By Balazs Koranyi and Francesco Canepa
FRANKFURT (Reuters) – Inflation in the euro zone is different to that in the United States, much as ECB President Christine Lagarde insists, but the bloc will still face many of the same headwinds as others, limiting how far price growth can slow.
The ECB put an interest rate cut in June on the table on Thursday, arguing that price growth was decelerating towards 2% and the 20-nation bloc was “not the same” as the U.S., which is struggling with unexpectedly stubborn inflation that may delay interest rate cuts there.
While numerous differences underscore Lagarde’s point, Europe does not exist in a vacuum and problems in the U.S. are bound to make their way across the Atlantic, albeit over time and in a more muted form, economists say.
Two fresh surveys by the ECB published on Friday reveal the contrast – one suggesting euro zone growth will be barely above zero this year, and another showing the bloc’s biggest firms see contracting investments, workforce cuts and poor retail sales.
This is pushing the long expected recovery further and further out, and even if the economy seems to have bottomed out, the tentative signs of demand and sentiment recovery point only to a gradual and muted rebound.
Annualised growth in the U.S., meanwhile, was above 3% in the final quarter of 2023 and inflation was driven primarily by demand.
“We remain convinced that, given wildly different demand/consumption backdrops in the euro area and U.S., U.S….
