As the ECB has expectedly raised interest rates by 25 bps, it begs the question of whether this is one and done or the beginning of more. With a 1.25% benchmark rate now, it still remains well below the last CPI reading of 2.6% y/o/y for the Euro Zone that compares with their 2% target rate so the ECB is still very accommodative. The economic realities though of the harder hit European countries will be a factor but with a sole mandate of price stability, so will the future direction of commodity prices from here. At 8:30 we’ll get some color on this when Trichet treats us to his thoughts. The BoE left rates unchanged at .5% as expected but the pressure is immense for them to raise rates soon with CPI running above 4%. The markets response to Portugal’s plea for help is limited as their fate was set in stone weeks ago. What’s most important now is whether the firewall around Greece, Portugal and Ireland holds up and doesn’t engulf Spain. Spanish yields are just a touch higher today.

Category: MacroNotes

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3 Responses to “The ECB follows words with action”

  1. franklin411 says:

    “Begs the question” does not mean “requires us to ask.” It’s a phrase that means a logical fallacy in which a person composes their question in such a way as to leave only one possible answer. IE–”Why are you such a terrible driver?”

  2. franklin411 says:

    Actually, a better way to put it would be to phrase the question in such a way as to *suggest* a certain idea.

  3. Jack says:

    @franklin411: Thank you, thank you, thank you for the “beg the question” true definition. It will fall on deaf ears but at least it’s out there.