VIEW: Pictet's Ducrozet On The Recent FT Article

In the wake of the FT article titled "Unpublished ECB Inflation Estimate Raises Prospect Of Earlier Rate Rise," covered earlier, noted ECB watcher Frederik Ducrozet of Pictet has flagged some worries:

• "The first thing is that it may not be appropriate for the ECB to comment on unpublished documents or internal models in private circles."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."