September 09, 2021
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ECB accepts undershoot with less pepp

  • The ECB recalibrated the PEPP at a slower pace. Although that should not threaten favourable financing conditions, the reduced stimulus seems inconsistent with attempting to meet the inflation target. The total envelope may not now be filled.
  • By accepting an undershoot of the new symmetrical 2% inflation target, the ECB’s actions suggest less change in its reaction function than we thought. Nonetheless, rate hikes remain a remote prospect and the APP is likely to step up as PEPP steps down.

August 26, 2021
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ECB unpacks forward guidance parcel

  • The latest MPA includes a detailed discussion on the ECB’s new forward guidance, which is intended to reinforce the message that 2% is no longer a ceiling for inflation.
  • The Governing Council still views the excessive recent rise in CPI inflation as temporary, with no indication that it is feeding through to higher wage agreements.
  • On balance, we still see a taper in December as more likely than a September change.

August 19, 2021
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Norway: frozen on hiking path

  • The Norges Bank reiterated its September hike signal, noting that economic conditions are starting to normalise and repeating concerns about building financial imbalances.
  • We still see downside risks to their projected rate path, however much depends on developments in capacity utilisation contained in the next Regional Network Report.