ECB easing, whether you want it or not
- The ECB is going to ease. Growth is above trend, bank lending is accelerating, core inflation is above is 2015 average in most economies and the Euro is below fair value – but still easing is likely. We see a rate cut and increased bond purchases.
- The justification will be lower inflation projections (i.e. lower oil prices, because it will be headline inflation). This is the ECB's target, after all (headline CPI, not oil. Though it might as well be oil at the moment).
- Chinese inflation came in higher than expected – food and lunar new year related. There is no global read through (China does not export food, and core inflation correlations are extremely low) – other than that there may be a slight weather element to the price rise as well.
- New Zealand cut rates – markets are upset because the governor of the RBNZ had seemed to indicate that he had no intention of cutting rates. But then miscommunication and misinterpretation are part of the way we live now.