Justin had the news on the expected aggressive rate hike from the European Central Bank ahead:
HSBC has 5 reasons, in brief:
- Service sector's activity is remarkably robust.
- The labour market is still fairly tight, and wages are steadily increasing;
- Due to low productivity and growing salaries, the growth in labour costs for businesses is greater than what is consistent with a 2% inflation objective;
- Policymakers believe there is "more ground to cover" and some want to hike rates until they see evidence of a "sustained basis" decline in core inflation, which we do not believe will occur until after the summer;
- The fiscal environment is still favourable, with money previously dedicated to energy support measures now going into more general spending and widespread tax credits.
