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A day for contemplating central banks

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  • Euro area inflation data comes out from the main economies of the region. Spain is expected to have negative consumer price growth, but the rest are expected to having rising prices (albeit at a low level of increase).
  • We do not think structural deflation especially likely in the Euro area. Labour costs continue to rise, and for a majority of the population their personal inflation experience is higher than the reported Euro inflation rate most of the time.
  • UK Bank of England deputy governor Broadbent has been speaking in the wake of stronger wage inflation, suggesting UK rate increases would be gentler (accompanied by a classical music backing track perhaps?) and to a lower level. The Bank is of course tightening policy through other means, already.
  • The US gives job openings data which may help to confirm the idea of a labour market that is tightening, at least for skilled workers. This reinforces the idea, held by most economists, that the Fed will act earlier to raise rates than markets appear to expect.

Listen to the audio version of this briefing.