inflation

European economy 8th July 2021

ECB Raises The Bar For Normalisation In The Short-Run, Flexibility Is The Key For Policy

Monex Europe | Today’s announcement by the European Central Bank can be perceived as net dovish in the short-term by markets, as the shift from an asymmetric target to a new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets. Previously, the ECB’s inflation target was set at “below, but close to 2%”, which contributed to the eurozone’s structural issues with low inflation for years. By changing this target to a symmetric target, which means any undershoots and overshoots would be equally undesirable, the central bank moves the bar slightly upwards for inflation before policy is required to tighten.

Relevant News Item 23rd June 2021

We Need To Talk About Inflation

José Ramón Díez (CaixaBank Research) | While expected, the rise in inflation is causing discomfort due to the high levels that have been reached and the risk of it persisting at those levels for longer than desirable without investors being startled. The key is whether we are faced with an economy that is simply skidding around as it seeks to accelerate from 0 to 60 in a short time, in which case inertia will allow it to easily regain stability; or, on the contrary, overheating caused by an excessively expansive demand-focused policy could test the strength of the economic engine.

World economy 7th June 2021

Have We Entered ‘The Great Inflation 2.0’?

Consumer spending in the United States increased to pre-pandemic levels of around $13.4 trillion in the first quarter of 2021 from $13.0 trillion in the fourth quarter of 2020. If the pandemic can be characterised as the economic engine being parked rather than broken, pent up demand could quickly cause consumer spending to overshoot the trend from recent years.

World economy 15th May 2021

US Inflation Spike Brings Tapering Back On Fed Agenda

Keith Wade (Schroeders) | Headline CPI inflation rose to 4.2% year-on-year in April the highest level since September 2008. Meanwhile the core measure, which strips out food and energy prices, rose to 3%, a level last seen in 2006. It is unlikely that the inflation figures will spook the Federal Reserve, although they will mean an upward revision to its forecasts. More importantly, when combined with strong growth in GDP, it will have to start to think about slowing its asset purchases.

Spanish economy 30th April 2021

Spain’s Headline Inflation Jumped To 2.2% In April (1.3% In March), The Highest Rate Since October 2018

Luís Pinheiro de Matos (Caixabank Research) | Headline inflation rebounded to 2.2% in April (1.3% in March). The figure is above CaixaBank Research’s forecast (1.6%). On the other hand, core inflation moderated to 0.0% (0.3% in March), a rate not seen since 2014. The new high in inflation can be explained entirely by the performance of energy prices, while the underlying components have not yet shown signs of recovery.

World economy 23rd April 2021

Globalisation Ensures Low Inflation For A Long Time To Come

Ofelia Marín Lozano | In March, April and May this year we will see published inflation close to or above 2% year-on-year. But this can simply be explained by the rise in oil prices. Crude oil, which a year ago, at the height of its confinement, fell to levels of around 30 dollars per barrel, is now trading above 60 dollars per barrel, is now trading at over 60 dollars. In our opinion, although inflation could pick up notably in the second quarter of 2021, with year-on-year readings above the 2% that the US Federal Reserve and the ECB have set as a benchmark for the long term, the underlying inflationary risks remain well under control and support the maintenance of an accommodative monetary policy for a prolonged period of time. Simply put: core inflation only rises consistently if wages rise and, with higher unemployment, it is very difficult for that to happen.

European economy 23rd April 2021

While Europe Is Expecting An Inflation Peak Of 2.5%, The US Is Talking About 4.1%!

Mutuactivos | How would you react to an inflation figure of 4.1%, albeit temporary? In short, we believe that it could push the T-note above 2% temporarily, even a scare in the markets, but in that case it is likely that the Fed would try to influence it to moderate it: either by changing its “active passive” discourse to one of greater involvement, closer to that of the ECB, or directly by buying debt to control the yield curve.

Spanish economy 30th March 2021

Spain CPI Soars 1 Percentage Point In March To 1.3%, Its Highest Level In Almost Two Years

The Consumer Price Index (CPI) rose by 1% in March compared to the previous month, taking it to 1.3%, almost 1.5 points higher than in February (0.0%), according to preliminary data published today by the National Statistics Institute (INE). With this upturn, with which the annual CPI marks its third consecutive positive rate, inflation climbs to levels unseen for almost two years. In fact, such a high CPI rate had not been reached since April 2019, when it stood at 1.5%.

European economy 10th March 2021

Fed Memo To The ECB: “My Rates, Your Problem”

Bruno Cavalier (Oddo BHF) | There are two types of central banks in the world. On the one hand, those who believe that the recent rate hike is widely justified. This is the case for the Fed, at least so far. On the other hand, those who think the opposite. This is the case of the ECB, which is exasperated to see European rates rising, not as a sign of a solid recovery, but because of the contagion of the US bond correction.

In the World, World economy 8th December 2020

What About Inflation? When It Will Come?

José Ramón Díez Guijarro (Bankia Estudios) | In the more recent past, the central banks have had enough to deal with trying to combat the risk of deflation linked to the structural changes of recent decades: globalisation, ageing population, digitalisation, etc. And now, practically without any solution of continuity, they have to face a crisis which may lead to new permanent “shocks” in inflation. These would derive from changes in the consumption patterns and from the accelerated digitalisation process. Or from the intensive use of non-conventional monetary policy measures.

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