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.
The CFM surveys informs the public about the views held by prominent economists based in Europe on important macroeconomic and public policy questions. Some surveys focus specifically on the UK economy (as the CFM is a UK research centre), but surveys can in principle focus on any macroeconomic question for any region. The surveys shed light on the extent to which there is agreement or disagreement among these experts. An important motivation for the survey is to give a more comprehensive overview of the beliefs held by economists and in particular to include the views of those economists whose opinions are not frequently heard in public debates.
Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
The surveys are done in collaboration with the Centre for Economic Policy Research (CEPR).
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?
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?
Question 1: How likely is it that peak headline euro area inflation is behind us?
Euro weakness in 2022
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
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