ECB: Lane and De Guindos Echo Prior Comments; Neutral Downplayed
Headlines crossing from ECB Executive Board member's Lane and de Guindos. Appear broadly in line with comments earlier this week at first glance.
Lane highlights:
- "It’s important to have narrative frameworks, and one of the narrative frameworks is when inflation is well above 2%, it’s very important that everyone understands that monetary policy is going to be restrictive,”...“Now as you get closer to that zone, let’s not talk about neutrality, let’s talk about what’s appropriate"
- January services inflation “came in softer than I would’ve expected,” and noted that “fairly soon, we will be back at our 2% target.”
De Guindos headlines (all bbg):
- "*ECB'S GUINDOS: SERVICES INFLATION REMAINS TOP PRICE CONCERN" bbg
- "*ECB'S GUINDOS: INFLATION TO START CONVERGING TO 2% IN SPRING"
- "*ECB'S GUINDOS: NEED PRUDENT APPROACH TO MONETARY POLICY"
De Guindos on services inflation in his interview with Hospodárske Noviny on Feb 5: " It is important that services inflation starts to decelerate. We believe this will happen because services are very wage-sensitive, and we expect wage growth to start to decelerate. We also see our corporate surveys confirming our belief that wage dynamics will start to slow down, so we expect this to help bring down services inflation."
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GILTS: Downside put spread in Gilt
G H5 88.00/86.00ps, bought for 18 in 5.5k.
BONDS: Fresh Multi-Month Highs For Crude Not Having Much Impact
Little feedthrough for bonds as both Brent and WTI crude oil futures hit the highest level seen since mid-October.
- Out commodities team have highlighted yesterday’ s API inventory data as a key driver of the move.
- Elsewhere, signs that sanctions are tightening supplies, with a reduction in consumption of Iranian and Russian crude, as well as reports of Ukraine hitting a Russian oil depot that supplies a military airfield, provide further support for crude.
AUSTRIA: Foreign Min Schallenberg To Take Over As Interim Chancellor
Der Standard reports that Foreign Minister Alexander Schallenberg will, for the second time in his career, be sworn in as interim chancellor. The transition will come on Friday 10 January and comes after incumbent Chancellor Karl Nehammer announced that following the collapse of coalition talks he would step down as head of the conservative Austrian People's Party (ÖVP) and chancellor.
- The Schallenberg administration will be a caretaker gov't in the same nature as the Nehammer administration that has been in place since the September 2024 federal election. It will engage in the day-to-day running of gov't, but will not be able to propose new legislation or make major policy decisions.
- The ÖVP also confirms that acting federal chair Christian Stocker will give a statement to the press at 1400CET (0800ET, 1300GMT). This comes a day after Herbert Kickl, leader of the right-wing populist Freedom Party of Austria (FPÖ) confirmed that he had accepted the mandate from President Alexander van der Bellen to form a gov't and would be inviting Stocker to begin exploratory talks.
- Stocker has, at least tacitly, signalled that the ÖVP under his leadership would be willing to at least start negotiations. There remain risks for the ÖVP in taking on the junior coalition role, with little opportunity in such a position to boost their credentials ahead of the next federal election.
Chart 1. Austrian National Council, Seats
Source: parlament.gv.at, MNI. N.b. Numbers in brackets indicate change of seats at 2024 election.
