Overview

• At the Forum on Central Banking, ECB President Christine Lagarde unveiled a consensus-backed strategy committing to forceful or persistent policy responses to large deviations from a 2 percent inflation target
• Germany’s annual inflation unexpectedly eased to 2 percent in June and eurozone inflation rose to 2 percent, prompting ECB officials to consider pausing rate cuts at their next meeting
• Fed Chair Jerome Powell used a high-profile panel discussion to resist political pressure from President Trump and emphasize the Fed’s autonomy in setting interest rates
• Central bankers from the US, eurozone, UK, Japan and South Korea raised concerns that protectionist policies, Middle East tensions and trade disputes could undermine the dollar-based monetary system
• Market participants now expect any further ECB rate reductions to hinge on incoming data and unresolved trade negotiations, making a move later in the year more likely