2022 Grey Swan #14: ECB to Hike in 2022
- By MakroSchreiber
- 3 min read
How about that dovish staff forecast?
At the 16 December ECB meeting, the staff 2023-24 inflation projections are still below 2%. This makes my Grey Swan – the ECB hiking six months after the Fed – a shade darker. But I think this new information is insufficient to sink it completely.
The staff forecast is consistent with the modest wage gains we have seen this year, but may not be ‘forward looking’. The European labour market has closed the Covid gap well ahead of the US. And while wage negotiations take longer and wages are slower to adjust than in the US, UK, Canada, etc., Europe is much more unionised than the US. And if the expectations ball gets rolling, it can go a long way.
A removal of negative interest rates is not a rate lift-off in conventional policy terms.
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