Archive

EA Inflation Subdued Enough for the ECB

• The final EA HICP inflation print confirmed the downside surprise to 2.4% from the flash release. Progress gets more challenging as energy and food base effects wear out.
• Although services inflation is stuck at 4%, that is far better than the UK’s 6%, and the median inflationary impulse is broadly settling below the ECB’s target.
• Labour costs might remain inflationary, but the ECB seems to have sufficient confidence to cut in June unless the data surprise significantly to the contrary.

By Philip Rush

UK Stuck With High Services Inflation

• UK CPI inflation exceeded the consensus by 0.1pp as it only slowed to 3.2% in March, as we forecasted. Services inflation stuck at 6%, and high-frequency impulses increased.
• Persistently high pay settlements sustain wage and underlying price inflation above target-consistent levels. We only see services slowing below 4.5% in September.
• We expect the BoE to cut in November after the ECB and Fed. Further resilience in UK and global data could still cause all three to roll back even further.

By Philip Rush

Canada CPI Inflation 2.9% y-o-y (consensus 2.9%) in Mar-24

- Canada's annual CPI inflation rate in March 2024 crept up to 2.9%, in line with market expectations, returning to the highest growth since December 2023.
- However, disinflation has left the current rate 0.42 percentage points below the one-year average while core measures kept slowing and to a surprising extent.

Jefferson - Economic Uncertainty and the Evolution of Monetary Policymaking

In this speech, Philip Jefferson discusses the importance of understanding uncertainty in monetary policy decision-making. He presents historical examples of how economic thinking on monetary policymaking in the presence of uncertainty has evolved. Jefferson highlights the views of Milton Friedman, who emphasized the limited knowledge of policymakers and advocated for simple rules in monetary policy. He also discusses the Bayesian approach to uncertainty and the implications of ambiguity aversion. Jefferson emphasizes that the appropriate response to uncertainty depends on the specific circumstances. He discusses the lessons learned from the past, including the need for policymakers to act quickly or cautiously depending on the level of uncertainty, the limitations of rigid adherence to simple monetary policy rules, and the importance of humility in policymaking. He concludes by discussing the current economic situation, with a focus on inflation and economic growth.


Positivity Score: 75
Uncertainty Score: 80