Tag Archives: ECB inflation

The latest signs that wages are picking up together with drops in unemployment should help push the ECB along the road of policy normalisation.Wage growth is an important input in the ECB’s reaction function, and so far it has failed to respond to the narrowing of the output gap. It could be the normal behaviour of a lagging indicator, especially as labour market slack is likely to be larger than what the drop in headline unemployment would suggest. Or, it could be that “the slope of the...

Macroview While we expect no concrete action at this week’s policy meeting, we believe extension of QE is coming and bond scarcity issues will be addressed. We do not expect any new action to be announced at the ECB’s policy meeting on Thursday, but we do expect that the ECB will reiterate that the size of its asset-purchase programme and its duration are exclusively a function of the inflation outlook. We also expect that the bank will hammer home the message that it has the flexibility to...