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Economic Commentary

Robertson stephens Economic Commentary June 10, 2024

June 10, 2024
As expected, the decision by the European Central Bank (ECB) last week to cut its benchmark interest rate to 3.75% from 4% establishes considerable creative tension for the June 12 meeting of the US Federal Open Market Committee meeting. Heightening the drama, however, will be the May US Consumer Price Index released earlier that same morning. Given this confluence of events — supplemented by the strong US employment report last Friday and the May Producer Price Index, which will be reported on Thursday—no one expects the Fed to do anything but attempt to get through the post-meeting press conference without setting financial markets on fire. The real storyline will be in the Summary of Economic Projections released concurrently with the interest rate decision, wherein any substantial changes in the thinking of the Fed Governors will be apparent. In many ways, the ECB provided considerable cover for the Federal Reserve to stand pat and wait almost as long as it wanted to for more data confirming the inflation trends; Christine LaGarde made it abundantly clear that the ECB rate cut was a very limited loosening of monetary policy. “Less High for Longer” is being tried out as the new catchphrase, but the difference from “Higher for Longer” is minimal. Nevertheless, the monetarists at the ECB are well-respected, and their actions taken in an inflation environment similar to that of the US present a challenge for the Fed and Chairman Powell in particular.

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