Global | A summer to gain more confidence

Summary

In a particularly turbulent environment such as this, it is worth highlighting the calm, rationality, consistency as well as humility with which central banks are implementing their monetary policy.

Key points

• Key points:
• A good example of this is the recent speeches by the U.S. Federal Reserve (Fed) stating that the decision to cut interest rates is “getting closer, although the time has not yet come”.
• Although the U.S. economy is showing increasing signs of a slowdown and inflation seems to be returning to a moderate path, the Fed does not want to risk a déjà vu: a few months ago, it laid the groundwork for lowering rates, but had to extend the pause after the economic upswing.
• In the same vein was Thursday's decision from the European Central Bank (ECB) to maintain interest rates, following June's cut. On the one hand, risks to activity are once again on the downside, many of the components of core inflation are performing favorably, and corporate earnings have absorbed wage growth in the first quarter of the year.
• However, domestic inflation ( particularly on services and wages) remains high and the uncertainty regarding the trend in the triad of wages- profits-productivity is no less significant. This is sufficient reason to pause in July and not commit to anything; in September everything is “wide open”.
• But uncertainty (in capital letters) will not dissipate in September. Economic policy decisions, especially in the United States (after its November presidential election), but also in Europe and China, will be key for inflation and rates.

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