Eurozone: When forward guidance blurs guidance
In a week with few economic data releases, the latest ECB communications turned the week tumultuous. It appears that worries about inflation have risen sufficiently for the ECB to accelerate the path of tightening. So, in addition to a faster tapering process that could see asset purchases end in Q3, we now also expect the ECB to hike the deposit rate in December and again in March next year, ending the period of negative interest rates.
What you will learn:
- The European Commission updated its forecasts, with its GDP growth expectations broadly in line with our own.
- However, it expects inflation to slow less markedly than us next year. This shows how the uncertain and complex inflation outlook is right now, notably due to volatile energy prices.
- France’s President Macron announced a massive nuclear development plan, with the construction of 14 new nuclear reactors.