» ECB Acknowledges Better Economic Backdrop (Belatedly)! Decision Economics

ECB Acknowledges Better Economic Backdrop (Belatedly)!

Posted January 17, 2017 by rvillareal

Summary Highlights

 Markets will be looking to the Council meeting on Thursday to see if any ECB reaction is evident in the wake of the sharp pick-up in HICP inflation in the last few weeks.  Instead, perhaps, markets should be (more) watchful to see if the ECB revises up its assessment of the economy.   

  • Regardless, slavishly focusing on core consumer prices and/or playing down the recent rise as being solely oil-price induced, means the ECB is ignoring evidence elsewhere regarding price pressures. Very clearly, producer prices have started to rise.
  • There are two key themes that the ECB should be more willing to acknowledge but may be unwilling to do so at the current juncture. Firstly, price pressures are emerging, both from the demand and the supply side. Secondly, the current backdrop clearly sees robust Eurozone consumer and business survey dat.
  • Against this backdrop, markets thinking may shift from the accusations made in December that the central bank was tapering to enquiries this around why the ECB is not considering such a policy shift!
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