e2fda6f48f4beb7f2e9a16bde35b727c4d7cd8e0d73c422d49e7378ade652268;;[{"layout":"linklist","uid":26246,"publicationDate":"28 Sep 17:37","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181231.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJONVgIeo7x-ZU6taDmKjrKk=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Economics Chartbook - Central banks head for exit (4Q21)","product":"The Unicredit Economics Chartbook","synopsis":"<ul class=\"ucrBullets\"><li><strong> Global: <\/strong> Growth has peaked, and we are fine-tuning our global GDP growth forecast for this year, to 5.8% from 6%, and for next year, to 4.6% from 4.7%. The spread of the Delta variant has weighed on demand over the summer, while shortages of materials and labor continue to constrain supply and will probably last into 2022. Growth is likely to remain robust next year, thanks to accumulated household savings, inventory restocking, and the declining economic effects of each new wave of COVID-19. However, growth rates will naturally ease as pent-up demand, fiscal support and spare capacity fade. Inflation will likely remain high through year-end before moderating as base effects turn negative and supply starts to adjust. Central banks will continue to chart a gradual exit from emergency measures.<\/li><li><strong> US: <\/strong> We now expect GDP growth of 5.8% this year (from 6.1%) while our forecast for next year is 3.9% (from 3.8%). This is the result of a downward revision to growth in 3Q21 and slightly stronger growth early next year. GDP is likely to reach its pre-pandemic trend line in 1Q22, a quarter later than previously expected. Inflation is close to peaking but will likely remain elevated well into next year as supply disruption looks set to last longer than anticipated. We continue to see inflation falling back towards 2% by end-2022. The Fed will likely start tapering its QE in November and cease net purchases around mid-2022. We expect the first rate hike in early 2023, followed by a second hike in 2H23.<\/li><li><strong> Eurozone: <\/strong> GDP is likely to expand by 5% this year and by 4.3% in 2022. Activity is set to increase strongly again in 3Q21, followed by slower growth at the turn of the year as the reopening boost fades and manufacturing output slows. GDP will probably recover to its pre-pandemic level by year-end. Prospects for 2022 remain positive, supported by deployment of NGEU funds, but activity is unlikely to return to its pre-crisis trend before 2023. Inflation will probably peak in November at close to 4%, before falling sharply over the course of next year. The ECB seems keen to close the PEPP in March. If so, maintaining easy financing conditions and a smooth transmission of monetary policy would require stepping up the pace of the APP and increasing its flexibility.<\/li><li><strong> CEE: <\/strong> We expect economies in EU-CEE and in the Western Balkans to grow by around 6% in 2021 and 4.6% in 2022. Turkey\u00b4s economy could expand by 9.7% in 2021 and 5.5% in 2022. In Russia, GDP growth could slow from 4% in 2021 to 2.4% in 2022. In 2021, the recovery has been driven by pent-up consumer demand\u00a0and exports. In 2022, investment could contribute more to growth, helped in EU-CEE by NGEU disbursements, in Russia by spending from the National Wealth Fund and in Turkey by easier financial conditions. Supply-chain bottlenecks, rising energy prices and buoyant consumer demand could keep inflation outside target ranges for longer than central banks currently expect. Further monetary tightening is needed to ensure price stability.<\/li><li><strong> UK: <\/strong> We are lowering our GDP growth forecasts to 6.4% for this year (from 6.7%) and 5.9% next year (from 6.1%), delaying the time when we expect GDP to surpass its pre-pandemic level by one quarter to 2Q22. Inflation is set to rise to almost 4% in 4Q21 and remain there through 2Q22, before falling back to close to 2% by end-2022. The MPC seems prepared to raise rates as soon as February, but we expect lower growth and higher unemployment to delay a hike until late 2022\/early 2023.<\/li><li><strong> China: <\/strong> We are reducing our GDP growth forecast for 2021 to 8.2% from 8.5%, and for 2022 to 5.0% from 5.7%. The summer turned out to be challenging due to a mix of natural disasters and the spread of the Delta variant. Looking beyond 3Q21, there are several headwinds that might dent the economic outlook, from abrupt state interventionism to rising vulnerabilities in the real estate sector and an economically-damaging 'zero tolerance' approach to COVID-19. Fiscal and monetary policy are likely to remain accommodative. <\/li><\/ul>","hash":"e2fda6f48f4beb7f2e9a16bde35b727c4d7cd8e0d73c422d49e7378ade652268","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"0","showcompanies":"0","showcountries":"0","showcurrencies":"0","synopsislength":"-1","synopsisexpand":"0","nodate":"0","nolinktitle":"0","notitle":"0","dateformat":"d M G:i","noproduct":"0","noflags":"0","shownav":"0","oldestedition":"","limit":"12"}},{"layout":"linklist","uid":26247,"publicationDate":"28 Sep 17:17","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2021_181230.