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ECB’s De Guindos Mentions Higher Rates, While Inflation Ticks Lower
Inflation has been improving everywhere, with the increase in crude Oil prices since this time last year. In Europe the CPI (consumer price index) inflation has also been improving, but it is still behind the US, where inflation jumped above 4% on an annualized basis last month. In the Eurozone inflation is staying below 2%, while core inflation is much lower and it ticked even lower today.
Although, the ECB vice president Louis de Guindos mentioned higher interest rates, if the economy keeps improving. This is way ahead of the FED, considering that the US economy is at a much better place. EUR/USD has turned down today, trading around 1.21 now.
Latest data released by Eurostat – 19 May 2021
- April final CPI YoY +1.6% vs +1.6% prelim
- Core CPI YoY +0.7% vs +0.8% prelim
No change to the headline estimate but the core reading is revised a touch lower, so that will at least continue to reaffirm the ECB’s take that actual inflation isn’t quite taking off yet in the region.
Remarks by ECB vice president, Luis de Guindos
- The present levels of yields are favourable
- Momentum of vaccination campaign key in recovery
- Crypto volatility not posing risk to overall financial stability
- If there is an unwarranted rise in yields, we will act
- If there is a recovery, yields will go up
- We’re going to see positive growth in Q2
The ECB is certainly looking more sanguine about bond market conditions as of late, even if yields are threatening higher as pointed out earlier. If real yields continue to climb though, that will certainly pose a problem to the central bank but for now, a problem deferred is a problem out of mind.
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