ECB's Lane (conducted on August 31st): I would underline the fact that there has been some easing in goods inflation and services inflation, which is a welcome development.

Inflation

• "expect to see this famous core inflation come down throughout the autumn."


• "at some point you have to remove the supports that were put in place last year. So we do expect, with energy and food, some bumpiness."


• "I would underline the fact that there has been some easing in goods inflation and services inflation, which is a welcome development."


• "But what is really important: some of the conjectures about the summer, whereby maybe we would continue to see quite strong services inflation, including coming out of the obviously still strong demand for tourism in many countries — services inflation remains significant, but the fact that there was some easing, I think, helps to limit that narrative. "


• [oil/gas turnaround] "That remains a major source of uncertainty."


• "...we have a cyclical inflation problem, not a long-term inflation problem."

Forecasts

• "We want people to understand that this is a temporary inflation episode. It’s not going to disappear overnight, but at the same time it would be a mistake to extrapolate the high inflation we’ve seen into a longer-term projection."


• "Our assessment for this year and the coming years is that the profit component is going to fall."

Transmission

• "So the interest rate policy, we think, works through industry sectors and I wouldn’t overemphasise, in the European context, the mortgage channel. It is the most visible channel in some countries but I think that how firms respond to high interest rates is probably more dominant in the overall mechanism."

Yield Spreads

• "If you have that cyclical view of the problem, this is why I think those spreads are contained. Let me emphasise: this is why it’s so important that we do keep these short-term rates high for sufficiently long."

Climate Change

• "I don’t think the net effect on inflation is going to be zero, but because it operates both on demand and supply, it’s relatively contained."

via ECB

05 Sep 2023 - 07:02- Fixed IncomeData- Source: ECB