Aurelia Butler

Hello and welcome to the working week.Groundhog Day is coming up. I know. Have we ever escaped it since the pandemic struck? The headline news this week certainly feels strangely familiar: UK prime minister Boris Johnson on the ropes, Ukraine and Russia on the brink of conflict. Are we really about to witness a return of the Soviet empire?Fortunately, there is cause for celebration this week with the lunar new year on Tuesday — get some tips about the wisdom of investing in China from this FT video. There is also change afoot with the lifting of Covid-19 restrictions in France, England and Scotland, enabling the Old Firm football match in Glasgow to be played in front of a decent-sized crowd at Celtic Park for the first time in what feels like an age on Wednesday. Are you thankful for the certainty or eager for some change? Email me at [email protected] dataIt is a busy week for economic news with further indications on inflation and unemployment in developed countries with purchasing managers’ index data out to provide some international comparisons.The UK interest-rate decision will come on Thursday and a rise is expected, despite last week’s data pointing to a slowdown in the economy. After the Bank of England’s communications fiasco late last year, it has decided to respond by saying less rather than more. A rate rise will be the first back-to-back tightening of monetary policy since 2004, fuelling expectations that more will follow.CompaniesWe are midseason for quarterly earnings with more Big Tech and bank results. These sectors have been among the winners from the pandemic, but they now face challenges as developed economies emerge from the crisis.Meta, the parent of Facebook and Instagram, which reports on Wednesday, has been seeking new revenue sources to power its future growth. It has also been stung by recent scandals over content moderation and privacy, contributing to a drop in popularity for its main social networking products, which in turn threatens its $85bn-a-year advertising-based business model.A number of carmakers will be arriving on the Wall Street forecourt and analysts will be looking to see whether they are any closer to making technological breakthroughs, such as on the perhaps overhyped driverless car. General Motors, which reports on Tuesday, is funding the transition to electric vehicles even as analysts expect to see revenue and earnings decline in the fourth quarter. The company said last week that it would spend more than $4bn to convert a Michigan factory to build electric pick-up trucks and another $2.6bn with LG Chem to build a battery cell plant. Analysts polled by FactSet predicted the automaker would earn $1.16 per share in the fourth quarter, down from $1.93 a year earlier, on revenue that has fallen 5 per cent to $36bn over the same period.Key economic and company reportsHere is what to expect in terms of company reports and economic data this week.MondayEU, Italy, Mexico: flash Q4 GDP dataEvraz Q4 trading updateGermany, preliminary consumer price index (CPI) data for JanuaryItaly, Japan: monthly unemployment figuresUK, quarterly estimates of government deficit and debt plus British Retail Consortium’s monthly economic briefingResults: KPN Q4, Mitsubishi Motors Q3, Ryanair Q2, UBS Q4TuesdayAustralia, Reserve Bank of Australia holds its monthly meetingBrazil, Banco Central do Brasil’s monetary policy committee meeting beginsCanada, monthly GDP dataFrance, provisional CPI figures for JanuaryEurozone, France, Germany, Italy, UK, US: IHS Markit manufacturing Purchasing Managers’ Index dataEU, European Central Bank Q4 euro area quarterly bank lending survey plus Eurostat unemployment figuresGermany, monthly labour market figuresIndia, Union BudgetUK, Bank of England’s monthly money and credit figuresResults: Alphabet Q4, ExxonMobil Q4, General Motors Q4, Lundin Energy FY, Starbucks Q1, Tele2 Q4, UPS Q4WednesdayEU, flash monthly eurozone inflation dataItaly, monthly CPI dataUK, Nationwide house price indexVodafone Q3 trading updateResults: AbbVie Q4, Banco Santander FY, Ferrari FY, Meta Q4, Novartis Q4, Panasonic Q3, Sony Q3, Spotify Q4, Telenor Q4ThursdayCompass Group Q1 trading updateEU, European Central Bank monetary policy meeting in Frankfurt, Eurozone main refinancing rate plus retail sales figuresEurozone, France, Germany, Italy, Japan, UK, US: IHS Markit services PMI dataSouth Korea, Turkey: CPI dataUK, Bank of England bank rate decision plus corporate bond and gilt purchase targetResults: ABB Q4, Amazon Q4, Banco Bilbao Vizcaya Argentaria Q3, BT Q3, ConocoPhillips Q4, Dassault Systemes Q4, Eli Lilly and Co Q4, Enel FY, ICE Q4, Infineon Technologies Q3, ING Q4, Merck & Co Q4, Nintendo Q3, Nokia FY, Norton LifeLock Q3, OMV Q4, Prudential Financial Q4, Ralph Lauren Q3, Roche FY, Shell Q4, Skanska FY, Takeda Q3FridayCanada, monthly unemployment figuresFrance, industrial production indexGermany, monthly factory order figuresEurozone, France, Germany, UK: IHS Markit construction PMI dataUS, monthly motor vehicle sales, payrolls and unemployment figuresResults: Aon