Morning from Europe.

Central bankers have started voicing concerns around the difficulties of walking the last mile on inflation. The guiding star of the ECB, Isabel Schnabel, said this morning in FT that “ recent incoming data do not allay my concerns that the last mile may be the most difficult one,” , which is admittedly a half pivot on her pre-Christmas pivot.

Her rhetoric this morning sounds awfully reminiscent of her Nov 2 speech in St Louis named “the last mile”, where she highlights how “A recent IMF study shows that such strong initial base effects have often given rise to “premature celebrations”” and how “in about 90% of unresolved inflation episodes, inflation declined materially within the first three years after the initial shock, but then either plateaued at an elevated level or accelerated again.”.

There are admittedly some worrying signs in e.g. service prices in the IFO survey (see chart 1), but a re-acceleration in wages/sticky inflation in Q2 is already the base-case of the ECB staff projection. This is already the base-case of the ECB.

Chart 1: Q2 risks in wages / services inflation?