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoJRIvbGu4hUoKSAHz3HkdWA==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Time for policy normalization (4Q21)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> We expect economies in EU-CEE and in the Western Balkans, to grow by around 6% in 2021 and 4.6% in 2022. Turkey\u00b4s economy could grow by 9.7% in 2021 and 5.5% in 2022. In Russia, GDP growth could slow from 4% in 2021 to 2.4% in 2022. <\/li><li> Before the end of 2022, output gaps could turn positive in Hungary, Poland, Romania, Russia, Serbia, Slovenia and Turkey. <\/li><li> Pent-up demand is driving the recovery in 2021, helped by savings accumulated in 2020, and rising wages and employment. Exports are contributing to growth owing to strong demand for cars, a bumper harvest, returning foreign tourists and, in Turkey, to competitive gains amid currency depreciation. <\/li><li> In 2022, investment could contribute more to growth, helped in EU-CEE by disbursements from the EU\u00b4s Recovery and Resilience Facility (RRF), in Russia by spending from National Wealth Fund and in Turkey by looser financial conditions.<\/li><li> Public policies are a risk to medium-term growth due to populist spending triggering a limited fiscal adjustment, a backlash against green energy, poor implementation of structural reforms and nationalist agendas affecting economic goals.<\/li><li> Supply-chain bottlenecks, rising energy prices and buoyant consumer demand could keep inflation outside target ranges for longer than central banks currently expect. Further monetary tightening is needed to ensure price stability.<\/li><li> Due to structurally tight labor-market conditions, we expect inflation in EU-CEE to diverge from that in the eurozone in the coming years, forcing EU-CEE central banks to tighten further. The CBR might need to keep the real interest rate positive due to structural rigidities. The CBRT gave up its inflation mandate, with potential consequences on financial stability.<\/li><\/ul>"},{"layout":"linklist","uid":26225,"publicationDate":"26 Sep 13:40","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181205.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJONVgIeo7x-ZkA4rYLSOxDo=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181205.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJONVgIeo7x-ZkA4rYLSOxDo=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181205.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJONVgIeo7x-ZkA4rYLSOxDo=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<p><ul class=\"ucrBullets\"><li> What\u00b4s behind China\u00b4s woes, and the likely policy response.<\/li><li>Where contagion is likely to show up.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":26174,"publicationDate":"19 Sep 12:46","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181142.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPaG4-M9sZL7rRG5092p5Vc=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181142.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPaG4-M9sZL7rRG5092p5Vc=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181142.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPaG4-M9sZL7rRG5092p5Vc=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<p><ul class=\"ucrBullets\"><li> The election practicalities and what it\u00b4ll take to change the constitutional debt brake.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> The latest polls and what they tell us about the next government coalition.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> What it\u00b4ll mean for key policies.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> I\u00b4ll summarize what I see as Angela Merkel\u00b4s legacy, highlighting where the next government will remain in her footsteps and where it\u00b4ll likely deviate.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":26173,"publicationDate":"17 Sep 16:49","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181141.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPaG4-M9sZL7KHUqBs3IQBA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Soaring wholesale electricity prices heat up debate on cost of green transition","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Eurozone wholesale market electricity prices have hit an all-time high this week. This is primarily due to the steady increase in the price of natural gas (used by power plants for electricity generation) amid persistent supply shortages and bottlenecks in alternative renewable energies. It also reflects, albeit to a lesser extent (EU Timmermans said by 20%), the rise in the price of greenhouse gas emission allowances related to Europe\u00b4s greater ambition for emission-reduction targets (by 55% compared to 1990 levels by 2030 from 40% previously). The latter has contributed to an increase in the cost of electricity generation for those plants using (more polluting) fossil-fuel technologies whose production is still needed to meet electricity demand. <\/li><li> Eventually, the increase in retail electricity prices is probably accounted for to only a small extent by the rising price of gas emission allowances via the pass-through of changes in wholesale electricity prices to retail ones (which, in turn, varies depending on each country\u00b4s price-setting mechanism). Still, the recent increase in wholesale electricity prices has sparked a heated debate across Europe about the cost that consumers will have to bear to support the green transition and how to avoid a backlash. It has also raised fears of a repeat of the yellow-vest protests that raged in France at the end of 2018, albeit they were not primarily about climate action. <\/li><li> The transition