Q4, Bristol-Myers Squibb Q4, Carlsberg FY, Intesa Sanpaolo FY, Regeneron Pharmaceuticals Q4, Sanofi-Aventis Q4, Sumitomo Q3, Suzuki Q3World eventsFinally, here is a rundown of other events and milestones this week. MondayNorway, annual Arctic Frontiers conference begins in TromsoUK, Scottish office workers will be allowed to return to their desks and there will be no limits on care home visits in England as lockdown rules are easedTuesdayAustria, mandatory vaccination laws come into effectLunar new year celebrations, marking the start of the Year of the TigerMyanmar, anniversary of the military overthrow of the elected government of Aung San Suu Kyi in a coupRussia assumes the presidency of the United Nations Security CouncilUK, 50th winner of the Costa Book of the Year announced in LondonUS, National Freedom Day commemorating the date when Abraham Lincoln signed the 13th Amendment abolishing slaveryWednesdayFrance, most of the country’s remaining Covid restrictions are expected to be lifted, including the reopening of nightclubsUK, Glasgow’s Celtic and Rangers game kicks off at Celtic Park, the first Old Firm derby since restrictions on fan numbers was lifted in mid-JanuaryUS, Groundhog Day celebrated in the Pennsylvania town of PunxsutawneyThursdayBafta announces the nominations for the EE British Academy Film AwardsBy-election for the Southend West seat previously held by Conservative MP David Amess, who was killed last OctoberFridayDenmark, Copenhagen’s annual Light Festival beginsChina, Summit between Chinese president Xi Jinping and his Russian counterpart Vladimir Putin in BeijingUK, deadline for a deal to be agreed between the mayor of London and the government to cover Transport for London’s pandemic revenue shortfallSaturdaySix Nations rugby tournament opens with Ireland playing Wales at the Aviva stadium, Dublin, and Scotland playing England at Murrayfield, EdinburghSundayCosta Rica, general electionQueen Elizabeth has reigned for 70 years, the first British monarch to reach this Platinum Jubilee milestoneTo hear the news in under three minutes, listen to the FT’s new audio digest, updated three times a day, every weekday More

ROME (Reuters) – Italian Prime Minister Mario Draghi is likely to have a hard time controlling his coalition, politicians and analysts warn, after relations within and among the ruling parties worsened over this week’s election of a new head of state.Outgoing 80-year-old President Sergio Mattarella was re-elected for a second term on Saturday, with party chiefs asking him to carry on after seven rounds of fruitless, often fraught voting in parliament to choose a successor.With elections in the euro zone’s third largest economy little over a year away, Draghi now has to lead his bruised government through a number of difficult challenges.He is under pressure from the parties in his broad coalition to raise borrowing to curb the impact of higher energy costs on firms and households, and the parties are at loggerheads over a contentious reform of the pension system.Italy has also pledged to Brussels it will adopt by the end of the year around 100 measures in return for some 200 billion euros ($223 billion) of pandemic recovery funds. The success of Italy’s Recovery Plan is seen as crucial to the prospect of further EU joint borrowing in the future.Meanwhile the coronavirus crisis shows little sign of abating, with Italy seeing hundreds of deaths every day. Draghi had wanted the role of president himself, but his bid was opposed by two large parties in the coalition and mustered little support among rank and file lawmakers.Financial markets are likely to welcome the continuation of the status quo as a sign of stability but the week of turmoil has left deep scars.”Mattarella’s election belies the fact that most of Italy’s political parties are in tatters,” said Francesco Galietti, head of political risk consultancy Policy Sonar.”We need to understand whether the key ingredient of Draghi’s government – a broad, cross-partisan majority – will still be there in a few weeks, because if not, the situation will rapidly become untenable.” Draghi’s coalition includes the main centre-left and centre- right parties as well as the right-wing League, the once anti-establishment 5-Star movement and several smaller parties.The presidential election saw these groups bitterly divided, with the centre-left Democratic Party (PD) largely supporting Draghi’s bid, and the League and 5-Star against it.”Mattarella 2 – a misleading semblance of stability,” was the title of a report on Saturday by advisory group Teneo.INTERNAL SPLITSPrecisely how the turmoil plays out for Draghi remains to be seen. Some politicians say that with the parties sidetracked by internal strife Draghi’s own role as commander of the coalition will actually be strengthened.”I think the government comes out of all this stronger,” PD leader Enrico Letta, a strong Draghi supporter, told reporters on Saturday. “I think there will be less desire among each party to mark out its territory and dig its elbows into the others.”This view was shared by Ettore Rosato, a