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Something for your Espresso: Cold-flation coming

Ueda has hawked up the rhetoric this morning after hawkish PPI numbers from Japan. We see a dovish CPI report from Europe this week, but the cold-flation is looming.
2023-11-27
<a href="https://stenoresearch.com/author/andreas/" target="_self">Andreas Steno</a>

Andreas Steno

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Morning from Europe.

The Japanese Services PPI printed at 2.3% overnight, which is a strong hint that underlying price pressures are establishing themselves at or just above the 2% handle in Japan.

Governor Ueda later said that there are signs of a virtuous wage to price cycle, but that the outlook remains too uncertain to base decisions on it.

The discussions on bringing policy rates above 0% in Japan have always been aimed at a late Q1-2024 timing (before year-end, means before fiscal year-end) and we therefore remain unconvinced that they will manage to use this window of opportunity to hike front-end rates before it is “too late”.

Chart 1: PPI pressures are broadening in Japan

Ueda has hawked up the rhetoric this morning after hawkish PPI numbers from Japan. We see a dovish CPI report from Europe this week, but the cold-flation is looming.

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