A slight shaking of complacency
- The minutes of the US Federal Reserve showed a central bank preparing to hike rates this year. Market complacency that the hike will take place after June should have been shaken a little (some members still talk of June as possible), although September is our base case.
- The Bank of England policy decision is not expected to change anything. Quantitative and regulatory tightening is in place, monetary policy remains unchanged for now. Political certainty would probably be a pre-requisite for a rate change (not because of political influence, but because the uncertainty is considerable).
- Greece has a EUR450m payment due to the IMF today and probably will not default on it. Greece is also due to publish CPI which is likely to continue to show genuine deflation. There is an irony that Greece is the one Euro area economy that has proper deflation, and the one Euro area economy excluded from quantitative policy.
- Dutch CPI is likely to be negative in a "relative price decline not deflation" kind of a way. German industrial production was a little weaker than expected, but export values continue to grow in response to the weaker Euro.