April 30, 2021
2021-04-30 inf_head.png

EA: HICP boosted by Spanish energy

  • Flash EA HICP inflation increased by 0.3pp to 1.6% in Apr-21, in line with the consensus. It was 0.1pp above our forecast, though, as energy and food strengthened by more. Services and non-energy industrial goods were in line, so the core was too.
  • Most of the upside news came with Spain’s flash release yesterday. We have enhanced our model for Spain with daily retail energy prices to avoid future surprise here. Overall, our EA forecast stays about a tenth higher, averaging almost 1.8% in 2021.

April 29, 2021
2021-04-29 inf_head.png

Reflationary decoupling

  • Surging US inflation arguably risks spilling over to Europe amid a high degree of co-movement between them, but the relationship can break up like it did in 2005-06.
  • The spillover of US reflation is likely to be incomplete, especially to the euro area, so relative price level hikes can be sustained for inflation-linked instruments, in our view.

April 22, 2021
2021-04-22 ecb_head.png

ECB: middle ground behind the world

  • The ECB announced no policy changes again at its April meeting, with purchases continuing at their faster pace. There doesn’t seem to have been much economic pressure on its February forecasts so far and financial conditions have behaved.
  • PEPP purchases are occurring at the middle-ground pace between their initial surge and recent lull. This pace could slow as soon as June but a more likely continuation to September still wouldn’t threaten the parameters for the program’s current envelope.