Inflation to rise further, but then fall

Inflation will rise further from the 3% level reached in August in the coming months, but we are confident that it will drop back sharply next year, as most measures of underlying inflation and wage pressures remain very low. Meanwhile, all eyes will be on the ECB Governing Council meeting next Thursday, when we expect policymakers to announce the start of a very gradual reduction in the Bank’s asset purchases.
Andrew Kenningham Chief Europe Economist
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European Data Response

EZ Unemployment (Oct.)

While labour market conditions continued to improve in October, the recent deterioration of the Covid situation and increased uncertainty due to the Omicron variant are likely to mean the recovery takes a breather over the next couple of months, just as it did when restrictions were in place at the start of 2021.

2 December 2021

European Economics Update

Macron on course to defeat far-right challengers

The confirmation earlier today that far-right pundit Eric Zemmour will stand in France’s presidential election next spring comes as no surprise given his rise in the polls. But French President Emmanuel Macron still looks on course to win a second term, defeating the far-right candidates and keeping France on a pro-European, reformist track. In this Update, we answer five key questions about the election.

30 November 2021

European Data Response

Euro-zone Flash HICP (Nov.)

November’s inflation data were yet another surprise on the upside. The Omicron variant has increased the level of uncertainty even further but for now we suspect that it will have a fairly small impact on inflation. Still, headline inflation looks set to remain above target until at least the end of next year.

30 November 2021

More from Andrew Kenningham

ECB Watch

Slower purchase pace in sight, but rate hikes are not

The ECB is likely to use next week’s meeting to prepare the ground for a very gradual reduction in asset purchases under the emergency PEPP. But, taking a leaf out of the Fed’s book, it will stress that this does not mean that rate hikes are getting closer, or even that policy is being tightened. Looking ahead, we think the ECB is most likely to end its PEPP purchases by next March but simultaneously step up its APP purchases. And it will leave its deposit rate unchanged until beyond 2025.

2 September 2021

European Economics Update

ECB may not agree taper until December

The account of the ECB’s July meeting confirms that a minority of Governing Council members objected to the dovish shift in the Bank’s interest rate guidance. Partly because of this, we now think the Bank is more likely to take until December to agree when and how to “taper” its PEPP purchases.

26 August 2021

European Data Response

German Ifo Survey (August)

The second successive decline in the Ifo Business Climate Index in August provides further evidence that Germany’s recovery is losing some momentum, partly due to supply chain difficulties in the manufacturing sector and the Delta variant. That said, GDP should still increase sharply in Q3.

25 August 2021
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