Joined April 2009
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16 Jun 2022
Central banks: from whatever it takes to whatever it breaks.
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Jun 11
ECB sources vs. counter-sources game is up to another level.
*ECB GOVERNORS EYE JULY PAUSE AFTER FIRST HIKE
*ECB OFFICIALS SEE NEXT RATE HIKE POSSIBLE AS SOON AS JULY
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Frederik Ducrozet retweeted
Jun 11
Cut-off dates for assumptions weeks before ECB meetings mean resulting forecasts are often dead on arrival. Ireland's massive growth revision in Q1 means that Eurozone growth would need to average 0.5% q/q for the rest of the year to hit 0.8% for 2026. Will be a lot lower. Alas.
Jun 11
🇪🇺 Our take on ECB staff projections:
- core HICP looks a bit low in 2026 (even accounting for a June setback in services) but a bit high in 2027 (too much pass-through)
- headline HICP back to 2% in 2028 (likely below 2% by Q4 2028)
- GDP growth still too high in 2026 (Ireland)
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Jun 11
ECB's staff analysis on potential second-round effects from higher energy prices. Looks pretty straightforward to me.
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Jun 11
Joke aside, Box4 may be the most interesting bit of the June projections, discussing the calibration of ECB models to account for non-linearity and higher sensitivity of wages, core prices and inflation expectations to realised inflation during similar shocks.
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Jun 11
🇪🇺 ECB staff projections for inflation show headline HICP back below target by Q4 2027, but core HICP above 2% throughout the forecast horizon.
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Jun 11
New ECB projections for inflation are close to market pricing for this year, but below HICP swaps into 2027.
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Jun 11
So what is a 25bp hike supposed to achieve? Not "insurance", nothing "forceful", but a "signal".
That's probably the closest to the truth imo.
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Jun 11
Three scenarios, including a milder one, but it's unlikely, but we need to hike in all of them.
Thank God it's Friday.
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Jun 11
Forward guidance 2.0 from @Lagarde:
"It will be what it will be"
Kevin Warsh must be taking notes.
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Jun 11
🇪🇺 Our take on ECB staff projections:
- core HICP looks a bit low in 2026 (even accounting for a June setback in services) but a bit high in 2027 (too much pass-through)
- headline HICP back to 2% in 2028 (likely below 2% by Q4 2028)
- GDP growth still too high in 2026 (Ireland)
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Jun 11
🇪🇺 ECB hikes rates for the first time since September 2023.
Inflation projections revised higher (though 2026 core HICP at 2.5% looks a bit lower than feared); GDP growth projections down (0.8% in 2026).
July may be live, but the ECB is not pre-committing to anything yet.
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Frederik Ducrozet retweeted
Jun 3
First, the supreme court collapsed the Trump administration's tariff wall.
Then the Trump erected a temporary tariff fence, due to fall down again in late July.
Last night USTR shared how it plans to rebuild the tariff wall's foundations. 🧵
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Jun 2
🇪🇺 A very bad inflation report for the ECB, including a 50bp rise in services inflation that looks at odds with national data, way above staff projections.
Likely to be reversed, but this will keep the ECB on high alert following an all-but-certain rate hike next week.
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Jun 2
I'd watch for seasonal adjustment issues in transportation, airfares, package holidays and other energy-impacted HICP items in the final releases. But a lot of the damage will be done anyway.
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Frederik Ducrozet retweeted
May 29
CHART OF THE DAY: On Apr 16, the IEA made a headline-grabbing warning: Europe had "maybe 6 weeks or so of jet fuel left." It's week seven; the planes are still flying. Since those headlines, European wholesale jet fuel prices have fallen ~30% to a ~3-month low.
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May 21
🇪🇺 Olli Rehn is basically giving up to the idea that the ECB "needs to hike" to "preserve credibility". The bond market is doing part of the heavy lifting for the central bank, but it’s also forcing their hand because they worry the sell-off will worsen if they don’t hike.
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May 21
Still, the growth outlook is weakening and there’s no risk of a wage-price spiral whatsoever. A bumblebee ECB should not overreact.
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May 21
🇪🇺 French PMIs registered one of the largest drops in output and employment outside covid and the sovereign debt crisis. Inflationary pressures are rising and tighter financial conditions will only make things worse.
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Frederik Ducrozet retweeted
May 20
Germany is the epicentre of the China Shock 2.0 reverberating in global markets
In a new paper, @Brad_Setser and I show the shock is a key driver of Germany’s economic malaise. And it's accelerating
Berlin needs to stop admiring the problem, and join efforts to fight back
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