Written Commentary
ADM Exceeds 5M Regenerative Agriculture Acreage Gal
September 9, 2025
- All eyes on the ECB as Japan PPI, German WPI and Swedish CPI are digested along with hawkish BoJ comments, US PPI ahead
- ECB to cut rates 25 bps, but remain cautious on future path for rates, staff forecasts may shade GDP and CPI expectations, but perhaps not as much as recent data should dictate, in order to temper rate signalling
- UK: weaker than expected GDP likely less material to BoE rate path than signal of lower pay settlements from latest IDR survey
EVENTS PREVIEW
All eyes will be on the ECB meeting, which is expected to see the Depo rate cut 25 bps to 3.50%, while it was already announced in March that the spreads to the Refi and Marginal Lending rates will be tightened an additional 35 bps (3.65% and 3.90% respectively). Given well aired and quite profound differences of opinion among ECB council members about further policy easing, the stubborn level of Services CPI, in part offset by the sharp drop in its negotiated wages to 3.6% y/y (with Q2 Compensation Per Employee due to be published with final Q2 GDP), forward guidance will likely again be limited to being ‘data dependent’. Staff forecasts for 2024 GDP and Inflation are expected to be shaded slightly lower, longer-term forecasts for CPI should in theory be cut quite sharply, given recent inflation trends, but if the ECB wants to continue to signal some ambivalence on the path for rates, then the reductions may be rather more modest, to avoid sending a more clear-cut signal on future rate cuts.
Comments overnight from BoJ’s arch hawk Tamura set a further marker in the sand in terms of the potential rate trajectory, though others on the BoJ board are probably less hawkishly inclined, but still the rate differentials with the rest of the G7 are set to narrow significantly and will serve to unwind more long-term JPY carry trades. Yesterday’s UK GDP were primarily a function of the weakness, or rather mean reversion in Industrial Production and Construction Output, and a reminder that despite the relative strength of Q1 and Q2 GDP, the underlying trend rate has not really accelerated that much. The overnight UK IDR pay survey, showing settlements slowing to 4.0% y/y in the May-July from 4.8% are rather more material to the BoE’s rate trajectory, though unlikely to prompt the BoE MPC to opt for a rate cut at its September meeting.
Following on from yesterday’s mixed CPI data, today’s PPI is expected to see energy prices bear down on headline inflation, with a modest 0.1% m/m headline rise driving the y/y rate down to just 1.7%, though core CPI is seen up 0.2% m/m for an unchanged 2.4% y/y. The latter will again be subject to the divergent forces of Trade Services, which dragged on core PPI in July, and upward pressure from Financial Services.
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