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Euro-zone inflation probably unchanged in April, but will fall further this year National data published so far suggest that euro-zone inflation remained at 2.2% in April, and that core inflation probably rose from 2.4% to 2.6%. (Euro-zone data due on …
30th April 2025
Strong start to the year but tariff-induced slowdown ahead The acceleration in euro-zone GDP growth in Q1, to 0.4% q/q, suggests the economy started the year on a stronger footing than we expected and activity surveys suggested. Nevertheless, we still …
This publication has been updated with additional analysis ESI points to small hit from tariffs in April The ESI for April point to a small hit to the euro-zone from US tariffs in April and suggest that growth remained quite weak. With the drag from …
29th April 2025
Spain’s economy to stay strong this year, but Sweden’s may struggle Spain’s rapid economic growth (+0.6% q/q in Q1) is likely to continue for some time yet, despite trade uncertainty. While consumption and government spending were weaker than expected in …
Business surveys for April suggest that US tariffs have not done much damage in the euro-zone so far. The euro-zone Composite PMI edged down rather than collapsing and the Ifo Business Climate Index for Germany, which is the most vulnerable of the larger …
25th April 2025
Ifo resilient in the face of tariffs The rise in the Ifo Business Climate Index (BCI) in April suggests that US tariffs have not yet meaningfully hit economic activity in Germany, though some sentiment indicators have fallen sharply. But the economy is …
24th April 2025
Hit from tariff chaos looks small so far but could get bigger April’s euro-zone flash PMIs suggest that the immediate damage to production from US trade policy has been limited so far. But firms reported some front-loading of orders, so output might take …
23rd April 2025
More cuts to come from the ECB This week’s decision by the ECB to cut interest rates came as no surprise, and the Bank’s overall messaging reinforces our view – which is shared by investors – that the Bank will keep cutting. (You can read our response …
17th April 2025
The ECB’s decision to cut its deposit rate from 2.5% to 2.25% today was expected. And the monetary policy statement sent a clear signal that the Bank will cut rates further to counter the impact of trade policy uncertainty. We are forecasting two more …
ECB acknowledges downside risks from trade uncertainty While the ECB’s decision to cut its deposit rate from 2.5% to 2.25% today was expected, the monetary policy statement clearly points to further policy easing to come. The statement says the outlook …
March’s decline in services inflation was entirely due to transport, which in turn reflected past moves in oil prices and Easter timing effects. But the fundamentals still point to continued declines in underlying price pressures this year. And higher US …
16th April 2025
Although the EU is likely to respond to US tariffs at some point, recent developments reinforce our view that it will move slowly and that any retaliation will be moderate. This should limit the damage from the trade war for Europe and is one reason why …
15th April 2025
Outlook clouded by tariff tensions This publication has been updated with additional analysis The increase in euro-zone industrial production for a second consecutive month in February is not a sign of a sustained recovery for the sector. Instead, it is …
The ECB’s Bank Lending Survey paints a positive picture of the housing market. Conditions for consumer credit and corporate loans were less encouraging, and the tariff chaos of the past two weeks might have made banks more cautious about lending and …
With the Swiss currency having experienced its largest two-week appreciation since the “Frankenshock” in 2015, the SNB may already have started selling francs in the FX market. We have a 25bp cut pencilled in for June, but the risks are that policymakers …
11th April 2025
This week’s historic changes in US trade policy and the associated market fallout point in the direction of a weaker euro-zone economy, lower inflation and looser monetary policy. While US tariff policy has become extraordinarily volatile, we are assuming …
This week’s coalition agreement sets the stage for a substantial fiscal stimulus which should eventually get Germany’s economy growing again. But the new government will have to deal with new challenges from the US which mean there is unlikely to be much …
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
We think the ECB will cut its deposit rate next week and again in June and July. The Trump tariff shock has heightened downside risks to inflation. But policymakers will give little forward guidance next week. Despite President Trump’s latest decision to …
Despite the 90-day pause to the US’s “reciprocal” tariff regime, ECB policymakers will still need to assess the impact of higher US tariffs for euro-zone inflation. Some have argued that tariffs could boost euro-zone inflation in the medium term, but our …
Higher US tariffs will be a substantial drag on the euro-zone economy this year. Looser fiscal policy in Germany will give a small boost in 2026, but overall we expect the euro-zone to grow fairly slowly in the coming years. We also think that the tariffs …
9th April 2025
Europe Chart Pack (April 2025) …
8th April 2025
Retail sales picked up in February This publication has been updated with additional analysis Euro-zone retail sales rose in February for the first time since September last year, and we expect consumer spending to grow at a modest pace over the coming …
7th April 2025
German industry already weak of tariff hit The fall in German industrial production in February left it very weak. With US demand generating around 7% of German manufacturing value added, the sector will be hit hard by US tariffs. And higher defence and …
