The European Central Bank (ECB) is being perceived as more hawkish than the Federal Reserve (Fed) as it projects a fall in core inflation for the Euro zone, similar to the Fed. Markets are pricing 120 bps in Fed cuts in 2024 and 130 bps in ECB cuts, which is seen as a mispricing. The ECB's shift is in contrast to the Fed's concerns about inflation, with the ECB expressing more concern about the risk of deflation. This has led to a significant UK-US monetary policy divergence. The ECB's hawkishness is causing concerns about a potential acceleration of inflation in the Eurozone, leading to a rally in the euro against the dollar, while the Fed is reacting to a faster-than-expected fall in US inflation. The ECB's previous misguided hawkishness caused a decade of deflation after the 2008 crisis, and it is being seen as a concern again now.
ECB & BOE outhawking the Fed with the Fed pivoting towards rate cuts next while the economy is “much stronger in the U.S.” comparatively to Europe itself with nearly half of Europe almost in a recession yet ECB & BOE are remaining much more hawkish than the Fed and not leaving…
ECB & BOE outhawking the Fed with the Fed pivoting towards rate cuts next while the economy is “much stronger in the U.S.” comparatively to Europe itself with nearly half of Europe almost in a recession yet ECB & BOE are remanning much more hawkish then Fed and not leaving rate…
The ECB yesterday decided to be a lot more hawkish than the Fed, even though it projects a fall in core inflation for the Euro zone (black) that's similar to the Fed (blue). Misguided ECB hawkishness caused a decade of deflation after the 2008 crisis. That is happening again now. https://t.co/ZaH8iAyFpq
The #ECB is now more "hawkish" than the #Fed. While the Fed worries about #inflation coming down too much, the ECB is concerned it might accelerate. This will cause a rally in the euro verses the dollar, mitigating price pressures in the EuroZone while increasing them in the U.S.
Coming on the back of the last 24 hours’ significant UK-US divergence in monetary policy, the @ECB came out much closer to the @BankOfEngland than the #FederalReserve by… Pushing back against market pricing of early 2024 cuts; and Expressing more concern about the risk of…
Lesson from yesterday's FOMC isn't that the Fed is dovish. Instead, it's that US inflation fell much faster than expected. Fed is just reacting to that. ECB now must make the same shift. What's true for the US (lhs) is even truer for the Euro zone (rhs). Inflation is tumbling... https://t.co/db33t6BFx3
Markets price 120 bps in Fed cuts in 2024 (lhs) and 130 bps in ECB cuts (rhs). This is a glaring mis-pricing as we go into 2024. Markets price a global easing cycle, but don't price Euro zone stagnation and tumbling inflation. The ECB will end up cutting much more than the Fed... https://t.co/oaIgHFJ7ZT