Economy Watch: European View (June 2024)

Sustained improvements in business and consumer confidence suggest the European economic outlook remains bright. Consumer price inflation rose in May, complicating the ECB’s monetary policy decision making. While the central bank did cut its three main policy rates by 25bp in June, the path for further interest rate cuts remains unclear. In the UK, stubborn services inflation thwarted a June interest rate cut. We maintain that interest rate cuts will begin in August. We leave our European forecasts unchanged from a month ago, still expecting the region to grow below-trend in 2024, or at a rate of 0.9% year-on-year.