Following last month’s refi rate cut, we expect the ECB to keep all its rates unchanged in June. The new staff projections will likely show a downward revision of the GDP forecasts. However, they should remain consistent with a stabilization of activity in the summer. Moreover, the latest business sentiment releases brought some relief, showing stronger-thanexpected improvements for the three major member countries in May. The announcement of bold unconventional policy measures is unlikely. 


The BoE meeting on the same day is expected to confirm an unchanged monetary policy stance as well. The majority of the MPC is still concerned about inflation risk, despite the latest decline of the yoy CPI rate for April. It would take clearer evidence of materializing downside risks for enough members to change their vote in favor of more asset purchases. 


In the US, we expect the gradual labor market recovery to have continued, with payroll gains of 180,000 in May and a steady unemployment rate at 7.5%. Not least the timely jobless claims figures suggest that neither the budget cuts (sequester) nor the temporary growth slowdown have led businesses to dismiss additional workers. 


The recovery in the US is getting important tailwind from the housing market. The annual rate of change of the S&P/Case Shiller home price index climbed back into double-digits in March, in line with the improved fundamentals of the real estate market. If sustained, the wealth effect of a 10% rise in house prices would lift GDP growth by about one half of a percentage point.