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Macro Nugget: Show this chart to your favorite ECB hawk

Does a weak EUR automatically lead to imported inflation?
2024-12-03

As calls for a 50 bps cut in the EZ are getting louder EZ inflation hawks are emerging from their nest and warning about a reignition of inflation through the FX/import channel. Looking at the nominal effective exchange rate we find a more nuanced picture telling us that you can weaken the EUR without importing inflation. Remember this next time you meet your favorite ECB hawk.

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