Growth conditions may be holding up better than anticipated, but it is still early to be seeing any major impact from the Russia-Ukraine war just yet. As mentioned earlier here, the first part is the surge in price pressures and that is precisely what we got from all three euro area reports today.
A record surge in price pressures will weigh on business sentiment, adding to the headache for consumers as well down the road. And when you add in higher energy and fuel costs, consumption is going to struggle in the months ahead surely.
And yet, the slowdown isn't exactly the ECB's worst problem. It is the fact that inflation is going to keep higher and more persistent too. Policymakers are already reluctant to get on the tightening horse but now they may have little choice but to do so and even then, it isn't going to solve the problem. What fun.