Euro: Fiscal questions with disinflation progress – BNY
BNY’s Geoff Yu argues that European disinflation is allowing focus to shift from emergency inflation control toward growth and fiscal credibility. Yu notes that falling inflation in Poland and Hungary’s fiscal discipline have improved sentiment, but warns that fiscal consolidation must keep pace with easier financial conditions. The NATO Summit is seen refocusing markets on Europe’s defense funding trade-offs.
Disinflation shifts focus to budgets
"June's preliminary inflation prints across Europe show a clear sequential slowdown, driven by the extended ceasefire and lower commodity prices. We expect inflation expectations to continue falling."
"The constraint, however, is no longer energy or supply shocks, but the risk that financial conditions loosen faster than fiscal consolidation. Poland’s full-year fiscal deficit is still expected at 6.8% of GDP, while 37% of this year’s borrowing program remains outstanding."
"Fiscal credibility is now essential for governments seeking to reduce borrowing costs toward pre-war levels, if that’s still achievable. Higher Fed expectations and tighter ECB policy are already exporting tighter financial conditions across Europe, leaving far less monetary policy space."
"Preliminary June inflation releases continue this week, with soft prints expected across the region. Hungarian CPI is forecast at just 1.8% y/y, below target and below expected Czech inflation (2.1% y/y), despite the Czech Republic never experiencing a comparable fiscal impulse."
"The NATO Summit in Ankara is the key political event, with Trump expected to press European allies to shoulder a greater share of defense spending despite increasingly constrained public finances. Recent developments in Europe’s defense sector have weighed on performance, while structural challenges elsewhere in the economy persist."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Wall Street giants collectively raise rate hike forecasts, US Treasury futures continue to fall, gold drops over 1% to break 4000
After the US October CPI exceeded expectations, Goldman Sachs and Nomura added a forecast for an interest rate hike in March next year, while Deutsche Bank included a forecast for a rate hike in January next year. Currently, the market has fully priced in a 25 basis point rate hike in December, with a 13% probability for a 50 basis point hike. On Wednesday, the US Treasury spot market was closed, but Treasury futures continued to fall, with corresponding yields rising by about 2 to 4 basis points, and spot gold came under pressure, dropping by 1.1%.
No Need to Worry About the Cooling Down of AI Data Center Construction? The US Import Boom Is Unlikely to Subside in the Short Term, Real Impact May Come in 2029
It takes an average of 4.8 years from finalizing investment to starting construction of a data center project, and an additional 2.6 years from construction start to becoming operational. Servers usually cannot be installed until after the building structure and racks are completed. For trade partners such as Taiwan (China), South Korea, and Mexico who rely on US data center supply chain demand, the inertia in construction timelines provides at least a one- to two-year buffer for future exports.
Federal Reserve Major Debate: When Should the Tenure of “Number Three” Williams End?
The main point of contention is whether Williams should step down in June 2028, upon completing a full 10-year term, or in June 2027, when he reaches the mandatory retirement age of 65. Analysts point out that the Federal Reserve Board holds ultimate discretion; if he leaves early, Fed Chair Waller would be able to assert greater control over the appointment to this critical position. However, forcing Williams to shorten his term could easily be interpreted as political manipulation. Williams himself is expected to serve until June 2028.
Crypto prices
More
