Europe: time for fiscal consolidation

Wednesday 17 January 2024

Cross Asset


Europe: time for fiscal consolidation

January 2024 | The US Federal Reserve has indicated that its "Higher for longer" narrative is over. The Fed does not want to restrict the economy longer than necessary, and is attentive to the impact of higher rates on growth. It is now back to the point where both mandates (price stability and maximum sustainable employment) are important. Despite recent positive developments, Christine Lagarde said the European Central Bank (ECB) shouldn't lower its guard as inflation tumbles, admitting that "we did not discuss a rate cut at all." The divergence between the Fed and the ECB is particularly notable given the eurozone's recent weaker economic performance and more rapid disinflation compared to the US.

01 |  The public finances of eurozone countries began to improve in 2023 and we believe fiscal consolidation will intensify in most eurozone countries during 2024.

02 |  The "easier part" of the disinflationary process is past, and the path to bringing core inflation back to target will require a substantial moderation in demand and growth.

03 |  After a strong Q3 performance, we expect the US economy to progressively weaken driven by moderating domestic demand impacted by tighter credit conditions.

January Cross Asset - Europe: time for fiscal consolidation

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of January 12, 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the [author] and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.

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