2025-07-24 16:08

Deposit rate left at 2% ECB awaits outcome of US-EU trade talks Reported 15% tariff worse than ECB's baseline Autumn rate cut seen as less likely FRANKFURT, July 24 (Reuters) - The European Central Bank left interest rates unchanged on Thursday and offered a modestly upbeat assessment of the euro zone economy, raising doubts among investors about further policy easing even while U.S. tariff threats cloud the outlook. The ECB has cut its policy rate eight times since June 2024 after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia's 2022 invasion of Ukraine. Sign up here. But the economy was now in a "good place" and growth is in line with projections or a "little bit better", ECB President Christine Lagarde said, bolstering market bets that the ECB may be done with cutting rates altogether. Financial markets which had fully priced in a rate cut this autumn just days ago now see only an 80% chance of a move, and even that may not come until the spring. Confirming waning appetite for rate cuts, sources close to the discussion said the bar for a move in September was high and would require weaker growth and inflation, along with lower staff projections. Lagarde herself took a more measured stance and would not be drawn into rate cut talk. "We are in this wait-and-watch situation," Lagarde told a press conference. "We are in a good place because our projections point to inflation stabilising at target in the medium term." She said the ECB's baseline projection for modest growth and inflation at its 2% target continued to hold, and that most data since the June data have confirmed that outlook. Lagarde's optimistic tone even prompted some economists to look again at their own projections. "We are revising our forecasts and no longer expect a final cut of the ECB deposit rate to 1.75% at the September meeting," Commerzbank economist Jörg Krämer said. "Now expect an unchanged deposit rate of 2.0% for the rest of this year and for 2026." Recent data suggest the economy is holding up well and fresh PMI surveys out on Thursday indicated an acceleration in business activity, led by a solid improvement in the dominant services industry and with manufacturing recovering. Euro zone banks have seen rising loan demand and policy uncertainty has not yet translated into an economic or market downturn even if some companies are starting to feel the pinch from tariffs in their profits. TRADE UNCERTAINTY Trade negotiations still pose a risk and a final deal is far from certain, even as reports suggest that the two sides are moving closer on a possible agreement based on a 15% tariff on U.S. imports of EU goods. "We are attentive to where the negotiations are heading (but) we take the news one day at a time," Lagarde told a press conference. "The sooner this trade uncertainty is resolved, the less uncertainty we will have to deal with and that will be welcomed by many economic actors including ourselves." While the White House has dismissed the reports as speculation, 15% tariffs would be roughly halfway between the ECB's baseline and severe scenarios for the euro zone economy, presented last month, but milder than Trump's threatened 30%. The ECB's June estimate showed that higher U.S. tariffs would result in lower growth and - depending on any EU retaliation - lower medium-term inflation in the euro zone. Even the ECB's baseline projection from June, which incorporates 10% tariffs from the United States, saw price growth below 2% over the next 18 months. Lagarde acknowledged that scenario included the possibility of a temporary undershooting of the inflation target but said it was not a cause for concern. "With growth holding up and inflation at target, we believe the cutting cycle is drawing to a close," Konstantin Veit, a portfolio manager at PIMCO said. "The current 2% policy rate is likely a level considered the mid-point of a neutral euro area policy range by the majority of Governing Council members." Lagarde's upbeat assessment also pushed short-dated German bond yields to their largest daily rise in two months, as traders took it as a signal that another series of rate cuts next year might be unlikely. "Taking today’s meeting at face value, the bar for yet another rate cut this year has clearly been raised," ING economist Carsten Brzeski said. "Still, we think that actual inflation could come in lower than the ECB expects and hard macro data could rather disappoint over the summer." https://www.reuters.com/business/finance/upbeat-ecb-keeps-rates-steady-raising-doubts-about-further-easing-2025-07-23/

