An Official Denial Suggests Stagflation Is Now The Base Case For Europe
ECB’s President Christine Lagarde says “Stagflation Isn’t the Base Case.” I suggest that should just about seal it. Include the US as well…
ECB Deposit Rates via St. Louis Fed
The Base Case
Be afraid, then…
From the creators of “there is no inflation” and its sequel “it’s only transitory” comes…
“ECB’s Lagarde Says Stagflation Isn’t the Base Case”
— Daniel Lacalle (@dlacalle_IA) May 7, 2022
From the creators of “there is no inflation” and its sequel “it’s only transitory” comes the base case.
“Stagflation isn’t our baseline scenario presently,” Lagarde told the Slovenian newspaper Delo in an interview published Saturday.
“While extraordinarily large uncertainty could cause a slowdown in economic growth accompanied by high inflation, the current situation can’t be compared to that of the 1970s.”
Lagarde reiterated that based on the data at hand, net asset purchases are expected to end “at the beginning of the third quarter.” Asked about interest rates, the ECB president said officials will keep “all options open” and progress gradually.
Euro area inflation rate courtesy of Trading Economics, annotations by Mish
Imagine Stagflation With Negative Rates
Stagflation is recession and inflation at the same time. Negative rates with stagflation will be a world first.
You will not have to imagine too much longer because the Eurozone is on the verge of recession if not in one right now.
Meanwhile despite a record high eurozone inflation rate of 7.5% in April, the ECB is sitting on -0.50% funds rates with a pledge from Christine Lagarde to move slowly.
What About the US?
Stagflation is the base case for the US too.
Despite reckless QE, massive inflation, and enormous stock market bubbles, Kashkari is in denial.
Hoots of the Day
Congratulations Christine, you win my “Hoot of the Day” award.
Central bank presidents are on a roll.
In case you missed it, please see Stocks, Gold, Oil, Rip Higher as Dovish Powell Wins Hoot of the Day Award
Just one day later, I commented Bond Massacre Continues and the Fed Dove Rally Fails Already
The Fed and ECB are swinging from the vines like George of the Jungle, with no idea where the trees are and certainly no idea what inflation is.
* * *
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