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ECB: Hawkish voices grow on energy and fiscal risks – Danske Bank

Danske Research Team reports that ECB officials are turning more hawkish as energy-driven inflation risks and potential fiscal easing in the Euro area build. Executive Board member Schnabel still sees policy in a “good place” but stresses monitoring energy-price persistence, while Governor Kazimir suggests an ECB reaction may be closer than markets expect.

Policy seen in good place but risks rising

"ECB Executive Board member Schnabel was on the wire yesterday, highlighting that the March forecasts will partly reflect the economic impact of the Iran conflict, noting upside inflation risks amid geopolitical uncertainty. Schnabel reiterated that policy remains in a "good place" but stressed the need to monitor the persistence of energy-price shifts closely."

"Meanwhile, Slovakian ECB governor Kazimir stated, "I'd say a reaction by the ECB is potentially closer than many people think," while emphasising patience for now as the ECB prepares for its March meeting."

"In the euro area, governments are taking steps to shield consumers and small businesses from rising energy prices, which could lead to larger deficits and increased debt issuance."

"Croatia implemented a binding cap on fuel prices two days ago, while Greece has capped profit margins for fuel companies and food retailers until 30 June, but has not capped outright fuel prices. Austria will introduce a cap on power prices for households and small businesses starting in July. France and Italy are monitoring petrol pump prices for excess profits but have refrained from announcing price caps or fiscal easing measures so far."

"Any easing of fiscal policy could strengthen hawkish voices in the ECB's governing council, but we still expect the ECB to remain unchanged."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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