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Reporting on key macro data at the time of release.
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- Yesterday's relatively hawkish comments from ECB Executive Board member Isabel Schnabel - who judged the risks to the inflation outlook now to be skewed to the upside, thought it probable that net PEPP purchases would stop in March, and also doubted whether the flexibility of the PEPP purchases should be transferred to the regular APP purchases - prompted a sell-off in euro area government bonds.
- But today brought some highly dovish comments from fellow Executive Board member Fabio Panetta, who challenged much of Schnabel's analysis and policy conclusions.
- Among other things, Panetta stated that high inflation in the euro area was largely driven by supply shocks not demand, and predominantly reflected disturbances generated abroad.
- He cautioned that the pandemic wasn't over and judged that the downside risks to economic activity might be growing. And noting continued subdued growth in negotiated wages, he doubted that upside risks to medium-term inflation were crystallising.
- He reminded that the ECB's strategy review had committed to be "forceful and persistent" in monetary policy to achieve the medium-term inflation target on a sustained basis, even if it required a moderate transitory overshoot. And he thought that the conditions for raising rates specified in the ECB's forward guidance were "not close to being met".