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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
ECB
The ECB's September staff forecasts out today include a downward revision to GDP growth in 2023-25, with headline HICP seen higher for 2024 alongside a downgrade to core HICP, but 2025 inflation more tame.
- Compared with consensus medians, the new projections look optimistic on growth, albeit they are far more pessimistic vs June's forecasts - see table.
- For inflation, while 2023 forecasts are in line, the ECB seems much more concerned with headline price pressures in 2024: the 3.2% HICP forecast is up from 3.0% in 2024, and 0.5pp above current consensus. Core HICP in contrast has converged with consensus a little for 2024, at 2.9% (vs 3.0% prior), vs BBG survey 2.8%. The 2025 headline (2.1%) and core (2.2%) forecasts are down 0.1pp from June's.
- The ECB's staff projections explain: "HICP inflation has been revised up for 2023 and 2024, driven by higher energy futures prices, and down for 2025, as the impacts from the appreciation of the euro, tighter financing conditions and weaker cyclical conditions are seen to dampen HICP inflation excluding energy and food."
- The ECB forecasts illustrate a stagflationary scenario for the coming year, but more "flationary" than "stag" vs current analyst estimates. (Note ECB and private sector unemployment estimates for 2023-24 are the same.) That perception of course tilts the balance of risks toward further tightening, as opposed to cuts that markets have priced in on account of weaker expected growth/recession risks.
- It may be that private sector analysts will continue to raise their forecasts for 2024 inflation, which already to 2.7% this month from 2.5% prior - likely on the back of a rebound in energy prices in recent weeks.
- But on growth, as ex-ECB chief economist Peter Praet told MNI today ("ECB Likely To Soon Debate Cuts- Ex Chief Economist Praet"), "the ECB’s seeming optimism on a 2024 recovery despite today’s rate hike may be unconvincing to markets".
Source: ECB Staff Projections, BBG Medians, MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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