A modestly welcome sign for bond and equity investors
Inflation in the eurozone rose at a slower pace than forecast with CPI showing a 6.1% year-over-year advance against expectations of 6.3%. Compared to the previous month’s year-over-year print of 7%, it is a modestly welcome sign for both bond and equity investors. Core CPI which excludes the more volatile (but paradoxically more important from a consumer viewpoint) food and energy inputs rose 5.3% against expectations of a 5.5% advance. While the delta is going in the right direction, this is still multiple times over the European Central Bank’s (ECB) target inflation level and uncomfortable for the central bank which we believe will remain in hawkish mode at upcoming policy meetings. Remember too that the ECB is still further behind this global rate policy cycle, certainly compared to the US Federal Reserve, who are likely to stand pat at the next meeting.
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