Stefan Gerlach's picture
Affiliation: 
EFG Bank
Credentials: 
Chief Economist

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 high 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 below 3.5%
Confidence level:
Not confident
Comment:
While the euro area economy has been surprisingly unaffected by tighter monetary policy, the ECB started raising interest rates only in July. There is thus plenty of tightening in the pipeline. I would not be surprised if the euro area economy were to slow markedly, forcing the ECB to reconsider the outlook for interest rates.

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

Answer:
Very likely
Confidence level:
Confident
Comment:
For headline inflation to rise further, a large additional shock is required. While that can always happen, it seems unlikely.

Euro weakness in 2022

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

Answer:
No
Confidence level:
Confident
Comment:
The ECB should focus on ensuring price stability even if that results in large changes in the exchange rate of the euro to other currencies.

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

Answer:
Monetary policy differences
Confidence level:
Confident
Comment:
With the economies in the US and the euro area impacted to different degrees by the Russian invasion of Ukraine, monetary policy divergences and exchange rate changes were inevitable.

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