- Cited high energy costs and tightening financing conditions as reasons for shallow recession
- Growth is expected to recover as headwinds fade
- Growth expected to be subdued next year
- Price pressures are strong across sectors
- Consumer energy subsidies pull down inflation now but will push it up later
- Depreciation of the euro is feeding through to prices
- Wage growth is strengthening
- Eurosystem will not invest all maturing securities
- Our stance will continue to be data dependent
- Full text
The review from former ECB top deputy Vitor Constancio isn't exactly glowing:
Bad news for Euro Area prospects.The ECB decisions, language and forecasts,point to an excessively hawkish policy that will aggravate the coming recession unnecessarily. The expression “rates will still have to rise significantly” is grounded on controversial inflation forecasts. As mentioned at the ECB site, December (and June) forecasts are coordinated by National CBs whereas in the other quarters ECB staff does it. So, the 2023 inflation prediction jumps from 2.3% in September to a whopping 3.4% in today’s forecasts, pushing the 2.3% to 2025!. For 2023, the forecast is now 6.3%. These are averages which implies that starting from the present 10%, to get a 6.3% average implies that by December 2023 should be at 3.x% (below 4%). In that case what can explain an inflation of 3.4% for 2024 w/ energy prices stabilizing? The prospects coming from such a hawkish language and forecasts, if materializing in compatible future decisions, is more important than the 50bps rate increase today (following the FED) and the expected beginning of QT in March by 15bn per month.
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