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Monetary policy, in the main

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  • Monetary policy is likely to occupy market attention this week. The Euro area starts things off with the publication of final consumer price data for May. The expectation is for a 0.5% yoy rate, in line with the preliminary estimates. We believe Euro inflation picks up this year.
  • Outgoing Bank of England governor Bean was suggesting that an interest rate increase should be a cause of much rejoicing in the UK, as a sign that all is for the best in this best of all possible worlds. Rightmove showed UK house price inflation slowing.
  • The US awaits the FOMC meeting later this week - a meeting with a fuller complement of governors than we have been used to, and with perhaps a slight tilt to the hawkish. Industrial production data today should show some bounce back.
  • Away from the monetary policy concerns, markets will doubtless keep an eye on events in Iraq where violence has continued. However the current oil price does not seem likely to prove especially threatening to growth.

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