- Core inflation in the EZ is now being pulled lower by disinflation in goods; services will follow later.
- The EZ inflation data support our call that the ECB will end its hiking cycle in July.
- Punchy wage growth won’t keep the ECB hiking beyond July, but it is an upside risk for rates in 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Disinflation has arrived in the EZ.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A sticky core leaves room for two more 25bp hikes over the summer.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: How much further does the ECB have to go?
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Down a nudge, but the ECB likely isn’t quite done yet.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still points to a pick up in activity.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The fever is breaking, except in services.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: BLS points to 25bp hike from the ECB this week.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: CS problem is solved as far as the SNB is concerned; fight against inflation continues.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Markets believe the ECB is done; we don’t.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Staying the course; a sustained rise in volatility is needed to prevent hikes in Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: President Lagarde hints at more hikes post March but keeps cards close to her chest on number and size.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: At least one more 50bp hike is on the way; no change to QT plans.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Italian bond yields offer an attractive carry, but yields are likely to stay high this year and next...
- ...Even if the spread to bunds falls, as we expect, assuming Italy doesn’t rock the boat with the EU.
- We expect BTP yields to rise to 4.35% by June, before easing back to 4.0% by year-end.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The EU’s new gas price cap is an insurance policy against further price surges; it will not lower prices...
- ...As a result, its impact on inflation will be nil in the absence of a renewed jump in wholesale costs.
- EZ current account data show that the EZ terms of trade shock from the war in Ukraine is easing, a bit.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Tighter-for-longer ECB policy leads us to downgrade our GDP estimates, through 2024.
- We now look for GDP growth of 0.5% in 2023 and 1.5% in 2024, both are 0.3pp lower than previously.
- Economic growth should pick up in 2025, as the ECB will now also likely cut rates further in 2024.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Core inflation data will allow the ECB to raise rates to 3.5% by June, but the tune will change in H2-23.
- PMI data confirm the greenshoots seen in November, but still point to GDP falling sharply in Q4.
- EZ energy imports plunged in October, but we can’t assume this is the start of a more sustained fall.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: No near-term relief likely in core inflation.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: ECB hawks to markets; “we’re the captain now”.
Claus Vistesen (Chief Eurozone Economist)Eurozone
