Fade hawkish MPC minutes: contrary to MPC three judgements plus downside risks to UK consumption & net exports

This piece argues that last week’s susprising-hawkish MPC vote and minutes do not represent a dramatic change in the picture for UK monetary policy.  The limits to the MPC approach of looking through temporarily above-target inflation, driven by sterling’s post-referendum depreciation, are further from being reached than the minutes-related headlines suggest. So the limited rebounds … More Fade hawkish MPC minutes: contrary to MPC three judgements plus downside risks to UK consumption & net exports

ECB Preview: subdued wage and core inflation prospects mean it’s too early to tone down forward guidance

This piece argues that, despite recent improved €Area inflation and activity data, Draghi is likely to reiterate a highly-acccommodative ECB policy stance at Thursday’s press conference. Contrary to growing market discussions, the ECB is very unlikely to drop it’s forward guidance text on potential further rate cuts as it remains focussed on subdued core inflation … More ECB Preview: subdued wage and core inflation prospects mean it’s too early to tone down forward guidance

ECB preview: Awaiting the credit easing bazooka but several dark clouds persist

This post dissects the Euro Area macro-financial and policy situation in advance of the 2 June ECB meeting. The main points are: Draghi will likely focus on the positive prospective effects of their imminent credit bazookas (TLTRO II and CSPP) including highlighting the positive anticipatory impact of CSPP on bond issuance and spreads. That said, … More ECB preview: Awaiting the credit easing bazooka but several dark clouds persist

ECB to deliver easing despite easing financial conditions: listen to Draghi and Praet

I argue below that the ECB seems likely to at least meet market expectations for easing on 3 December, despite EA financial conditions having recently eased. While tightening financial conditions contributed to the ECB turning dovish, the reverse doesn’t apply. The fragile EA macro situation means that ECB can’t take the risk of the recent … More ECB to deliver easing despite easing financial conditions: listen to Draghi and Praet

Should the ECB be concerned about labour market dynamics and inflation breakevens?

Recent Euro area data have been moderately positive, albeit far from stellar: the Citi EA Economic surprises indicator has been broadly flat since mid-May. Probably the nicest recent upside surprise was the bounce in core HICP inflation from 0.8% to 1.0% in the flash July data, the highest since April 2014, beating market expectations of … More Should the ECB be concerned about labour market dynamics and inflation breakevens?