These futures would currently result in average prices of around 50 euro per MWh for this year and next year.
Remember that back in December, the ECB had still penciled in gas prices to average 120 euro per MWh in 2023 and 98 euro in 2024 based on market futures. New projections to show lower inflation in 20Ĭompared with the December forecasts, the external environment and the so-called technical assumptions have changed drastically. Macro developments since the February meeting have not brought any relief for inflation and the inflation outlook, which is why a 50bp rate hike looks like a done deal. Add to this higher nominal wage growth this year and next year and it is easy to understand the ECB’s concern about stubbornly high core inflation. Selling price expectations in industry have come down significantly but remain close to all-time highs in services, suggesting that the pass-through of higher input prices to consumers is far from being over. At the same time, however, core inflation continued to increase and there are no signs of a peak, yet. Also, the ECB’s very own consumer expectations survey this week showed a further drop in consumers’ inflation expectations. As of March, there should be a sharp negative base effect from energy prices. Lower energy prices have led to lower headline inflation than expected in December and will continue to push down headline inflation further. Since the start of the year, hard data is still anything but rosy It is far from certain that the Chinese reopening will be sufficient to shift the eurozone economy into a higher gear. After the inventory build-up at the end of last year, production could still remain sluggish. As regards sentiment indicators, consumer confidence remains low and actual assessment components are still weak. Interestingly, two downward revisions of German GDP data and one downward revision of Irish GDP data brought the eurozone economy at the brink of recession in the fourth quarter of 2022 and another stagnation in the first quarter cannot yet be excluded. While there have been some positive developments in confidence indicators since the start of the year, hard data is still anything but rosy. Stagnating economy and stubbornly high inflation
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