2025-07-24 15:36

SAO PAULO, July 24 (Reuters) - Brazilian motor maker WEG (WEGE3.SA) , opens new tab said on Thursday it expects to offset most of the impact from the 50% tariff U.S. President Donald Trump said he would impose on Brazilian goods partly by adjusting some export routes. Analysts have cited WEG - whose motors are used in vehicles, wind turbines and power transmission lines - among the most exposed firms to the steep tariffs, which are due to take effect on August 1. Sign up here. The company on Wednesday reported lower-than-expected second-quarter results, noting that geopolitical uncertainties have limited long-term visibility and led some clients to postpone investment decisions for large projects. Chief Financial Officer Andre Rodrigues suggested on Thursday the firm could use its Brazilian operations to supply countries such as Mexico and India, whose products would in turn meet U.S. demand. "The execution may take a few months, but once the change is implemented, we expect to be able to mitigate most of these impacts," he told a call with analysts, though warning the move would also depend on the levies Trump imposes on other nations. WEG has plants in over a dozen countries, including the United States and Mexico, and has touted its global presence and broad product portfolio as factors that might help shield it from the tariffs' impacts. Rodrigues said that products made in Brazil currently account for less than a third of WEG's U.S. sales. He noted that the effects on WEG's second-quarter results of the 10% tariff Trump had initially imposed in April were small, saying that the firm made some price adjustments in the U.S. to offset the impact of those levies. "Looking ahead, at this point it's not possible to have a firm stance, given the many uncertainties and volatility in the trade structures being discussed," Rodrigues added. "But if the current situation persists, WEG does have an action plan." https://www.reuters.com/world/americas/brazils-weg-expects-mitigate-most-impacts-trump-tariffs-2025-07-24/

2025-07-24 15:32

FRANKFURT, July 24 (Reuters) - European Central Bank policymakers are setting a high bar for an interest rate cut in September and they would need to see a significant deterioration in growth and inflation before backing further easing, two sources told Reuters. The European Central Bank left interest rates unchanged on Thursday after cutting eight times in a year, biding its time while Brussels and Washington try to negotiate a trade deal that could ease persistent uncertainty over tariffs. Sign up here. But sources at the meeting said that policymakers would not be spurred into action by the mere announcement of U.S. duties on European Union imports. Instead, they would need to see an actual weakening in the inflation and growth data as well as lower projections from ECB staff in September if they are to back a rate cut. An ECB spokesperson declined to comment. While the discussion on Thursday was harmonious, a few policymakers wanted to send out a warning about inflation coming in lower than expected. Instead, the ECB said that risks to economic growth were "tilted to the downside" while "the outlook for inflation (was) more uncertain than usual". ECB President Christine Lagarde hinted at this division, saying that, while the decision to keep rates on hold was unanimous, the risk assessment was "broadly shared". The sources said that policymakers mostly agreed on how the economy would behave in the ECB's baseline scenario, in which the U.S. administration imposes a 10% tariff rate on European Union imports. But they differed about the adverse scenario, in which the tariff rate is higher. Policy hawks, who favour higher interest rates, saw risks that inflation would get a boost from supply disruptions related to tariffs and possible retaliation. Doves saw downside risks from slower economic activity prevailing. Lagarde, who said her job was to present the view of the Governing Council rather than her own, listed both types of risks in her news conference. https://www.reuters.com/business/finance/ecb-policymakers-set-high-bar-sept-rate-cut-sources-say-2025-07-24/

2025-07-24 15:15

MEXICO CITY, July 24 (Reuters) - Mexico's headline inflation slowed in the first half of July, falling back within the central bank's target range and fueling expectations that the bank will continue to cut interest rates in Latin America's second-largest economy. Consumer prices rose 3.55% in the 12 months through mid-July, data from the national statistics agency showed on Thursday, slowing down from the 4.51% reported a month earlier. Sign up here. The figure also undershot the 3.64% expected by economists polled by Reuters. The slowdown in inflation "shows that the Bank of Mexico has room to keep cutting interest rates," President Claudia Sheinbaum said at her regular morning press conference. The Bank of Mexico, which targets an inflation rate of 3% plus or minus one percentage point, lowered its benchmark interest rate by 50 basis points in June - its third straight cut of that magnitude - bringing it to 8.5%, the lowest since August 2022. In the first half of July alone, Mexican consumer prices rose 0.15% compared to the prior two weeks, also below expectations of a 0.27% increase. Analysts at brokerage Monex said the data was a surprise as inflation in the first half of July reached its lowest level for this period in a decade, but emphasized challenges on core inflation. The closely watched core price index, which strips out some volatile food and energy prices, climbed 0.15% in early July, compared with 0.22% a month earlier. The 12-month core rate came in at 4.25%. "Given the stubbornness of core inflation, we expect Banxico to reduce the scale of its cuts: for the August 7 meeting, we estimate that it will cut the benchmark interest rate by 25 basis points to 7.75%," Monex analysts added. https://www.reuters.com/world/americas/mexico-inflation-fall-early-july-reignites-rate-cut-expectations-2025-07-24/