leading light of the centrist Italia Viva party, who told Reuters Draghi could count on Mattarella’s ongoing support and would be pleased the ruling parties had finally all voted for the same candidate.However, the voting also revealed numerous internal splits within the parties and with jockeying for position ahead of the election already beginning, the early signs for stability are not promising. Many League lawmakers were unhappy with leader Matteo Salvini’s frequent changes of candidate and his final decision to back Mattarella. The League’s Industry Minister Giancarlo Giorgetti told reporters on Saturday he was considering resigning, before backtracking later in the day.”The League’s internal tensions will all be vented on the government,” Giorgio Mule, a junior defence minister from Forza Italia told Reuters.On the right of the political spectrum, the unity of a conservative alliance of parties was also shattered over the presidential election, with Salvini repeatedly making plain his anger towards traditional ally Forza Italia, a partner in Draghi’s coalition.Elsewhere, simmering tensions within the 5-Star Movement have come to a head, with Conte swapping accusations with internal rival Luigi Di Maio, who is foreign minister and a former 5-Star leader.Veteran centrist politician Pier Ferdinando Casini, who was himself a front-runner for the role of president, said on Sunday that with political relations “lacerated” by the week of conflict there was no doubt that the government was weakened.”I hope that the parties now redouble their support for Draghi, but seeing as I haven’t just landed from the moon, and this is the last year before elections, I’m afraid that’s not going to happen,” he told Corriere della Sera daily.($1 = 0.8974 euros) More

When humans compete with machines, wages go down and jobs go away. But, ultimately, new categories of better work are created. The mechanisation of agriculture in the first half of the 20th century, or advances in computing and communications technology in the 1950s and 1960s, for example, went hand in hand with strong, broadly shared economic growth in the US and other developed economies.But, in later decades, something in this relationship began to break down. Since the 1980s, we’ve seen the robotics revolution in manufacturing; the rise of software in everything; the consumer internet and the internet of things; and the growth of artificial intelligence. But during this time trend GDP growth in the US has slowed, inequality has risen and many workers — particularly, men without college degrees — have seen their real earnings fall sharply.Globalisation and the decline of unions have played a part. But so has technological job disruption. That issue is beginning to get serious attention in Washington. In particular, politicians and policymakers are homing in on the work of MIT professor Daron Acemoglu, whose research shows that mass automation is no longer a win-win for both capital and labour. He testified at a select committee hearing to the US House of Representatives in November that automation — the substitution of machines and algorithms for tasks previously performed by workers — is responsible for 50-70 per cent of the economic disparities experienced between 1980 and 2016.Why is this happening? Basically, while the automation of the early 20th century and the post-1945 period “increased worker productivity in a diverse set of industries and created myriad opportunities for them”, as Acemoglu said in his testimony, “what we’ve experienced since the mid 1980s is an acceleration in automation and a very sharp deceleration in the introduction of new tasks”. Put simply, he added, “the technological portfolio of the American economy has become much less balanced, and in a way that is highly detrimental to workers and especially low-education workers.”What’s more, some things we are automating these days aren’t so economically beneficial. Consider those annoying computerised checkout stations in drug stores and groceries that force you to self-scan your purchases. They may save retailers a bit in labour costs, but they are hardly the productivity enhancer of, say, a self-driving combine harvester. Cecilia Rouse, chair of the White House’s Council of Economic Advisers, spoke for many when she told a Council on Foreign Relations event that she’d rather “stand in line [at the pharmacy] so that someone else has a job — it may not be a great job, but it is a job — and where I actually feel like I get better assistance.”Still, there’s no holding back technology. The question is how to make sure more workers can capture its benefits. In her “Virtual Davos” speech a couple of weeks ago, Treasury secretary Janet Yellen pointed out that recent technologically driven productivity gains might exacerbate rather than mitigate inequality. She pointed to the fact that, while the “pandemic-induced surge in telework” will ultimately raise US productivity by 2.7 per cent, the gains will accrue mostly to upper income, white-collar workers, just as online learning has been better accessed and