Thursday’s ECB meeting confirmed that the Bank is a long way away from pivoting to looser policy. And the strong inflation print in November and rebound in activity surveys in December are only likely to keep officials in a hawkish mood. Meanwhile, the turmoil in financial markets following the meeting suggests there is a high risk that concerns about fiscal vulnerabilities in the periphery limit any reduction in the ECB’s balance sheet. Next week, we expect to learn that the German Ifo rose in December and that growth in euro-zone hourly labour costs held steady at 4% in Q3.
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