Goldman Sachs says that despite showing the EU economy is stagnating the rate inflation is “too high for comfort”, which supports the case for the European Central Bank holding rates unchanged at the current high level for the next year.
GS points to the ECB raising its projections for headline inflation in 2023 and 2024, albeit acknowledging that underlying price pressures have begun to ease (headline rates will be held high by energy prices).
GS say the only ratcheting down of rates:
- might come from a material growth downturn that would also speed up
- the ECB is also fairly downbeat on the growth
On Wednesday we got the leak that the ECb would hike due to inflation:
- Unnamed source says ECB to hike its inflation forecasts, firms case for rate rise
- More on the apparent leak of an ECB rate hike coming on Thursday
The forecasts from the Bank were indeed raised, along with rates:
2023 inflation was forecast at 5.6%
- the prior forecast was 5.4%
2024 Inflation At 3.2%
- the prior forecast was 3%
The 2025 inflation projection was trimmed to 2.1%
- Prior Forecast 2.2%
This article was written by Eamonn Sheridan at www.forexlive.com. Source