Ethan Ilzetzki's picture
Affiliation: 
London School of Economics

Voting history

Prospects for Euro Area Inflation in 2023

Question 3:  Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?

Answer:
ECB policy interest rates will be too low in 2023.
Confidence level:
Not confident

Question 2: Relative to market forecasts of the ECB’s MRO rate peaking at 3.5%, which of the following is more likely during 2023?

Answer:
The MRO rate will peak at 3.5%
Confidence level:
Confident

Question 1: How likely is it that peak headline euro area inflation is behind us?

Answer:
Roughly even odds
Confidence level:
Not confident

Euro weakness in 2022

Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?

Answer:
Real factors
Confidence level:
Very confident
Comment:
The timing and magnitude of monetary policy differentials can explain only a small portion of the euro's decline relative to the dollar. In contrast, the European economy was far more exposed to the Russian invasion of Ukraine than was the US. The Euro Area suffered its largest current account deficit in a decade and this is easily explained by the increased price of energy imports. This began reversing when oil prices declined, without any major change in monetary policy. Hear more on this in this podcast interview: https://directory.libsyn.com/episode/index/show/macromusings/id/24984384

Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?

Answer:
No
Confidence level:
Very confident
Comment:
The causes for the weak euro were real, Eurozone economies were running large current account deficits, and the exchange rate was doing exactly what it was supposed to do: force Euro Area economies to limit their importation of expensive energy, or else finance it through greater exports or lower consumption of other imports.

Pages