to a greener economy will inevitably imply an economic cost of adjustment. This is also the main reason why a shift in climate policies towards less-polluting energy sources has been postponed for so long. The main challenge for policymakers is to ensure that the cost of the adjustment is fairly redistributed and that the most vulnerable groups do not bear an excessive burden, which is a condition to make sacrifices more acceptable. In the face of the recent sharp rise in electricity prices, using part of the revenue derived from the emission trading system to help protect the purchasing power of low-income households represents an appropriate policy. The budgetary cost of these mitigation measures could eventually turn out to be relatively contained if inefficient government-sponsored bans and subsidies, which often concur in the formation of retail electricity prices, were financed in a more appropriate and visible way. This is also a proposal currently being debated in Italy.<\/li><\/ul>"},{"layout":"linklist","uid":26122,"publicationDate":"12 Sep 12:45","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<p><ul class=\"ucrBullets\"><li> The risk that growth is levelling off well before we reach post-pandemic cruising speed, and '<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> what it\u00b4ll mean for monetary policies. I suspect the peace at the ECB may be coming to an end.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":26121,"publicationDate":"10 Sep 16:35","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181081.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadPgUmEhAJ06A=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Durable goods fuel price pressure in the eurozone","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Our Chart of the Week shows that in the eurozone pipeline price pressure in consumer goods is largely driven by durable goods, and there are no signs of a turning point yet. <\/li><li> The European Commission gauge for selling price expectations as reported by producers of durable goods has skyrocketed to record-high levels during the summer, while upward pressure is less intense for non-durable goods. We expect that this evidence will increasingly be reflected in PPI numbers, which show a tight correlation with the survey. <\/li><li> Supply bottlenecks probably explain most of the strong price increases, given that Italy is the only country among the four largest eurozone member states in which demand for durable goods has exceeded pre-crisis levels. <\/li><li> Retail prices of durable goods have been accelerating, and further pressure in the coming months is baked in the cake. Yesterday, the ECB revised up its inflation forecasts, assuming that supply disruption will last into 1H22, longer than previously expected. However, durable goods account for only about a third of total core goods in the HICP basket. This should help mitigate the effect on core and headline inflation.<\/li><\/ul>"},{"layout":"linklist","uid":26085,"publicationDate":"03 Sep 16:16","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181021.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadecY8IMf9HXs=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181036.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadgo8XU8y71X8=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181032.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadoIoyrbiyJ4I=&T=1&T=1"},"title":"Oil Update - A complicated balancing act for OPEC+: From under-supply to over-supply","product":"Oil Update","synopsis":"<ul class=\"ucrBullets\"><li> Despite the OPEC+ tapering of its output cuts, the oil market remains in deficit, with global supply struggling to absorb burgeoning demand. <\/li><li> However, in 2022, the market is likely to be in surplus if OPEC+ removes its output curbs at the planned pace and oil production recovers in other parts of the world. If supply exceeds demand, inventories will start rising again and, ceteris paribus, prices will decline.<\/li><li> Such a scenario is likely to force OPEC+ to reconsider its exit strategy from the output cuts and this might be a source of tensions within the cartel. In its September meeting, OPEC+ confirmed its intention to inject more barrels into the market through the end of 2022 at a monthly pace of 400kb\/d, with a thorough review to take place in December. With this move, the cartel shrugged off the uncertainty caused by the spread of the Delta variant across the world. Actually, and contrary to the current tendency to downwardly revise the demand forecast for 2022, as the International Energy Agency (IEA) did in its August issue of the Oil Market Report, the Joint Technical Committee revised it to 4.2mb\/d, up from a previous 3.3mb\/d. Unlike the messy July meeting, when the UAE blocked the agreement between Moscow and Riyadh to partially remove the output curbs due to disappointment over its assigned quota, this time around there were no major sources of tension among traditional producers. However, harmony within the group might not last long. In a few months, if the removal of the output curbs proceeds as planned, with a full lifting by the end of 2022, the oil market is likely to shift from a situation of under-supply to one of over-supply that would weigh on oil prices and force OPEC+ to reconsider its output strategy, creating fertile ground for renewed tensions among its key members. If they follow