ECB Says It’s Approaching a Turning Point to Meeting Inflation Goal of 2 Percent

December 5, 2022

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6:00 pm

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33 comments

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Economics

*Inflation stats from ECB, comments by Mish.*

The lead chart is from the ECB Measuring inflation – the Harmonised Index of Consumer Prices (HICP)

Key Chart Points

The lead chart shows October rates of inflation for all the Eurozone countries.
The ECB base interest rate is 1.50 percent and the ECB has penciled in a rise to 2.0 percent on December 15.
The overall euro area inflation rate rose to 10.6 percent in October from 9.9 percent in September.
“End of First Half” explained below.

ECB’s Villeroy Wants 50 Basis-Point Hike to Fight Inflation

Francois Villeroy de Galhau, the ECB’s Vice Chair and governor of the Bank of France seeks a 50 Basis-Point Hike to Fight Inflation

Using a football analogy, Villeroy said an increase to 2% will mark the end of the first half to reach a normalization of rates in a game that has reached a turning point. He reiterated his expectation that the ECB may shift to a slower pace of rate hikes next year.

The ECB is determined to curb price gains and should get inflation back to its 2% target by 2024 or 2025, Villeroy said.

“This isn’t only a prediction, this is a commitment,” he said.

Second Half Commitment

On July 27, 2022, the ECB hiked rates to 0.00 percent from -0.50 percent set on September 18, 2019.

Talk of hiking interest rates to zero is seemingly ridiculous, but that’s what happened.

The ECB is at 1.50 percent as of November 2. On December 15, the ECB will likely hike to 2.00 percent.

At that point we would be 5 months into a rate hike cycle, with Villeroy determined to “get inflation back to its 2% target by 2024 or 2025”

Halves Explained

First Half: 5 months
Second Half: 12 to 24 months

Not to worry, “This isn’t only a prediction, this is a commitment.”

Inflation Roars Back in the Eurozone With New Highs in Germany, Italy, and France

For more details, please see Inflation Roars Back in the Eurozone With New Highs in Germany, Italy, and France

This post originated at MishTalk.Com.

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33 Comments

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OUdaveguy

2 years ago

Question for Mish on the map graphic; which software tool are you using to make these? I’ve started using both Visme and the free version of ARC/GIS (QGIS). I prefer these clean looking, minimalist infographic style maps like you have used here for depicting spatial information.

Lisa_Hooker

2 years ago

It is very straightforward.

All we need to do is pull those levers and push those buttons.

In the near future things will go to precisely what we have planned.

The current state of things is merely transient.

caradoc-again

2 years ago

Do we laugh or cry?

Ridiculous on multiple levels and the man puts his name and time stamp on this statement.

StukiMoi

2 years ago

After 2-3 years adding up to, even by our fraudulent “measures”, robbing you of 50% of your earnings; we will then declare “success” by reducing the rate of robbery a bit, for a while……..

I doubt the Euros have the brains to recognise it; but at least as far as the younger generations are concerned, the Ukranians are the lucky ones among them. The proper way to treat ALL their national overlords, is the way brave Ukranians are treating wannabe overlord Putin&crew.

Scooot

2 years ago

This isn’t going to help.

https://www.bbc.co.uk/news/business-63864786

Bam_Man

2 years ago

Fiat end-game is underway and it will not be pretty.

There are only clowns running this shiite-show now for a reason.

A sane, competent person would want nothing whatsoever to do with any part of it.

PapaDave

2 years ago

Reply to Bam_Man

You are correct.

A sane, competent person would accept the way things work in the world today; they would not be on a lifetime crusade of complaining, in the ridiculous “hope” that their complaining would ever change anything about how the world works; nor would they pin their hopes on some political “saviour” who claims only “they” can bring about change.

Instead, they would simply put their nose to the grindstone, and work hard to make a better life for themselves. Because that is about 100% more effective than wasting your entire life complaining about things you can’t change.

MarkraD

2 years ago

Reply to PapaDave

As someone who takes the bait on occasion, great reply.

PapaDave

2 years ago

Reply to MarkraD

We all do, on occasion. But I try not to get caught up in that very often. It tends to be a waste of time. And usually accomplishes nothing. And I often regret wasting my time.

Lisa_Hooker

2 years ago

Reply to PapaDave

A prime example is the folk who incessantly, repeatedly, chronically complains about other people complaining.

Obviously a borderlinel obsession.

PapaDave

2 years ago

Reply to Lisa_Hooker

Awwww, shucks. Speaking of obsessions. Thanks for being so obsessed with my occasional posts. Nice to have a fan club.

Mish

2 years ago

Here’s a debunking – fair and balanced of what Shadowstats gets right and wrong

His GDP chart is a real joke

And as I said he has been preaching hyperinflation forever

https://www.thestreet.com/economonitor/emerging-markets/deconstructing-shadowstats-why-is-it-so-loved-by-its-followers-but-scorned-by-economists

Billy

2 years ago

Reply to Mish

I think it’s fun for people to bitch about the government not doing enough with our taxes and how overall we are constantly doing worse.

This time of year allows us to see great movies like A Christmas Story. It portrays the life of an average American family back in December of 1940. This family had 1 house, 1 phone, 1 radio and most likely 1 full time income. The house was and is still located at 3159 W 11th Street, Cleveland, Ohio. Redfin says it’s a 4bd 2ba 1,792 sqft house.

It seems to me that every family I know has at least a similar house, 2 cars, 4+phones, and more than 3 TVs. I’d say we are doing pretty good. I just wish we didn’t give up respect for others, especially the elderly, and family values. I know it’s rare for families to sit down at a table together for diners.

jiminy

2 years ago

Reply to Billy

A large number (35%) don’t have a home and many homeowners don’t have a detached home. Visit a large city and see the homeless without even a rental unit. Maybe we are third world?

jiminy

2 years ago

Reply to jiminy

don’t own HOME

Lisa_Hooker

2 years ago

Reply to jiminy

The Township owns the homes.

