Jim Power

I think it's time for a little bit of a data dive.

I'll start with the Eurozone, if I may.

Earlier this week, we had the economic sentiment indicator released.

It fell from 96.2 to 93 in April.

And excluding Ireland, this is consistent with stagnation of growth in the Euro area.

expectations for both services and manufacturing very weak, but selling price expectations are up strongly, particularly in manufacturing.

So that's a sentiment indicator.

We got Eurozone GDP for the first quarter.

It disappointed up by just 0.1%.

And this has not captured anything like the full impact of the pandemic.

Iranian war Eurozone inflation in April jumped 3% from 2.6% and even in France it went from 1.7% to 2.2% and France was a country that we thought was sort of immune from the energy shock because of its dependence on nuclear energy produced domestically but yet we're seeing even in France inflation is feeding through the European Central Bank today Thursday left interest rates unchanged as we expected

But in the statement afterwards saying the upside risks to inflation and the downside risks to growth have deteriorated, that inflation expectations in the short term have moved up significantly, but long term expectations remain well anchored.

So this brings us back to a discussion we've had many times over the last since the Iranian crisis started on February 28th.

You know, what does the central bank do?

Growth expectations falling, inflation expectations rising.

To me, it makes no sense whatsoever to increase interest rates.

But the clue from the European Central Bank today, I think, is because they're saying that long term inflation expectations remain well anchored, but short term inflation expectations remain low.

are on the upside.

So that's basically the ECB telling us they are going to increase rates quite soon to prevent those short term expectations from turning into longer term inflation expectations.

So unfortunately, in the midst of all of this, you'd have to think that the risks to interest rates are on the upside in Europe.