Take two: ECB cuts rates; OECD lowers global growth outlook
- 09 June 2025 (3 min read)
What do you need to know?
The European Central Bank (ECB) cut its key deposit rate by 25 basis points to 2.0%, after Eurozone inflation fell below its 2% target. The ECB said the decision was partly based on an “updated assessment of the inflation outlook”, and now expects headline inflation to average 2.0% in 2025 and 1.6% in 2026 – each 0.3 percentage points less than its March projections. ECB President Christine Lagarde, however, stated that the ECB was “well positioned to navigate the conditions coming up”. As a result, AXA IM now forecasts just two more interest rate cuts this year to reach 1.5% by year-end, compared to four previously. A flash estimate showed the bloc’s annual inflation rate fell to 1.9% in May from 2.2% in April. Core inflation, which excludes energy, food, alcohol and tobacco, fell to 2.3% from 2.7%.
Around the world
The Organisation for Economic Co-operation and Development (OECD) cautioned that the global outlook is “becoming increasingly challenging” due to increased trade barriers, tighter financial conditions and elevated policy uncertainty. It now expects global GDP growth to fall from 3.3% in 2024 to 2.9% in both 2025 and 2026, down from its previous estimates of 3.1% and 3.0% respectively. The expected slowdown will be primarily concentrated in the US, Canada, Mexico and China. “The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,” the OECD said. AXA IM expects global growth of 2.6% in 2025 and 2.4% next year.
Figure in focus: 49.6
China’s business output contracted for the first time since 2022 during May, after faster services sector activity growth was unable to offset a steep downturn in manufacturing production. The Caixin composite Purchasing Managers’ Index (PMI), which includes both services and manufacturing data, fell to 49.6 in May from April’s 51.1 - a reading below 50 indicates contraction. Elsewhere, the S&P Global US composite PMI rose to 53.0 in May, from 50.6 previously, as both the manufacturing and services sector enjoyed increased levels of new business, with overall growth improving. But both the ISM manufacturing and services surveys, which are more closely correlated with the hard data, undershot expectations.
Words of wisdom
Biogases - The production of biogases - locally produced, low-emission fuels created from organic waste - could meet a quarter of annual global natural gas demand, equal to nearly one trillion cubic metres, according to a new report from the International Energy Agency (IEA). Despite its potential, biogases currently play a relatively limited role in the global energy mix, partly due to regulatory and economic barriers restricting uptake, it said. Meanwhile, a separate IEA report revealed global energy investment is set to reach a record $3.3trn in 2025, with clean energy technologies expected to attract twice as much capital as fossil fuels, at a record $2.2trn.
What's coming up?
On Monday, China issues its latest inflation data while the UK publishes unemployment numbers on Tuesday. Wednesday sees the US update markets with its inflation numbers for May; April saw the annual rate drop to 2.3%, its lowest in over four years, from 2.4% in March. Monthly UK GDP data is issued on Thursday while on Friday, both the Eurozone and Japan report industrial production numbers.
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