All articles tagged with #eurozone economy
ECB policy hawk Olli Rehn warns that a protracted Middle East conflict could keep euro-area inflation elevated, signaling a likely 25bp deposit-rate rise to 2.5% at the September meeting, while noting eurozone growth has held up and stressing caution to avoid an affordability crisis amid high energy prices.
ECB researchers warn that a correction in US technology stocks could threaten euro-area financial stability, given European exposure to US tech equities and the historically linked performance of US and European markets. They note that AI-driven booms can inflate valuations and risk premia, so a US tech downturn could become a eurozone stability issue even if AI proves transformative, especially if broader market instability accompanies the slide.
The European Central Bank is expected to cut interest rates to 3.75% from 4% this week, marking its first rate reduction in over five years due to falling eurozone inflation. This move contrasts with the U.S. Federal Reserve, which faces persistent inflation and is not yet ready to lower rates. The divergence in policies reflects differing economic conditions in the eurozone and the U.S.
European bonds fell as Germany plans to suspend debt limits for a fourth consecutive year, raising concerns about increased borrowing amid a slowing euro-area economy. Yields on German 10-year debt rose, along with other core European bonds, following hawkish comments by policymakers. The European Central Bank indicated it won't cut rates while wage growth remains elevated, and officials agreed to raise borrowing costs if necessary. S&P Global's purchasing managers' index showed contraction in November, while European stocks struggled for traction. In other news, crude oil prices dropped as discord within OPEC+ led to a delay in their meeting, dampening speculation of further production cuts. Iron ore also tumbled after Chinese authorities intensified efforts to cool the rally in steelmaking ingredients.