(Kitco News) - TheECB have backed themselves into a corner it seems. ECB president Lagarde saidthat "conditions are unlikely to be met next year" and this comesdespite money markets betting otherwise. With Chinese COVID-19 cases spikingagain it has been leaving analysts pondering if the supply shortages are over.If there is a fresh round of COVID closures in Asia (namely India and China) itcould disrupt the supply chain in Europe massively. This would in turn meanthat cost pressures would remain and inflation could run higher still.Obviously, this is a hypothetical scenario but the news overnight that casesare now increasing at the worst rate since the Wuhan outbreak could make for anuncomfortable next meeting at the ECB.
ECB'sde Cos said, "as pointed out by ECB's Lagarde the forward guidance doesnot support a market view of the first-rate hike in Q3 of 2022 nor any timesoon afterward". This is another ECB member supporting something thatcould be disputed over the coming few months. In addition to this ECB's Mullersaid that the "inflation spike is largely temporary" and again if thewinter months are tough Muller could potentially be wrong.
Awayfrom this, this morning the U.K. services PMI number came in higher than expectationsat 59.1. The report noted that this was the fastest rise in business activityfor three months. Tim Moore, Economics Director at IHS Markitsaid "Record rates of input price and output charge inflation appearto have dampened business optimism, which eased to its lowest since January.Comments from survey respondents also cited worries about prolonged staffshortages and constraints on growth due to the supply chain crisis.". Soalthough the number itself was positive there could be some trouble on thehorizon.
U.K.Services PMI (Oct) 59.1 vs exp 58.0 prev 55.4
EUUnemployment Rate (Sep) 7.4% vsexp 7.4% prev 7.5%
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