In this issue, William De Vijlder's editorial, Tarik Rharrab's analysis of the latest uncertainty indicators and the update of our “markets' review” and “economic scenario” sections.
Following the first rate cut at the June meeting of the ECB, the focus has now shifted to the timing and speed of further reductions in the deposit rate. The guidance is vague: decisions will be data-dependent. For investors, estimating policy rules -the relationship between past decisions and inflation and other relevant variables- has merits to get a better understanding. Such a rule shows the key role played by the difference between observed inflation and the inflation target. However, there are important caveats. The estimated rule implies a very slow adjustment of the deposit rate, which is difficult to justify when the ECB is in easing mode
In the United States, economic policy uncertainty, based on media coverage, fell slightly in May, after increasing for two months in a row. This drop can probably be attributed, at least in part, to the encouraging fall in inflation in April and May, which is feeding expectations of interest rate cuts by the Fed.
GDP growth, inflation, exchange and interest rates.
