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Out of the Box #25: Europe. From Technical recession to an real one?

The ECB Hawks have taken significant steps towards a forthcoming policy pivot. But what if they remain on the backfoot?
2023-12-05

As we predicted in the summer, the Eurozone has successfully curbed inflation at a quicker rate than the United States (see here). However, ECB council members continue to avoid stating the obvious. Nevertheless, it is reassuring to witness the most prominent hawks beginning to retreat from their inflation concerns.

Now that Eurozone inflation has returned to 2.4%, the earnest expressions of ECB members as they emphasize the significance of reining in price pressures were starting to appear somewhat farcical.

Chart 1: US CPI vs Euro Area MUICP

The ECB Hawks have taken significant steps towards a forthcoming policy pivot. But what if they remain on the backfoot?

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