Former ECB vice president Vitor Constancio says that falling inflation means that the final rate hikes from the Federal Reserve and ECB will be in July.
“Inflation came down again in the Euro Area and the US. HICP in EA was 5.5% (6.1% in May) and the US PCE was 3.8%. I expect the FED and the ECB to end hiking in July. The EA in particular is showing growing signs of weakness pointing to a recession,” he tweeted.
The former deputy to Mario Draghi noted the rapid decline in the Citi economic surprise index for the eurozone as a sign of a coming recession.
Earlier, Constancio also highlighted a paper arguing that US inflation was largely demand led, while in the eurozone it’s been more of a result of supply shocks.
The paper, shows that eurozone core inflation “consists primarily of pass-through from past headline-inflation shocks, not economic overheating”.
That’s another argument for the ECB to stop hiking.
This article was written by Adam Button at www.forexlive.com. Source