Stagflation is coming – after a scorching hot summer in the Mediterranean, winter is not the worst fear in the old continent. Policymakers at the Euro
ECB President Christine Lagarde will likely leave the door open to increasing borrowing costs again.Stagflation is coming – after a scorching hot summer in the Mediterranean, winter is not the worst fear in the old continent. Policymakers at the
However, this is mostly a result of tumbling energy prices, and bringing price rises from 5.3% to 2% is far harder. Core CPI, which excludes volatile prices of food and energy, is also at 5.3% YoY, and in this case, it is only 0.4% below the peak of 5.7% recorded in April this year. Why is underlying inflation so sticky? Many European workers are unionized, with wages indexed to inflation. Collective bargaining is one part of the story, and another is labor shortages seen all over the world.
This leaves the ECB, and especially its hawkish German members, in a conundrum. Further raise rates to battle inflation or pause to think? With 20 countries represented around the table, the result will likely be a "euro-fudge" of sorts, and it may turn into a lose-lose for the common currency. In this outcome, the bank leaves borrowing costs unchanged for the first time since early 2022, citing slowing price rises and growing uncertainty.
I see this scenario as less likely, as hawks are unlikely to relinquish their optionality. Nevertheless, the outcome for the Euro after several hours is similar. The ECB also publishes its updated growth and inflation forecasts at this junction. The figures will likely show lower estimates on both economic gauges. With recession worries hanging in the air, a significant downgrade in growth would hurt the Euro more than any change in inflation projections.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements.
Norge Siste Nytt, Norge Overskrifter
Similar News:Du kan også lese nyheter som ligner på denne som vi har samlet inn fra andre nyhetskilder.
European Central Bank is set for hawkish pause as the economy turns southShoppers in the region are holding back on spending as inflation eats up their disposable income.
Les mer »
European Bank unveils support for Türkiye's quake-battered small businessesThe support programme, set to be initiated by the European Bank for Reconstruction and Development (EBRD), forms a key component of the bank's €1.5 billion investment strategy for the quake-hit region.
Les mer »
Singapore's central bank slugs Three Arrows founders with 9-year banThe Monetary Authority of Singapore has issued nine-year prohibition orders to 3AC founders Kyle Davies and Zhu Su, effectively barring them from operating or taking part in financial firms in the city-state.
Les mer »
European equities close down 0.4%, FTSE tries to hold onEuropean equity indexes finished Wednesday broadly lower as investors brace for the latest rate call from the European Central Bank (ECB). Equities tu
Les mer »
Bank-trade groups blast proposed U.S. bank capital requirements as illegalA 1,100-page proposal by U.S. banking regulators to require lenders to hold more capital on their balance sheets violates the Administrative Procedure Act,...
Les mer »
European markets head for mixed open ahead of ECB rate decisionEuropean markets are heading for a mixed open Thursday as investors in the region look ahead to the European Central Bank's next rate decision.
Les mer »