their usual playbook, Russia would probably press on and push for a quick tapering of cuts, whereas Saudi Arabia would pause and call for caution. With more than 5mb\/d of spare capacity within the cartel and after almost two years spent trying to contain financial losses, it will be complicated to keep members in their ranks while halting the normalization process. A compromise could be to partly scale back the lifting of the cuts and keep supply more in line with demand, albeit still probably in excess of it. As a result, Brent would be likely to stabilize below USD 70\/bbl. A market still in deficitAt the moment, supply is clearly struggling to absorb burgeoning global demand that surged by 3.8mb\/d mom in June, almost three times the seasonal average. This is clear when looking at OECD oil inventories that have come down sharply since January (Chart 1). If one takes the difference between the current level of inventories and the pre-shale-boom average, the indicator is back in line with its pre-COVID-19 level. The difference in the five-year moving average is even negative. But, as discussed in past notes, this metric should be taken with a pinch of salt. Before the pandemic broke out, when the cartel had to decide the extent of the production cuts, it used to give a false perception of a balanced market as it gave weight to recent years of overproduction and so of high inventories. Now, it signals an overly under-supplied market because it is biased by 1H20, when inventories reached historic highs and storage capacity was close to its limit.Preliminary estimates for demand in July point to a loss of momentum due to the spread of the Delta variant, particularly in China where the central government tightened containment measures to prevent localized outbreaks from spiralling out of control. Cases of the Delta variant spread from Nanjing to 40 other cities. Several places have restricted mobility and introduced localised lockdowns. This zero-tolerance approach led to a sizable drop in both land and air mobility. In some Chinese cities, local airports cancelled up to 80% of scheduled flights. Across the advanced world, however, demand remained resilient throughout the summer thanks to the removal of the most intrusive restrictions, the good weather and rising vaccination rates. Overall, the strength of global demand, which is expected to grow by at least 3mb\/d qoq in 3Q21, is unlikely to be matched by equally strong supply, which is likely to rise by around 2.2mb\/d qoq on the back of the end of Saudi Arabia\u00b4s voluntary cuts and OPEC+ tapering. <\/li><\/ul>"},{"layout":"linklist","uid":26056,"publicationDate":"02 Sep 16:12","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181007.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxaddf1E3ZpA8eE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Eurozone inflation will rise further, but monetary policy should look through this","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The August flash estimate of eurozone inflation published on Tuesday surprised to the upside, showing a sizeable acceleration in the headline rate to 3.0% yoy from 2.2%. This is its highest level since late 2011. Core inflation rose strongly, to 1.6% yoy from 0.7%, explaining most of the jump in headline inflation. Our Chart of the Week breaks down core inflation into its two main components: services and core goods. It shows that the August acceleration was almost totally driven by a huge spike in the prices of goods. The gap between services and goods inflation, which had always been positive in the two and a half decades before the pandemic, has turned negative by an unprecedented 1.6pp (services: 1.1%, core goods: 2.7%). <\/li><li> Several temporary factors explain this unusual pattern. First, goods inflation was artificially inflated by the late start last year of summer sales on apparel in France and Italy, among other eurozone member states. This is a purely statistical effect, which reversed weakness recorded in the yearly change in apparel prices for July and which should fade over the next one or two months. Second, it is highly likely that manufacturers have continued to pass on some of the cost increases caused by supply bottlenecks and rising commodity prices. To the extent that higher production costs largely reflect the global ramifications of the pandemic, this should also be considered as a temporary factor, although available indicators suggest that its effects will last longer than expected, most probably into 2022. Third, services inflation was dampened during the summer months by lower weights (compared to 2020) for travel, leisure and hospitality expenses in the HICP basket. This explains why the reopening of several tertiary activities and a rebound in demand have been accompanied by weak services inflation until now. This effect will likely reverse in the fall, when these price categories typically record large seasonal price declines. We expect services inflation to rise more meaningfully over the coming months. <\/li><li> Overall, transient factors have played a key role in driving inflation in the euro area, and we expect they will continue to do so at least until the end of the year. These factors also include a 15.4% yoy increase in energy prices (which alone accounted for half of the headline inflation rate in August) and changes in Germany\u00b4s VAT rate. We expect that headline and core inflation will rise further in the coming months, before probably peaking in November. A clear slowdown is likely to start at the beginning of 2022, helped by the fading of the VAT effect in Germany, and to continue in subsequent months. This deceleration might push headline inflation back below 1.5% in about a year\u00b4s time, amid a strong base effect on energy prices. Monetary policy should remain patient and persistent. <\/li><\/ul>"},{"layout":"linklist","uid":25935,"publicationDate":"29 Jul 15:11","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180844.