Global Data Pod: A second ECB hike and still not done

Euro area economic growth maintains an above-potential pace, supported by resilient survey data despite localized weaknesses in France and softening capital expenditure. Energy prices continue to drive inflation uncertainty, though current storage levels and improved government coordination mitigate the risk of severe supply shortages. Core inflation is expected to remain sticky at 2.5% through early 2027, reinforcing the case for a third ECB rate hike. Meanwhile, France faces mounting fiscal challenges, with recent deficit data and political constraints limiting the scope for necessary structural tightening before the 2027 presidential election. The broader outlook remains tethered to energy price volatility and the potential for further geopolitical escalation in the Middle East, which continues to influence both inflation trajectories and central bank policy decisions.