Daily Alert – Tuesday 5th December 2023: Did an ECB hawk just allude to a rate cut?

Mark NugentDaily Alert, December 2023

Daily Alert – Tuesday 5th December 2023: Did an ECB hawk just allude to a rate cut?

Good afternoon.

Last night we saw Tokyo Core CPI come in at less than the expectation and significantly less than the prior month’s number. This is becoming a repeating pattern across the major economies, and it is looking like the 18-month battle against “transitory” inflation may be almost over, bar the shouting.

Talking of shouting, European Central Bank hawk Isabel Schnabel said that further interest rate hikes are “off the table”. It was reported in Reuters that “policymakers should not guide for rates to remain steady through mid-2024”.

Now, the “hikes off the table” bit is quite clear. The English in the second bit about guidance is not so clear, and the quotes represent me quoting Reuters. It is not clear if they were quoting Schnabel directly, but it would appear she is referring to the beginning of a cutting cycle. If so, the hawkish Schnabel would be the first central banker from the major economies to openly allude to rate cutting. That seems to be how the market is treating it as the Euro falls and the Euro50 stock market rises. Interesting.

I’ll be back tomorrow.

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