Investment Institute

A Conversation about the Conversation

  • 04 March 2024 (10 min read)

Key Points:

  • We think the ECB will admit the conversation has started on cutting, but we do not expect a clear timeline. June is still our base case for the first cut. 
  • There might be green shoots of recovery in global manufacturing, but the signals from China remain uncertain.
  • In the US, the January CPI worried us. The PCE version of core inflation did not reassure us.

Many members of the ECB Governing Council have already taken to the wires to opine on cutting rate, so it is unlikely in our view that Christine Lagarde will deny this week that the conversation has started internally. The council is however probably too divided – with varying degrees of patience - for her to embark on a precise discussion of the timeline. The recent dataflow did not send a clear signal. Core inflation fell less than expected in February and the three and six-month momentum suggests a re-acceleration may be ongoing. Yet, the doves can take comfort in the fact the negotiated wages decelerated in Q4 2023 for the first time since the spring of 2022, and they can easily point to the weakness in the real economy to argue against wasting time. The hawks however can argue that the credit impulse has improved lately. We expect the new forecasts to maintain ambiguity and we continue to think that the first cut will come in June. The lack of momentum of the Euro area economy is to some extent a product of the weakness in the manufacturing sector at the global level. Even in the otherwise stellar US economy, the latest ISM index in manufacturing was deep in contraction territory. We look however to the recent rebound of export orders in Taiwan – still the world’s key producer of chips - for early signals of a turnaround in global manufacturing. Still, we think that to solidify a proper recovery more Chinese traction would be needed. The cut in the 5-year LPR rate by the PBOC was an encouraging step, but how the central bank’s signals will be transmitted remains uncertain. Finally, we explore again the inflation dataflow in the US. Two weeks ago, we expressed our concerns over the January core CPI print. The PCE version did not reassure us. The “last mile” of disinflation is decidedly arduous.
Download the full article
Download report (592.96 KB)

Related Articles


Mind the Crowds!


UK General Elections: A one horse race to Number 10

  • by Gabriella Dickens
  • 21 June 2024 (10 min read)

Uncertain Winds


    This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Past performance is not necessarily indicative of future performance.

    Some of the Services and/or products may not be available for offer to retail investors.

    This publication has not been reviewed by the Monetary Authority of Singapore.