Helena Lyng Blak
6 weeks ago

Andreas Steno is Anticipating Input Costs Shocker

On the back of the hawkish CPI surprise, financial analyst Andreas Steno finds PPI consensus “amazingly low.”

U.S. Inflation Trends: A Hawkish Outlook

“The US inflation report made for hawkish reading,” says financial analyst Andreas Steno of Steno Research.

He expresses particular concern over "rising input costs spilling over to a cyclical re-acceleration of goods inflation into the spring at the worst possible timing for the Fed." This observation points to a potential misalignment between anticipated economic conditions and the realities faced by policymakers.

He elaborates on these concerns, stating, "If we look at our input cost monitor, we are a bit puzzled that the consensus for input costs is around 0.3% MoM again, which is out of whack with our observed price trends in the input basket over the course of March." This discrepancy suggests that market expectations may be undervaluing the potential for inflationary pressures.

Implications for the European Central Bank (ECB)

The resurgence of USD-based inflation is expected to influence the European Central Bank's (ECB) policy responses. According to Steno, "The ECB is an extraordinarily reactive central bank". He recalls how during the early days of the Covid-19 pandemic, “the ECB initially refused to “close spreads” while the Fed was enacting in Gung Ho QE.”

As for the immediate future, Steno points out that, "April is off the table in market pricing, while June is mostly discounted."

Steno emphasizes the stance of influential figures like Villeroy de Galhau from France, speculating that the “best” outcome for the upcoming ECB meeting may be "some sort of pre-announcement of a cutting lean for June."

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