Whats up with the ECB and Germany?
Last week the ECB held rates at 2% in line with predictions but with the effects of Katrina blowing stiff winds into Mr. Trichet’s face. Of course the big unknown remains the longer term effects of oil and gas prices as the EU struggles to interpret its own data – inflationary? stagflationary? or downright deflationary? The opinions continue to be split. With the German Bund yields dropping ever further similar to US Treasury yields in the US, the outlook certainly does not seem inflationary. Certainly pay rates have not been inflationary the last years and with the advent of more and more discounter shops, IKEAs and 99 cent shops opening I have SERIOUS doubts as to whether we can have a purely energy driven inflation. In fact, with Winter fast approaching, heating oil and petrol prices are rising and will likely be aggregate deflationary as consumers have less to spend on consumption ergo 99 cent shops everywhere. Yes, the cost of living overall is rising but is being extremely battle