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMbnchgdNKueNhOXGk6Ecd8=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Long-term inflation expectations in the US remain well-anchored ","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In June, 12-month CPI inflation rose to 5.4% in the US, its highest level since 2008. Rising inflationary pressures are linked to the reopening of the economy and the associated release of pent-up demand amid strong support from fiscal policy, and to supply bottlenecks (due to shortages of labor, commodities, and key intermediate inputs). We expect these forces to be temporary as demand fades and supply adjusts. But the higher and longer actual inflation rises, the more inflation expectations could be affected, forcing central banks to intervene and tighten their monetary policy stance. Given the role played by inflation expectations in the wage and price setting process, they have the potential to become self-fulfilling. In other words, they can serve as an 'accelerator' for inflation of the effects of temporary demand and supply shocks. Our Chart of the Week\u00a0shows that while short-term inflation expectations have moved higher, longer-term inflation expectations remain in line with historical averages when inflation was around target.<\/li><li> Measures of inflation expectations, at least in the US, come in a great variety. Some look at the short term, others at the long term. Some are based on surveys of households, firms or professional forecasters that are conducted by several institutions; others are derived directly from prices of financial securities. Regardless of the type, inflation expectations five years ahead and beyond look consistently well-anchored; in 2Q21, they were roughly in line with past averages. <\/li><li> Short-term inflation expectations, particularly of consumers compiled in surveys like those of the Conference Board and the University of Michigan, have been affected somewhat by the current inflationary spike ' but, historically, short-term inflation expectations have always been higher than long-term ones. Professional forecasters, instead, are looking through today\u00b4s volatility. This rise in short-term inflation expectations for households is not particularly surprising or concerning. Most people use simple rules of thumb to determine what they feel is the evolution of prices, such as the cost of food or petrol ' things they purchase frequently ' or their views about inflation are influenced by the media reporting information about current prices. That is why short-term inflation expectations of households tend to follow actual inflation higher (so-called 'adaptive' expectations). Importantly, however, households do not expect rising inflation to be lasting.<\/li><\/ul>"},{"layout":"linklist","uid":25841,"publicationDate":"18 Jul 13:53","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll revisit the ECB\u00b4s post-strategy-publication media blitz to explain and persuade the public ahead of Thursday\u00b4s Governing Council meeting that they\u00b4ll act 'forcefully and persistently' to achieve the revised inflation target ' raising expectations in the process. And I note the decision to take the digital euro project a step further.<\/li><li> As summer rolls in and most of the OECD economies show strong growth, the debate about the withdrawal of policy stimulus is picking up on both sides of the Atlantic. Yet, there is still a long way back for a full recovery in Europe and the list of unanswered questions about the strength and sustainability of the path back to recovery is long. I\u00b4ll summarize my seven key questions ' and, as a summer-special, I\u00b4ll illustrate them with a set of attached charts. To me the conclusion is clear: Any reduction in European policy stimulus would be a mistake. If you disagree after having read my note and looked at the charts, do write to me!<\/li><\/ul>"},{"layout":"linklist","uid":25821,"publicationDate":"14 Jul 15:55","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180711.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87YeLMLSmjPLpDw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Owner-occupied housing in eurozone HICP: Implications and challenges","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> With its strategy review, the ECB confirmed that the Harmonized Index of Consumer Prices (HICP) remains the appropriate measure for assessing the achievement of the central bank\u00b4s new price-stability objective (a symmetric target of 2% inflation over the medium term). However, the Governing Council (GC) acknowledged that 'the inclusion of the costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households'. Therefore, it recommended a roadmap to include owner-occupied housing (OOH) in the HICP. <\/li><li> Our Chart of the Week shows an attempt to quantify the effects