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Axel Weber versus the Vigilantes
29.05.2007What is Axel Weber trying to tell us when he hints that the ECB will no longer be using code words as the interest rates cycle nears its peak? Is he talking about a new communication strategy? Of course not. He is telling us something that is glaringly obvious: He is simply saying that interest rates must be getting closer to their peak!
Still talking about money
23.05.2007The Bundesbank is both right and wrong in its defence of monetary analysis. It is right in pointing out that central banks should study monetary trends carefully, and draw conclusions from this. But it is wrong to suggest that there is such thing as a stable demand for money.
Follow the Money
17.05.2007The most recent balance of payment and money supply data suggest that the euro area is presently subject to capital inflows on an unprecedented scale. Especially US investors appear to have discovered the euro area as a location for portfolio investment.
The return of inflation
14.05.2007The world economy is entering into an inflationary phase. In the US, the UK and Asia, underlying inflationary pressures are higher than suggested by the official price indices. The euro area is not exempt from this phenomenon, but it fares better than the rest of the world.
What explains the gap in euro area interest rate expectations?
06.05.2007Some forecasters say euro interest rates will rise to 4.5% by year-end. Others, like us, believe the ECB will stop at 4%. Remarkably, though, the pessimists and the optimists agree on almost everything relating to the euro area itself. The material disagreement, which explains the different forecasts almost entirely, relates to the US economic growth, and its impact on the euro/dollar exchange rate.