Fed's Powell, ECB's Lagarde and Brazil's Central Bank Chief At ECB Forum 7/2/24

Carl Quintanilla (0:00)

Market Moving Insight and Analysis join Jim Cramer, David Faber, and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street.

David Faber (0:08)

Global markets paying close attention to the ECB Central Banking Summit in Central Portugal. Coming up, don't miss Fed Chair Powell, ECB President Lagarde, and Brazil's Central Bank Chief.

They are all with our own, we like to say right here, Sara Eisen, who will be conducting the affairs for that conversation. Good Tuesday morning, welcome to Squawk in the Street. I'm David Faber with Leslie Picker and Wilfred Frost. We are live from Post 9th and New York Stock Exchange. Jim and Carl have the morning off. Let's give you a look at futures as we get ready to begin trading one half hour from now.

And you can see we are looking for a down open at this point.

We'll also keep an eye, of course, on the bond market. We begin, though, with the World Central Bankers. They are gathering at that ECB Annual Forum. It is in Portugal, as it was last year. Sara Eisen will be moderating. It's a panel that has Jay Powell, Christine Lagarde, the Governor of Brazil's National Bank. Last year, I think it was Japan's National Bank. This year, Brazil. And we, of course, will bring you live coverage of that event this hour.

Wilfred Frost (1:09)

Does Sara get to pick the extra Central Banker to bolt on?

David Faber (1:13)

I don't know. I don't know, though.

Wilfred Frost (1:15)

Well, look, let's be honest. Most of the questions are gonna go to Powell, then to Lagarde.

You know, I don't know. But it adds a great diversity to it. Didn't you wanna add that to your trip, David?

David Faber (1:26)

Which one? The to Central Portugal? You know, thankfully, I was there about a year ago, so I did get to see it, but I'm not the Central Banker interviewer at this network. I didn't think.

Wilfred Frost (1:37)

No, but you're a big fan of all areas in Europe.

David Faber (1:40)

I am, indeed.

Wilfred Frost (1:40)

No, but I mean, good timing, as always, for something like this, that Sara's booked, that 2.5% inflation coming in from Eurozone this morning, down from 2.6% in May, it was in line with expectations. The service inflation ticking up to 4.1%, and that's why the headline's crossing from the speech part of what Lagarde has been saying, that they're in no rush to cut interest rates from here. Interesting couple of similarities and one key difference to the US. The similarities, unemployment remains low across Europe, 6.4%, which is very low for the Eurozone, and also that service inflation remains sticky, similar to here. Both of those factors, of course, suggesting there's no immediate need for a cut.

The big difference from the US is that they have already, of course, cut once, 3.75% of the rate, having cut 25 bips in June. Altogether, you can see why Lagarde's headline from her speech is we're not in a rush to add an extra cut from here.

Leslie Picker (2:36)

How do you extrapolate that inflation data based on kind of the actual activity of cutting? I mean, is there any way to draw a correlation there or is it something still in wait and see?

Wilfred Frost (2:48)

So there's one similarity between the Eurozone and the UK, which is that we're about six months behind the US, getting to those sort of really attractive inflation readings a little bit later than the US, and probably now gonna follow suit of the US, which is we're gonna see things tick up again, not to the highs of 10, 11% that we saw 18 months ago, but gonna tick up again from here.

And the difference that you've seen with the ECB compared to both the UK and the US is that they did pull the trigger last month on a little bit of a cut when you did get those attractive readings. The question mark from here, which you guys have had for the last six months, the UK will have and the ECB will have too, is if you didn't cut at all or didn't cut much when the readings were very low and falling, are you really gonna cut when they're ticking back up again? And obviously that's why expectations for the number of cuts has been pushed back so much. And what we'll see from here if they do materialize.

David Faber (3:44)

Speaking of yields, of course, we always keep a close eye on the 10 year.

And that has moved up a little bit in the last couple of days. 20 basis points.