Homeowners are responsible for maintenance and insurance premiums and paying rent (taxes) to the Township.

I you want to see who owns your home stop paying the mortgage and/or the taxes and wait.

Eventually someone will show up with paperwork, a badge and a gun.

MarkraD

2 years ago

Reply to Mish

For anyone who reads it, I suggest skipping down to “The grocery price crosscheck” and reading from there to save time, his grocery comparison and mathematical deduction is a very simple and accurate way to get the point across.

After reading that, it’s completely obvious why Shadowstats is insanely wrong.

Six000mileyear

2 years ago

2.0% ECB rate compared to inflation in every EU member nation is itself inflationary. Controlling inflation involves raising rates above the rate of inflation when inflation if above target rate. Holding rates below inflation has shown not to guarantee economic growth or borrowing. There is a certain asymmetry to controlling inflation through setting the ECB interest rate.

WarpartySerf

2 years ago

We’re idiots, babe

It’s a wonder we can even feed ourselves

Bob Dylan

Robbyrob

2 years ago

Mish and his readers try https://dgoodwin.substack.com/p/is-the-world-getting-harder-to-predict

Captain Ahab

2 years ago

Reply to Robbyrob

The issue of the ‘is world getting harder to predict’ actually concerns the difference between risk and true uncertainty, and the human ability to discern situations before they occur. Incidentally, this goes to the heart of some other comments in this thread.

Risk is objectified uncertainty and reduces to probability distributions–largely the result of observing varying outcomes over time. With a probability distribution, outcomes can be easily hedged, insured, etc. Algorithms trade risk and return (reallocate the probability distribution). Unless your algorithm is superior, the net gain is minimal over time.

True uncertainty arises when actual outcomes are not anticipated.
It does not have assignable probability–that is the likelihood and mode
of occurrence are unknown.Uncertainty cannot be insured away.

What about Taleb’s Black Swans? Are they risk-based: a low-probability event with a profound outcome. Or uncertainty based? The original black swan already existed (in Australia), yet no one in Europe had seen one (just white swans), so black was ‘impossible.’ Taleb’s black swans are rare, or unknown, so easily overlooked until it is too late to take evasive action.

BTW, today’s economic black swan, IMHO, is (strongly) negative real interest rates. Simply, they are irrational. No lender in their right mind will pay the borrower to borrow, over a prolonged period. The looming question concerns competition and what happens when capital is subsidized and ineffectively allocated year after year. FTX is an early example.

Goodwin’s article does a commendable job of looking at factors underlying uncertainty and our ability to deal with it. During the 20th C, the human mind became more focused on specific details (atomistic–a direct result of the scientific method reducing to smaller and smaller parts) and less able to see the big picture (the interaction of whole system). At the same time, focusing on the big picture (eg. government planning) , missed the critical parts. Chaos theory was a wake-up call. Goodwin’s call for enhanced creativity should be a national impetus.

Lisa_Hooker

2 years ago

Reply to Captain Ahab

Governments often do irrational things and force them on the populace.

And quite often people are not rational.

(I refer you to the works of Robert Lucas, Jr. and Christopher A. Sims.)

“Uncertainty cannot be insured away.” – as in slicing and dicing aggregations of home mortgages.

FooFooFed

2 years ago

The biggest crime is European chimps, like American chimps keep

Electing and paying these ppl to perform horrifically.

Maximus_Minimus

2 years ago

If you accept that 2% inflation is price stability, you can also accept that 2% policy rate will lead to it.

Sadly, the minority of the population believes whatever the ECB says, the rest doesn’t have a clue. The conditioning is deeply ingrained.

Spoke to someone living in the EU. Said energy increases are bearable because the EU caps rate increases and subsidizes the rate.

The fact that the EU has no money other than member state contributions or what borrows on common credit card didn’t register.

KidHorn

2 years ago

Since inflation is measured year over year, eventually inflation rates will drop way down. Prices will stabilize at much higher prices than pre-covid.

Lisa_Hooker

2 years ago

Reply to KidHorn

The Federal Reserve has stated that they do not want stable prices.

They want prices that increase at a proscribed rate.

Every single year, year after year.

That this rate is low or high is irrelevant.

Matt3

2 years ago

Wow! They actually make the Fed look competent!

Captain Ahab

2 years ago

Seriously, hilarious. Halfway, but not to 2% target rates–what would you expect with a name like ‘Francois Villeroy de Galhau’. Instead, ‘the EU Implosion’ draws steadily nearer, with inflation rates bouncing around 8%, looming energy shortages, and social malaise….

Rbm

2 years ago

Anybody find it odd their on the 2 percent train also.

HippyDippy

2 years ago

Reply to Rbm

They’re all part of the same cartel. Controlled out of Brussels. Owning a bank is still the best way to rob one.

Scooot

2 years ago

“Villeroy said an increase to 2% will mark the end of the first half to reach a normalization of rates”

I’d like to ask him what a normal real rate is. 🙂

OUdaveguy

2 years ago

I’d really like to see more credible alternative economic entities created and universally cited to counter central bank nonsense and their purposefully induced monetary disasters. For example, Mises.org and Shadowstats.com should be getting the vast preponderance of airtime on the corporate media propaganda outlets that masquerade as “journalism.”

FlyNavy1

2 years ago

Reply to OUdaveguy

Shhh. Keep Shawdowstats between us.

ECB Says It’s Approaching a Turning Point to Meeting Inflation Goal of 2 Percent

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