The situation is becoming untenable for central banks

The avalanche of statistics published yesterday in the US before the long Thanksgiving weekend confirmed the reacceleration of activity and growing inflationary pressures: higher than expected household spending and income in October, rebound in investment (durable goods orders), lowest level of unemployment claims since 1969, but a drop in household confidence due to inflation whose preferred Fed’s measure (“core PCE deflator”) reached its highest level since 1990 (4.1%).

The Fed Minutes showed that the possibility of accelerating the exit from QE had been discussed. The probability of such a measure being announced as early as December is increasing and the markets are now anticipating a first increase in the Fed funds rate as early as June 2022. The only significant factor that could change the situation is the accelerated rebound of the Covid epidemic after Thanksgiving… 

  In Germany, the SPD-Green-FDP coalition has agreed on a governing program more quickly than expected: it is a mixture of very ambitious (unrealistic?) objectives in terms of energy policy to combat global warming, strong social measures (25% increase in the minimum wage)… and budgetary rigour, including at European level. How will all this work in practice? The question remains. But from the ECB’s point of view, there are ingredients for more inflation (increase in wages, social minima, price of CO2) that will strengthen the position of the “hawks”.

The EUR/USD exchange rate fell below 1.12 yesterday before rebounding. The economic agenda is light but the proceedings of the last ECB meeting will be published and several central bankers will speak today.

Share this news :

You might also read :

ES-gas
July 20, 2021

European prices extended gains

European gas prices extended gains yesterday, supported by rising temperatures, ongoing weak supply and strong Asia JKM prices (+2.59% on the spot, to €41.291/MWh). On…
ES-power
February 18, 2022

EUAs collapsed on 2022 free allocation start

The European power spot prices sharply rebounded yesterday on expectations of much weaker nuclear availability, although the still very high renewable production dampened the bullish…
ES-economy
September 23, 2021

Markets absorb Fed announcements smoothly

For a detailed analysis of the Fed’s announcements after its meeting, you can refer to the News sent last night.  Unsurprisingly, the process of reducing asset purchases should…
Join EnergyScan

Get more analysis and data with our Premium subscription

Ask for a free trial here

Don’t have an account yet? 

[booked-calendar]