of including OOH in the eurozone HICP. We make a (possibly conservative) assumption that the weight of OOH in the basket would be 10%. Over the last decade, the inclusion of OOH would have raised inflation by an average of 0.1pp per year, although the impact would have differed meaningfully over time. In 2011-13, amid weakness in the housing market, OOH subtracted from the inflation rate, while the opposite holds true in the following years, when inflation would have been 0.2pp higher, on average. This suggests two things. First, the slight increase in the target for inflation, under the new definition of price stability (to 2% from 'below, but close to 2%') changes very little in practice when OOH is taken into account. Second, inflation that includes OOH might become more pro-cyclical. Using a larger weight for OOH does not materially alter the average results, but obviously increases the cyclicality of inflation. <\/li><li> OOH is a tricky concept, as it reflects the costs of purchasing, maintaining and living in one\u00b4s own home. Currently, housing costs in the eurozone mainly enter the HICP through actual rents, with a weight of 6.5%, while the costs of OOH are not included. The perception by eurozone households, which we share, is that the weight of the cost of housing in the HICP basket is too low. Several advanced countries already include OOH in their inflation gauges. As a reference, in US CPI, the weight of actual rents is about 8%, while OOH accounts for most housing costs through the so-called owners\u00b4 equivalent rent, with a weight of about 24%. In the UK, the weight of costs of OOH in the CPI basket is about 16%. The main obstacle for OOH inclusion in the eurozone HICP is measurement issues, including differences in data availability and methodology in the way OOH is calculated by member states\u00b4 national statistics offices. Also, OOH data are currently published with a relatively long lag ' numbers for 1Q21 have only been recently published.<\/li><li> The ECB\u00b4s roadmap foresees four main stages for moving to an HICP including OOH costs as the main index for monetary policy purposes: 1. The construction of an analytical index for internal purposes, which includes OOH with approximated weights; 2 Eurostat to carry out further work on the statistical compilation of OOH weights, with the aim of publishing an experimental quarterly HICP including OOH costs in 2023; 3. An official quarterly index to be available by 2026; 4. OOH costs to be included in the HICP at a monthly frequency and in a timely manner (the ECB does not provide a timetable for this). During the transition period until stage 4 is accomplished, the main reference index for monetary policy will remain the current HICP, although 'the quarterly OOH index will play an important supplementary role in assessing the impact of housing costs on inflation and will thus inform the GC\u00b4s monetary policy assessments'.<\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":26247,"publicationDate":"28 Sep 17:17","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2021_181230.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoJRIvbGu4hUoKSAHz3HkdWA==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Time for policy normalization (4Q21)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> We expect economies in EU-CEE and in the Western Balkans, to grow by around 6% in 2021 and 4.6% in 2022. Turkey\u00b4s economy could grow by 9.7% in 2021 and 5.5% in 2022. In Russia, GDP growth could slow from 4% in 2021 to 2.4% in 2022. <\/li><li> Before the end of 2022, output gaps could turn positive in Hungary, Poland, Romania, Russia, Serbia, Slovenia and Turkey. <\/li><li> Pent-up demand is driving the recovery in 2021, helped by savings accumulated in 2020, and rising wages and employment. Exports are contributing to growth owing to strong demand for cars, a bumper harvest, returning foreign tourists and, in Turkey, to competitive gains amid currency depreciation. <\/li><li> In 2022, investment could contribute more to growth, helped in EU-CEE by disbursements from the EU\u00b4s Recovery and Resilience Facility (RRF), in Russia by spending from National Wealth Fund and in Turkey by looser financial conditions.<\/li><li> Public policies are a risk to medium-term growth due to populist spending triggering a limited fiscal adjustment, a backlash against green energy, poor implementation of structural reforms and nationalist agendas affecting economic goals.<\/li><li> Supply-chain bottlenecks, rising energy prices and buoyant consumer demand could keep inflation outside target ranges for longer than central banks currently expect. Further monetary tightening is needed to ensure price stability.<\/li><li> Due to structurally tight labor-market conditions, we expect inflation in EU-CEE to diverge from that in the eurozone in the coming years, forcing EU-CEE central banks to tighten further. The CBR might need to keep the real interest rate positive due to structural rigidities. The CBRT gave up its inflation mandate, with potential consequences on financial stability.<\/li><\/ul>","hash":"fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"-1","showcompanies":"-1","synopsislength":"-1","showcountries":"-1","showcurrencies":"-1","synopsisexpand":"0","nodate":"0","notitle":"0","dateformat":"d M G:i","nolinktitle":"0","noproduct":"0","noflags":"0","shownav":"0","oldestedition":"","limit":"1"}}]