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The ECB, when inflation is above target

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The ECB meets. Policy has been preannounced this year. However, there is a chance the hawks gang up on ECB President Draghi. When inflation was falling, Draghi said the headline rate was the one that mattered. Intellectual honesty may not be in fashion, but would compel an equal approach now that inflation is above target.
  • A change in policy today is unlikely, but a subtle change in tone is a possibility. There have been leaks about a noticeable upgrade to ECB inflation forecasts for this year, which may fuel the agitation over the ECB president's addiction to easing.
  • Chinese consumer price inflation was weaker than expected (due to food prices – China does not export food, so this of little international concern). Producer price inflation rose – that partially feeds through into export prices, but Chinese export prices have a limited impact on international inflation rates.
  • An EU summit kicks off today. A French opinion poll has Macron by 1% in the first round and 30% in the second round. US import prices are due for release – not currently an important statistic, but their relevance will rise in the event that a protectionism tax is imposed on US consumers.