognize the historical irony of Europeans praising German plans to re-arm.
But I’m just joking here, at least a bit. Let’s have the bank explain its good place: “The economy has continued to grow despite the challenging global environment. The robust labour market, solid private sector balance sheets, and the governing council’s past interest rate cuts remain important sources of resilience. However, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.”
Blah. That sounds good, if you like, uh, are a fan of…no, sorry, it doesn’t sound good at all, unless you live for a lack of clarity.
The EU-US trade deal, the Middle East ceasefire, and progress in US-China trade talks have “mitigated” some downside risks, Lagarde said, and then went on to cite a number of issues still facing the Eurozone, including dangers around the world from extreme weather events and projectile lead poisoning.
Along with talk of being in a good place, the bank also repeatedly underlined the amount of uncertainty it faces. That sounds like a particularly unattractive place to visit and live: Uncertainty Village. In fact, things are so unclear that the bank is apparently unwilling to say that its cutting cycle is over. The market seems to think so, and so do most analysts. Not being able to admit what we know is true sounds like a special kind of hell.
Or does the ECB feel it is in a good place relative to how things have been over the past few months, when Washington slapped Brussels with massive trade sanctions, threatened the destruction of Nato, and occasionally cozied up to Moscow? These issues seem to dissipated, for the moment that is. One must remember that the US now appears ready to deploy a carrier group on a whim.
Well, at least the drones and Russian fighters are only probing Nato airspace.
I guess you can say this is a good place. But I can think of one better, one from which a path leads to a clear destination, such as rate cuts or hikes, the latter of which seems most likely down the road, whether the ECB is willing to admit it or not.
Maybe the best place, for some, is when you don’t have to commit. That would make the ECB's the perfect place for them.
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- Surprise rise in GDP supports policy
- German spending to spur economy
- Some downside risks abating
- What is this ‘good place’ of which they speak?
By Eric Culp
European Editor, LiveSquawk News
@eculp.bsky.social
@EricCulpLS
As Frederik Ducrozet from Pictet Asset Management noted on X, “The characterisation of the shifts in the balance of risks (less negative on growth; broadly unchanged on inflation) suggests that the bar for cuts remains high.” In other words, there’s plenty of more of the same in the pipeline when it comes to interest rates, which is the sentiment of most analysts.
This is especially true with growth and inflation in acceptable realms. “We are in a good place,” ECB President Christine Lagarde told journalists in Florence, Italy, the site of this month’s rate decision meeting and press conference. “Is it a fixed good place? No, but we will do whatever is needed to stay in a good place.”
But alas Dear Reader, I’ve heard that phrase so often in the past few months that on Thursday it reminded me of a vaunted US TV comedy from last decade: The Good Place.
OK. Maybe this latest decision and the press conference were worth a miss, as predicted by ING’s Carsten Brzeski, and the yawnfest of a presser – with so much talk about the digital euro (a solution without a problem, as one journo noted) – may have given me too much time to think, but how good of a good place is the ECB really in?
For example, Lagarde appeared to be miffed when a journalist had the audacity to suggest that euro area GDP expansion of 0.2% in Q3 announced Thursday was middling. “I would not complain too much about growth at this point in time,” she noted.
Sure, last quarter’s result was double the market estimate of 0.1% – also the rate in Q2 – but that’s the kind of pulse you’d expect when pulling someone out of freezing water. If they are still alive.
Yeah, I’ve said it. The Eurozone economy is on life support.
Doldrums and more
Germany and Italy barely skirted recessions last quarter with sideways moves following contractions in Q2. In other words, the largest and third-largest economies in the Eurozone are stagnating. Good showings from France, Spain, and Portugal came to the rescue for the overall euro area number last quarter.
Fortunately for all involved, Berlin is about to spend up to EUR 1 tn or more on its military, infrastructure, and climate protection, a plan Lagarde cited as a likely boost to euro area growth without noting that Germany would be doing the heavy lifting.
I, as has many a meme-maker, do recognize the historical irony of Europeans praising German plans to re-arm.
But I’m just joking here, at least a bit. Let’s have the bank explain its good place: “The economy has continued to grow despite the challenging global environment. The robust labour market, solid private sector balance sheets, and the governing council’s past interest rate cuts remain important sources of resilience. However, the outlook is still uncertain, owing particularly to ongoing global trade disputes and geopolitical tensions.”
Blah. That sounds good, if you like, uh, are a fan of…no, sorry, it doesn’t sound good at all, unless you live for a lack of clarity.
The EU-US trade deal, the Middle East ceasefire, and progress in US-China trade talks have “mitigated” some downside risks, Lagarde said, and then went on to cite a number of issues still facing the Eurozone, including dangers around the world from extreme weather events and projectile lead poisoning.
Along with talk of being in a good place, the bank also repeatedly underlined the amount of uncertainty it faces. That sounds like a particularly unattractive place to visit and live: Uncertainty Village. In fact, things are so unclear that the bank is apparently unwilling to say that its cutting cycle is over. The market seems to think so, and so do most analysts. Not being able to admit what we know is true sounds like a special kind of hell.
Or does the ECB feel it is in a good place relative to how things have been over the past few months, when Washington slapped Brussels with massive trade sanctions, threatened the destruction of Nato, and occasionally cozied up to Moscow? These issues seem to dissipated, for the moment that is. One must remember that the US now appears ready to deploy a carrier group on a whim.
Well, at least the drones and Russian fighters are only probing Nato airspace.
I guess you can say this is a good place. But I can think of one better, one from which a path leads to a clear destination, such as rate cuts or hikes, the latter of which seems most likely down the road, whether the ECB is willing to admit it or not.
Maybe the best place, for some, is when you don’t have to commit. That would make the ECB's the perfect place for them.
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