Economy stagnant; new fiscal rules some way off

Data released on Friday confirmed that the euro-zone economy was broadly stagnant in Q4 and Q1. Meanwhile, the European Commission’s proposed new fiscal rules will need further changes before member states agree, but whatever form they ultimately take, fiscal policy will be tightened in the coming years. Next week, April’s inflation data are set to show that the core rate remained around its record high of 5.7%, which we think will encourage the ECB to raise rates by 50bp on Thursday.

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