President Trump’s decision to hit the EU with a 20% tariff on all imports has roiled European markets – the Euro Stoxx is down more than 7% since the announcement – and pose a growing risk to the global and European economies. Our forecast before the …
4th April 2025
Underlying inflation to remain elevated for the rest of the year Despite easing in March, CPIF inflation excluding energy remained elevated and is likely to remain high throughout this year. We are forecasting the Riksbank to keep its policy rate at 2.25% …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
If the 20% US tariff on the EU is sustained it is likely to reduce economic activity in the euro-zone by more than the 0.1-0.2% of GDP we had previously assumed. The impact on inflation should be small but risks to growth and confidence cement the case …
This page has been updated with additional charts and analysis. Inflation steady, but outlook weaker on tariffs Switzerland’s inflation rate was unchanged in March, but that news has been overshadowed by the much higher-than-expected tariffs announced by …
We think Germany is likely to raise defence spending by around 1.5% of GDP between 2024 and 2027. With the government unlikely to cut other spending much and the defence industry well placed to raise output quickly that could add 1.2% to GDP over that …
2nd April 2025
Services inflation down sharply March’s big decline in euro-zone services inflation strengthens the case for the ECB to cut interest rates at the meeting on 17 th April. The small fall in euro-zone headline inflation from 2.3% in February to 2.2% in March …
1st April 2025
Likely fall in services inflation points to April cut National inflation figures released so far suggest that euro-zone headline inflation edged down in March. Services inflation probably also fell, which will please ECB officials. The fall in German …
31st March 2025
With all the major business surveys for March now published, it is clear that while sentiment in the euro-zone has jumped, activity is still growing slowly at best. The more sentiment-driven ZEW and Sentix indices recorded big increases but the Composite …
28th March 2025
Net immigration to the euro-zone has been very high in recent years, and the risks are skewed towards it exceeding the European Commission’s projection of 0.3% per year over the long term. The historical trend suggests it could average 0.4%-0.5% while a …
This publication has been updated with additional analysis Growth still weak, but price pressures remain The EC survey for March shows a deterioration in business and consumer sentiment in the euro-zone, consistent with GDP doing little more than stagnate …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
Data released this morning showed that euro-zone money and lending growth continued to accelerate in February, supporting the case of those at the ECB who would prefer to pause interest rate cuts in April. The narrow M1 measure of the money supply – which …
This morning’s decision by Norges Bank not to follow through with the rate cut that it signalled in January was no surprise. The Bank also revised its interest rate projection up. We forecast two interest rate cuts this year, taking the policy rate down …
Norges Bank to cut very cautiously, if at all This morning’s decision by Norges Bank not to follow through with the rate cut that it signalled in January was no surprise. The Bank also revised its interest rate projection up. We forecast two interest rate …
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
25th March 2025
This publication has been updated with additional analysis. Sentiment improving but activity still weak still weak The Ifo Business Climate Index (BCI) and other surveys for March confirm that the prospect of fiscal stimulus is boosting sentiment in …
This publication has been updated with additional analysis. Germany recovering but euro-zone still weak February’s Flash Composite PMI provides more evidence that, after expanding by only 0.1% in Q4, the euro-zone economy remains all but stagnant in Q1. …
24th March 2025
Heightened military threat… but stronger GDP The rise in optimism about the euro-zone economy over the past few weeks has been remarkable. The ZEW index of investor sentiment in Germany saw one of the biggest increases on record in March. (See Chart 1.) …
21st March 2025
Overview – The euro-zone will get a boost from Germany’s decision to ditch its fiscal rules and ramp up defence spending, as well as the relaxation of the EU’s budget rules. But governments other than Germany won’t loosen policy very much, and the …
Norges Bank signalled in January that a rate cut was likely at its meeting next week, but we now think it will leave the policy rate unchanged at 4.5%. While we still suspect that it will lower interest rates a couple of times this year, the case for much …
20th March 2025
The Trump administration’s efforts to end to the war in Ukraine have raised the prospect of sanctions relief for Russia. This Focus outlines the main sanctions in place and the macroeconomic impact lifting them could have. While US sanctions relief …
The Riksbank left both its policy rate and its interest rate forecasts unchanged at today’s meeting, suggesting that monetary policy will be on hold for the foreseeable future. And while policymakers largely dismissed the sharp rise in inflation so far …
In the press conference following today’s SNB meeting, Chairman Martin Schlegel emphasised that inflation risks are mainly do the downside, suggesting that a further cut in June is possible. But we think today’s rate cut, taking the policy rate from 0.5% …
Riksbank's next move likely to be a hike The Riksbank left both its policy rate and interest rate forecasts unchanged at today’s meeting, suggesting that monetary policy will be on hold for the foreseeable future. However, we think the Bank is likely to …
Today’s cut the last of the cycle for SNB We think today’s SNB rate cut, taking the policy rate from 0.5% to 0.25%, will be the last in this cycle. While inflation was very low in February, at just 0.3%, and may fall further in the coming months, …
