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In the wake of the FT article titled "Unpublished ECB Inflation Estimate Raises Prospect Of Earlier Rate Rise," covered earlier, noted ECB watcher Frederik Ducrozet of Pictet has flagged some worries:

  • "The first thing is that it may not be appropriate for the ECB to comment on unpublished documents or internal models in private circles."
  • "Second, it's not a good timing to send such hawkish signals with respect to rate hikes - it never is. It's even worse if the ECB were to undermine the new inflation target and forward guidance that were implemented a few months ago."
  • "Third, why would you talk about the 2025 outlook? We have no idea what's going to happen next year. The time horizon of the staff projections is 3 years (we'll get the 2024 projections in Dec). Of course, the ECB has models over longer horizon, but that's not official policy."
  • "Even so, assuming inflation would be close to (but slightly *below*) 2% by 2025 wouldn't necessarily imply a rate hike in 2023 under the new guidance. You would need more substantial progress in realised and expected core inflation, let alone a modest overshoot."
  • "Fourth, this doesn't sound consistent with Philip Lane's own "two-stage approach", and even less consistent with Fabio Panetta's "far greater risks of doing too little than of doing too much" mantra."
  • "It's perfectly normal for the ECB to sound more confident. It'd be a mistake to sound overly confident at the risk of undermining the new inflation target and forward guidance. There's no upside in speculating over the timing of lift-off, only risks."