from Yahoo Finance
European Central Bank Cuts Interest Rates for the First Time Since 2019
This was CNBC’s live coverage of the latest European Central Bank monetary policy meeting.
by Jenni Reid
CNBC.com
The European Central Bank on Thursday confirmed a widely anticipated reduction in interest rates at its meeting, despite lingering inflationary pressures in the 20-nation euro zone.
It takes the central bank’s key rate to 3.75%, down from a record 4% where it has been since September 2023.
″Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady,” the ECB Governing Council said in a statement.
In updated macroeconomic projections that will be closely analyzed by investors, ECB staff raised their annual average headline inflation outlook for 2024 to 2.5% from 2.3% previously.
ECB Starts Cutting Rates, but Warns On Inflation
by AFP
Jordan Times
FRANKFURT, Germany — The European Central Bank (ECB) made its first interest rate cut since 2019 Thursday, reducing borrowing costs from record highs, but gave few clues about its next move while warning of continuing inflation pressures.
The key deposit rate was lowered a quarter point to 3.75 per cent, after the central bank had kept borrowing costs on hold since October.
After an unprecedented streak of eurozone rate hikes beginning in mid-2022 to tame runaway energy and food costs, inflation has been slowly coming down towards the ECB’s two-per cent target.
Thursday’s cut, the first since September 2019, will provide a much-needed boost for the beleaguered eurozone economy.
Why Consumers Think Inflation is Still Really High When It’s Not
Economic pessimism is sticky. And when perceptions are at odds with reality, it can have electoral consequences.
by Akshay R. Rao
Star Tribune
The punditry sections of many publications report what appear to be a set of astonishing results from a recent Harris Poll. Half or more Americans believe the U.S. economy is in recession (it is, in fact, growing), the S&P 500 is down (it is up some 25% in the last year) and that unemployment is almost at a 50-year high (it is at a 50-year low). Similarly, perceptions about runaway inflation persist even though inflation has declined dramatically in the last two years. To paraphrase Winston Churchill, this disconnect between perception and reality is a puzzle wrapped in a mystery shrouded in an enigma.
Global PMI Signals Persistent Elevated Selling Price Inflation in May
by Chris Williamson
S&P Global
Average prices charged for goods and services rose worldwide at a slightly increased rate in May, reflecting persistently elevated services price increases combined with accelerating price growth in manufacturing. However, there are signs of rates of inflation cooling in Europe. In the US, the PMI data are consistent with inflation falling closer to the Fed’s target in the coming months.
Persistent global price inflation
Worldwide PMI survey data compiled by S&P Global for J.P. Morgan showed average prices charged for goods and services having risen globally at a marginally increased rate in May. The composite PMI Prices Charged Index edged up from 53.2 in April to 53.3, a level only very marginally below the 53.4 average seen over the past year – a period which has seen the index stuck in a tight range and stubbornly elevated by historical standards. By comparison, this index averaged just 51.2 in the decade preceding the pandemic; a time when global consumer price inflation averaged 2.7%. The recent PMI readings are consistent with global inflation running at roughly 3.5%.
Democrats Rally Behind the Economy as Election Approaches
by John Carney
Breitbart.com
Democrats are increasingly optimistic about America’s economy despite signs that growth is slowing and inflation has accelerated.
A month ago, thirty-two percent of Democrats said they thought the economy was getting better, according to a survey by the Economist and YouGov. Thirty-five percent said the economy was staying about the same and 28 percent said it was getting worse.
The most recent polls show a big partisan shift. The June 2-4 poll found that 40 percent of Democrats say the economy is getting better, 36 percent say it is staying the same, and 19 percent say it is getting worse.
The shift in economic perceptions run contrary to economic data, which has generally shown economic growth is slowing and fewer workers are being added to payrolls.
Defense Manual for the War On Prices
by Vance Ginn
The American Institute for Economic Research
In the tumultuous economic landscape of recent years, The War on Prices, edited by Ryan Bourne, offers a crucial critique of widely held misconceptions about inflation and the role of market prices. This anthology, featuring chapters with insights from leading economists, targets the myths and misunderstandings that drive damaging price control policies during inflationary periods and beyond.
Central Argument: The Free Market as an Efficient Price Setter
The anthology strongly advocates for the importance of market-driven price signals versus government-imposed price controls, highlighting that prices are essential indicators of relative scarcity. It argues that market-set prices, rather than those mandated by government entities, are instrumental in aggregating our subjective values, thus fostering an optimal allocation of resources.
How People Can Better Fight Inflation
by Mark Thornton
Mises.org
People can’t stop the Federal Reserve from inflating the money supply, nor can we prevent them from adding more fuel to their fire.
We can only fight the fire started by the arsonists at the Fed from spreading further into our lives.
In this article, I want to review the ways that people fight the Fed’s fire—higher prices everywhere and the reasons why everyone should be actively fighting against inflation.
These techniques require some thinking, choosing, and acting, which isn’t a pleasant thing to do. Budgeting helps us set a pattern in life, and the Fed’s inflation disrupts our “pattern” in a bad way.
Service Sector Sees Strongest Growth in 9 Months, but Inflation Still a Big Problem
by John Carney
Breitbart.com
The U.S. service sector roared back to life in May, painting a brighter picture for economic growth but dimming hopes for a rate cut from the Federal Reserve.
The Institute for Supply Management’s index of the services sector jumped to 53.8 percent from 49.4 percent in April, the highest reading in nine months, according to data released Wednesday. The robust rebound, driven by strong new orders and a surge in export activity, points to economic resilience despite a Fed interest rate policy aimed at restricting activity.
Economists had anticipated a modest rise to 50.7, but the actual figures blew past expectations, marking a significant shift from April’s dip into contraction territory—the first since December 2022. Numbers above 50 percent indicate expansion, suggesting that the sector is firmly back on a growth trajectory.
ECB’s Inflation Challenge Looks More and More Like the Fed’s
by Mark Schroers
Yahoo! Finance, Canada
While there have been clear differences in the drivers of price growth either side of the Atlantic – a point ECB officials repeatedly stress — some economists see important parallels and warn against underestimating the risk of more persistent pressures.
Thursday’s widely telegraphed reduction in the deposit rate from a record-high 4% isn’t in question. The danger is that stubborn inflation akin to that in the US makes rapid subsequent moves less likely. The Fed has already had to rethink monetary loosening after price gains surpassed expectations, even if traders are still hopeful of a rate cut this year.
ECB to Begin Cutting Rates Even as Inflation Fight Continues
by Francesco Canepa and Balazs Koranyi
Reuters.com
FRANKFURT, June 6 (Reuters) – The European Central Bank was all but certain to cut interest rates from record highs on Thursday and was likely to acknowledge it had made progress in its battle against high inflation, while also stressing the fight was not yet over.
ECB policymakers have clearly telegraphed their intention to lower borrowing costs after seeing inflation in the 20 countries that share the euro fall from more than 10% in late 2022 to just above their 2% target in recent months.
The broad-based decline was seen as more than enough for the ECB to begin undoing the steepest streak of interest rate hikes in its history, which were a response to spiralling prices in the wake of Russia’s invasion of Ukraine.