ECB to hike MOAR into stagflation

Goldman on what is fast becoming the pattern everywhere.

BOTTOM LINE:

ECB Chief Economist Phillip Lane noted today that the risks to inflation remained to the upside and that monetary policy transmission may well be slower during this cycle, signalling more openness towards a further 50bp in May and a higher peak rate than in previous comments. Moreover, the data received this week have been firmer than expected, including (1) an upside surprise in the Spanish and French inflation numbers, and (2) a re-acceleration in Euro area bank lending in January. As a result, we now see a fourth 50bp in May (vs 25bp before) and raise our peak rate to 3.75% in June (vs 3.5% before).

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.