La ECB “It does not intend to bind itself to a particular rate path” and, even after the rate cut in June, remains “determined to ensure the timely return of theinflation to target 2% in the medium term and will keep reference rates at sufficiently restrictive levels for as long as necessary." However, we read in the Economic Bulletin of the European Central Bank led by Christine Lagarde (in the picture, ed), even with inflation returning to accelerate in May to 2,6%, “most measures of underlying inflation fell again in April” confirming “the picture of gradual decline in price pressures”.
ECB, the numbers for the first quarter of 2024
“After five quarters of stagnation, during the first quarter of 2024 the euro area economy grew by 0,3 percent. The services sector is expanding and the manufacturing sector is showing signs of stabilization at moderate levels,” we read in the ECB's latest economic bulletin. "L'employment increased by 0,3 percent in the first quarter of this year, with the creation of approximately 500.000 new jobs, and surveys point to continued growth in job positions in the short term. In April the unemployment rate showed a slight decline, standing at 6,4 percent, equal to the lowest level since the introduction of the euro. Companies continue to publish many offers of vacancies, although in slightly fewer numbers than in the past", continues Eurotower.
ECB, recovery thanks to household spending
“The recovery recorded by the euro area economy in early 2024 exceeded the levels expected by ECB experts in the projections last March, thanks to the impetus provided by net trade and by the increase in household spending. According to the most recent information, growth – we read in the bulletin – is destined to continue in the short term, at a faster pace than previously expected. Real disposable income is expected to continue to grow amidst robust wage dynamics, gradually increasing confidence and improving terms of trade, resulting in a consumption-led recovery during 2024. The impetus provided by net trade to beginning of the year partly reflects the volatility following the temporary decline marked at the end of 2023. However, foreign demand is expected to continue to grow, supporting the expansion of the area's exports”.
ECB, estimates on the average annual growth rate of GDP
“In the medium term, the negative impact of the past tightening of monetary policy would undergo a progressive reduction and activity would be supported by the hypothesized easing of financing conditions, in line with market expectations regarding the future evolution of interest rates. Growth would also benefit from the resilience of the labor market, in a context in which the unemployment rate falls to historically low levels over the projection horizon. In the period considered, productivity should accelerate as some of the cyclical factors that reduced growth in the recent past are reabsorbed", the ECB says.
“It is expected that, overall, the average annual increase rate of GDP in real terms is even to 0,9 percent in 2024 and salt to 1,4 in 2025 e to 1,6 in 2026. Compared to the projections of last March, the GDP growth prospects have been revised upwards for 2024, as a consequence of the unexpected positive dynamics highlighted at the beginning of the year and the improvement of the most recent information; for 2025 they have undergone a slight downward correction, remaining unchanged for 2026", continues the bulletin of the European Central Bank.
ECB, insist on capital markets union
“The budgetary and structural policies adopted at the national level should be aimed at making the economy more productive and competitive; this would help raise growth potential and reduce price pressures in the medium term. The effective, rapid and complete implementation of the Next Generation Eu programme, progress towards the realization of a capital markets union and completing the banking union, as well as strengthening the single market they would help promote innovation and increase investment in the ecological and digital transitions. The full and timely implementation of the new framework EU economic governance it will help governments to stably reduce the budget deficit and the debt/GDP ratio", highlights the ECB bulletin.
ECB, wars in Ukraine and the Middle East are sources of geopolitical risk
“The risks to economic growth are balanced in the short term, but remain tilted to the downside in the medium term. The expansion of the euro area would be affected by a weakening of the world economy or the intensification of trade tensions between the major economies. There Russia's unjustified war against Ukraine and the tragic conflict in the Middle East represent significant sources of geopolitical risk“. Thus the ECB in the economic bulletin. This, continues the ECB, "could lead to a loss of confidence in the future among families and businesses and produce interruptions in international trade. Furthermore, economic expansion could be slower if the effects of monetary policy prove stronger than expected.
However, it could be superior if inflation fell faster than expected and whether rising confidence and real incomes led to larger spending increases than anticipated, or whether global economic growth was stronger than expected. Inflation could be higher than anticipated if wages or profits rose more than expected. Upside risks for inflation also come from increased geopolitical tensions, which could lead to a rise in energy and transport costs in the short term, causing disruptions in world trade. Furthermore, extreme meteorological phenomena, and more generally the unfolding of climate crisis, could increase food prices."