2025-07-24 14:33

BRASILIA, July 24 (Reuters) - Brazil's federal tax revenue hit a record high in the first half of the year, lifted by strong June collections, revenue service data showed on Thursday, as President Luiz Inacio Lula da Silva seeks to boost public income to shore up fiscal accounts. Federal tax revenue rose 6.62% in June from a year earlier in real terms, reaching 234.594 billion reais ($42.51 billion). Sign up here. From January to June, revenue totaled 1.426 trillion reais, up 4.38% in real terms from the same period last year. Both the monthly and year-to-date figures were the highest ever recorded for their respective periods, the tax authority said. Revenue from the IOF tax on financial operations increased in June after the government raised the levy on several transactions via decree in late May. Although Congress later overturned the measure, it was reinstated earlier this month following a Supreme Court decision. The revenue service also highlighted a rise in income tax collection on financial investments, driven by the elevated benchmark interest rate, Selic, "which contributed to the performance of fixed income funds and securities." Policymakers have raised the Selic by 450 basis points since last September to fight inflation, taking the rate to a nearly 20-year high of 15%. Despite strong tax revenue, the government projected earlier this month a primary deficit of 26.3 billion reais for the year, excluding nearly 50 billion reais in court-ordered payments that the Supreme Court ruled should not count toward the fiscal target. While the figure remains within the zero-deficit goal's tolerance band of 0.25% of GDP, it underscores the challenge of balancing the budget amid rising mandatory spending, including pensions and social benefits. ($1 = 5.5187 reais) https://www.reuters.com/world/americas/brazils-tax-revenue-surges-record-h1-2025-07-24/

2025-07-24 14:06

Economic growth forecast cut due to Russian attacks Public spending, foreign aid support Ukraine's economy Government, IMF work on new lending program KYIV, July 24 (Reuters) - Ukraine's central bank left its key interest rate steady at 15.5% on Thursday for the third consecutive meeting, saying it expects inflation to continue to ease but wartime risks will constrain economic growth. Economic growth will slow to 2.1% this year compared with 2.9% in 2024, it said in a statement. Sign up here. The central bank previously predicted 2025 growth at 3.1% but it cut its forecast due to more intense Russian attacks in recent months. "Going forward, the pace of recovery will depend on the course of the war," the bank's governor, Andriy Pyshnyi, told media. Russia's full-scale invasion in February 2022 devastated the economy, with gross domestic product plunging by about one-third in 2022. The economy posted modest growth in 2023 and 2024, but it is still about 20% smaller than before the war. Pyshnyi said that public spending and a steady inflow of international aid had helped the economy in the first half of the year. But more intense Russian air attacks and further destruction of production facilities, infrastructure and housing had restrained growth, he said. The war has heated up in recent months with swarms of drones launched by both Moscow and Kyiv, fighting raging along more than 1,000 km (600 miles) and dim prospects for peace. Officials said the war was also causing staff shortages amid persistent emigration. GDP grew by 0.9% year-on-year in the first quarter of the year, data showed. Bad weather also weighed on growth prospects, delaying crop sowing and hampering future harvests in the farm business that is a major sector of the economy, the bank said. Another key risk for the economy was an insufficient level of international financial aid, Pyshnyi said. The bulk of Ukraine's revenues goes to defence, and aid from allies is crucial for Kyiv's ability to finance social and humanitarian spending. The government has received $24 billion out of $54 billion expected in aid in 2025. He also said the government worked with the International Monetary Fund, the country's key lender, on approaches for a new support program. The central bank also said it expects inflation to reach 9.7% at the end of 2025 and forecasts it to slow to 6.6% in 2026. https://www.reuters.com/world/europe/ukraines-central-bank-holds-key-rate-steady-says-war-risks-will-curb-2025-growth-2025-07-24/