Rate cuts developing: European Central Bank and Bank of England in June, Fed in September

The European Central Bank rate cut in June seems to be more or less a done deal:

The Bank of England, hmmm, not so sure, but soon:

Via Capital Economics, a note after the US CPI data:

  • We still expect inflation in [developed markets] to be broadly back at central bank targets by the end of this year
  • In anticipation of this, we expect the ECB and Bank of England to begin cutting interest rates in June, followed by the Fed in September

CE cite inflation developments:

  • The slightly more modest 0.3% m/m increase in core CPI in April was even better than it looked
  • annual rate of all items inflation fell to 3.4%, from 3.5%
  • core inflation down to 3.6%, from 3.8%
  • Fed’s preferred PCE inflation gauge will probably rise 0.2% m/m in April

And, from the Federal Open Market Committee (FOMC):

  • All things considered, this is consistent with the Fed cutting interest rates in September, particularly in light of the reported softness in control group retail sales last month


I’ll have to concur on the likelihood of a Fed September rate cut. As I’ve said before, with the US election coming in November the Fed will do what it takes to cut in September. Yes, the Fed is independent, but not THAT independent that it’ll ignore the election. (IMO of course)

Powell dodging hawkish questions like Neo in the Matrix