Director at Danske Bank // Cross Asset Strategy. [email protected] Ex. ECB / ESM / Nordea.
Copenhagen, Denmark
Joined January 2018
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An excellent speech @Isabel_Schnabel, wrapping up the past 7y of mon pol. A must read.
Well done! - and good luck on your new journey! ecb.europa.eu/press/key/date…
ECB hikes 25bp to 2.5% and is now in upper end of what is perceived to be neutral rate range
The simplified ECB formula seems to be;
Supply shock + resilience = rate hikes
Will more come? Can't rule it out. Depends on the duration of the supply shock.
A must-read speech by @Lagarde at #ECBForum in Sintra
Some strong reminders to markets on for example Forward guidance vs. Framework guidance, and the three criteria.
Balanced ECB guidance
Paying attention,yet not rushing to conclusions and thus decisions
‘upside risks to inflation and the downside risks to growth have intensified’
‘depend on the intensity and duration of the energy price shock and the scale of its indirect and ‘2nd round
Markets are "pricing" 75bp worth of rate hikes this year.
I would refrain from arguing that this is genuine rate hike expectations though.
And now back to pricing 20bp until year end...
Hopefully all the pain that had to pass through markets, have already been done, so we can have a sensible discussion.
Markets clearly taking its clues from the US claims data and not the us inflation nor the ECB decision.
Powell told markets to focus on the labour market in JH, and so does markets.
Q for Lagarde: then 1.8% will be interesting how she answers that.
Quite a jump in ECB's SPF on long term growth prospects.
German fiscal pacakge comes to mind as a possible explanation
ECB decision-slight dovish market reaction
- 25bp cut
-Focus on downside growth risks
-Nothing on inflation upside
-Removes the March guidance “is becoming meaningfully less restrictive”
A solid guess for the presser would be no guidance and wait for the June proj
Happy Easter
Inflation vs. deposit rate, market pricing
Markets are discounting a sharp drop in HICP inflation fixings, and a cut to (slightly below) 1.75% in the deposit rate.
While it looks like a rebound to 2% inflation, it a brief rebound. 2y2y inflation swap is 1.72%.
ECB market pricing
- 6bp lower (trough) since yesterday
- since the March ECB meeting, we now have 1 full 25bp rate cut additional, as priced by markets.
The reaction function laid out.
Reminds of the odysséen approach from the pre-pandemic episode.
Means increased data dependent for each upcoming monetary policy decision - and not a default option to cut or pause.
The burden of proof is on the data.
#ecbwatchers
A fourth phase coming?
Lagarde’s speech at the watchers’ conference last year mentioned three phases; the tightening, the holding and the dialling back phase.
Let’s see what she has in store today
#ecbwatchers
A fourth phase coming?
Lagarde’s speech at the watchers’ conference last year mentioned three phases; the tightening, the holding and the dialling back phase.
Let’s see what she has in store today
#ecbwatchers
No market reaction to the new wording.
Well calibrated wording, or sufficient caveats to the compromise?
Most important part of ECB's decision:
"Monetary policy is becoming meaningfully less restrictive"
Other things to note:
- 25bp rate cut
- lower growth and higher inflation in the ECB staff projections
No guidance for April
