Cash & Liquidity Management
Published  7 MIN READ

Hawkish Central Banks Highlight Persistence of Tight Monetary Policy

Exclusive insight for TMI subscribers! Northern Trust Asset Management share a monthly market commentary for treasurers.

Eurozone Market Update

In June, the ECB raised interest rates by 25 bps, taking the deposit rate to 3.5%. The Governing Council also confirmed discontinuing the asset purchase programme (APP) reinvestment in July. Annual Eurozone core inflation rose to 5.4 from 5.3 but printed below consensus. Eurozone composite PMI fell to 50.3, 2.2 points below expectations, dragged lower by manufacturing and services. Eurosystem staff projections provided a hawkish tilt with inflation expectations revised higher, indicating core inflation will remain above target until the end of 2025. President Lagarde provided strong forward guidance that barring a material change, rates will likely rise in July. While there is no wage price spiral, Lagarde highlighted unit labour costs were a critical driver of the upward inflation revisions.