The European Central Bank’s debate over how aggressively to tighten monetary policy is likely to intensify this week in the prelude to a pre-decision blackout period as data probably show a new record for inflation.
Out of the four biggest economies in the euro region, only Spain won’t show a quickening in inflation. Foresee acceleration in annual price increases, with the median estimate at 7.8%.
Those data will emerge against the backdrop of a vigorous public discussion on interest rates by ECB officials whose window to speak out before the June 9 decision will close on Thursday.
Behind the scenes meanwhile, exchanges between staff in Frankfurt and at central banks around the euro zone will also pick up pace as they finalize crucial forecasts for President Christine Lagarde to unveil the following week alongside a choreography of planned tightening through September.
The inflation statistics will begin trickling out on Monday, with Spain forecast by economists at 8.3% and then Germany at 8.1%. Belgium will also publish price data that day. Then on Tuesday, reports will be released for France and Italy as well as Austria, Portugal, Slovenia and the euro zone as a whole.
The region’s so-called measure of core inflation, stripping out volatile elements such as food and energy, is also likely to reach a new record, at 3.6%. Meanwhile the 0.6% monthly consumer-price increase predicted by economists would match that of April.
The president signaled the probable outcomes of the ECB’s three next decisions, with June’s likely to confirm an end to bond purchases, followed by quarter-point rate increases in July and September to exit subzero monetary policy.
The numbers will be all the more important for the role they will play in the decision on June 9. ECB Vice President Luis de Guindos said last week that the outlook won’t be “very different” from that of the European Commission. Its officials predicted on May 16 that inflation will average 6.1% this year and will be 2.7% next year, still above the ECB’s 2% goal.
