ECB: Inflation Alarm Wakes Policy in 2022

Chief Economist, Heteronomics

Phil Rush

Chief Economist

Heteronomics

Heteronomics represents a different kind of economics. We believe analysis should delve into the details of what is really going on, rather than using overly simplistic assumptions to quick-sell stories. Independence from myopic institutional pressures allows us to focus on the realities underlying your asset allocation decisions, without the conflicts of the old market structures. Heteronomics targets the themes driving UK asset prices, offering the benefits of depth, independence and ultimately price.

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Macroeconomics

<ul>
<li>Flash EA HICP inflation continued its extremely strong trend as broad support lifted it to 5.1% y-o-y in Jan-22. That was well beyond even our above-consensus forecast. </li>
<li>About a third of that 0.6pp error reflected weightings, with the rest more “core”. The shift up in the core trend seems set to remain problematic for economic models.</li>
<li>It looks increasingly likely that the downtrend will only noticeably begin in H2, with hawkish pressure mounting on the ECB in the interim.</li>
</ul>


Flash EA HICP inflation continued its extremely strong trend as broad support lifted it to 5.1% y-o-y in Jan-22. That was well beyond even our above-consensus forecast. 
About a third of that 0.6pp error reflected weightings, with the rest more “core”. The shift up in the core trend seems set to remain problematic for economic models.
It looks increasingly likely that the downtrend will only noticeably begin in H2, with hawkish pressure mounting on the ECB in the interim.


EA: Weights Compound Inflation in Jan-22