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Prices and policy

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Euro area producer price inflation is due and is expected to stay resolutely negative. This is relevant, not because of its impact on consumer prices (dominated by service costs) but because of what it may signal about listed corporate pricing power.
  • Euro area PPI also allows an examination of the impact of the Euro, by comparing PPI for exports outside the Euro area with PPI for exports inside the Euro area. A stronger Euro effectively undermines pricing power for exporters.
  • The ECB policy decision is not expected to do anything – the coalition for easing having fragmented. Draghi's comments may be of interest to the extent that they reference the UK referendum, and perhaps also political populism and economics.
  • Powell of the Fed is speaking on bank regulation. The interesting thing about bank regulation is the extent to which t is being used by some countries as a policy tool for central banks, and the consequences (intended or unintended) for the economy.