ECB cuts, SNB more so. And Australia’s unexpected unemployment fall.
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Why did the ECB cut rates by 25 basis points and what does it mean for Europe?
A cut by the ECB, a big cut by the Swiss National Bank, and a surprise fall in Australian unemployment yesterday and US PPI a bit higher than expected as well. So does any of that change the expectations for cuts next year from various central banks, particularly given the ECB's rather pessimistic growth forecast for the next few years, and that's without a trade war. It's Friday, it's the thirteenth of December, twenty twenty four. It's the morning call from NAB. Good morning. Well, the US dollar's up naught point three percent today, with the euro down by the same amount and naught point six percent falling the Swiss franc. The Aussie is marginally up a little, uh below sixty-three point six US cents now.
Bond yields are quite a bit higher, especially in Europe. Up ten basis points for ten year bonds in France, up eight in Germany, up sixteen in Italy, and five in the UK, but just up three basis points for the US and four in Canada. US equities not finishing on earth. Great position, all closed in the red, down half percent for the Dow and the S P, the Nasdaq down 0.7%, NVIDIA down more than one percent today. In Europe, well, they are up a little bit, just 0.1% for the Eurostocks fifty, the DAX and the FTSE one hundred. Uh and uh yeah, well, the ECB overnight down twenty-five basis points to three percent. Let's focus on that first of all with NABS Taylor Nugent in Melbourne. That answers the question whether
Yeah, and I would
say that's not necessarily much of a surprise from the ECB that was you you know the wide consensus and and twenty-five basis points was was priced into market so you know that move not a not a big surprise there and you know fairly modest um market reaction to the kind of totality of the updates as well. We saw growth and inflation forecasts revise down marginally maybe inflation forecasts not not revised down as much or getting back to two percent as soon as as some Might have been hoping for. Um, but um all in all, you know, twenty-five basis points and not too much firm guidance going going forward, not necessarily
They're feeling their way now, aren't they, to try and find their way to whatever whatever the neutral rate is. Yeah. They might be getting close to that.
Exactly. Gavin Gavin Friend in in London has titled his his notes The Hunt for Neutral Is On which, you know, sounds sounds very appropriate, you know, if you look at that post meeting statement.
How did the Swiss National Bank’s 50‑bp rate cut surprise markets?
Sounds like a blockbuster movie for Christmas, actually, doesn't it?
If you look at that post meeting statement, um, you know, one, there was a change there. They removed the line that said that policy was going to need to be uh sufficiently restrictive. Um and so, you know, we're looking forward meeting by meeting approach, moving, continuing to move lower as we move through the first part of twenty twenty five is is the expectation, um, down towards more neutral levels. So, you know, two to And a quarter percent, something of that kind of kind of ilk should be kind of the near-term target. If you look at the the market pricing there, you know, it's actually a little bit higher up than it was going in, but you know, not too many moves. But you know, markets were pricing a deposit rate getting down to you know two percent by uh by April.
Um that's now moved up around five basis points or so. So, you know, not particularly large reactions, but you know. Nothing in there to suggest that uh Lagarde and the the ACB are inclined to deliver on the kind of you know aggressive easing that takes rates to neutral immediately or even plumbing below neutral to support that sluggish growth outlook. A little bit more cautious, but you know, certainly uh you know seemingly very open to the idea that you know the time for restrictive policy is is you know fading pretty fast. quickly and they will continue to move lower through twenty five.
Well, that sluggish growth outlook down to just one point one percent growth next year from one point three percent, which was their estimate in September, then just one point four percent growth for twenty twenty six and then back down to one point three percent for twenty twenty seven in the doldrums for quite some time it seems.
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Chapters
8 chapters
1
Why did the ECB cut rates by 25 basis points and what does it mean for Europe?
0:01–2:15
2
How did the Swiss National Bank’s 50‑bp rate cut surprise markets?
2:15–4:57
3
What does the higher‑than‑expected US PPI indicate for Fed policy?
4:57–7:11
4
Why did Australia’s unemployment rate unexpectedly fall to 3.9%?
7:11–9:39
5
How are ECB growth forecasts influencing future rate‑cut expectations?
9:39–11:59
6
What are the implications of the RBA’s current stance after the unemployment data?
11:59–13:55
7
How do state‑level unemployment variations affect the national outlook?
13:55–15:35
8
What role does productivity play in Australia’s growth challenges?
15:35–17:49