leveraged by wealthier, white students.Education is where the rubber meets the road in fixing technology-driven inequality. As Harvard researchers Claudia Goldin and Laurence Katz have shown, when the relationship between education and technology gains breaks down, tech-driven prosperity is no longer as widely shared. This is why the Biden administration has been pushing investments into community college, apprenticeships and worker training.The idea is to prevent the hollowing out of labour markets in sectors and places that went along with, say, the Clinton era embrace of free trade without adequate protections for workers. If they don’t have training to cope with technology-driven change, the anger of blue-collar workers in Midwestern swing states could be dwarfed by that of lower and middle-income service workers whose jobs are automated.Other issues require policy solutions. Companies receive more tax benefits from investing in technology, which can be depreciated, than in human labour. Getting rid of depreciation allowances for equipment such as software and robots could narrow that gap.Competition policy and better corporate regulation have roles to play, too. As Acemoglu told the House last year, “Big Tech has a particular approach to business and technology, centred on the use of algorithms for replacing humans. It is no coincidence that companies such as Google are employing less than one-tenth the number of workers that large businesses such as General Motors used to do in the past.”Big Tech’s business model is about getting rid of human labour and turning human behaviour into a raw material. It’s one that will be under increasing pressure in the year ahead, as the administration tries to push through legislation to curb the power of the platforms before the midterms. The bigger question of how to reconnect the fortunes of capital and labour in the coming era of mass automation remains [email protected] More

This should be a propitious time to redesign the EU’s maligned fiscal rules. Much has changed in just the last few years. Above all, the desire for public and private investment — to accelerate the decarbonisation of the economy as well as its digitalisation — is widespread, both in Brussels and in national capitals.The pandemic has also reshuffled the old politics. The Rubicon of joint borrowing for cross-border transfers has been crossed. The obvious success of massive deficit spending in 2020 has reinforced the lesson Europe’s policymakers grudgingly started to draw after previous crises: that a rigid approach to budget discipline hurts rather than helps fiscal sustainability, economic growth and political cohesion. A changing of the guard in important countries creates an opportunity to look at old dossiers with new eyes. The new government in Berlin seems committed to investment-intensive growth both at home and in Europe. Similar openness can be detected in the Netherlands and elsewhere. Mario Draghi’s premiership in Italy has reduced north-south distrust. So has the implementation of the jointly funded national recovery plans, widely seen (so far) as successful, with the exception of countries bent on undermining the EU’s legal order.But nobody would want to bet on reaching a political agreement to significantly reform the fiscal rules, which stand to be reintroduced next year, after being relaxed at the beginning of the pandemic. Thus we live with a double paradox. EU countries are collectively pursuing vastly better economic policies than they have done in a long time. That is true in the short run — the pandemic’s hit to jobs, incomes and productivity has been much more minor and shortlived than we had reason to fear — and in their ambitions for the long run. Yet on both fronts such progress would be curtailed by the current fiscal framework — in particular its drastic requirement to reduce public debt burdens.Finance ministers are keenly aware of the risk of undermining the recovery by withdrawing fiscal support too soon — indeed they have jointly recommended a “moderate supportive fiscal stance” for the eurozone as a whole this year. And the commitment to investing in the green and digital transition, while ensuring it does not leave people behind, is strong. Yet rules cannot just be ignored in a union that is a body of law more than anything else.

There are three ways out of this dilemma. One is to subject economic policy to the old rules, on the basis that legal ties underpinning the European project must take priority. But the previous crisis showed that if you try that, you sacrifice both economic performance and political cohesion.The next is to stretch the rules enough to permit the desired policies. As German chancellor Olaf Scholz likes to point out, the fiscal framework has proven its flexibility. Its suspension could be extended. The European Commission has a lot of interpretive power and could issue more lenient guidance as to how Brussels will judge national policies’ compliance with the rules, rewarding growth-friendly investment with fewer demands for belt-tightening.This comes with its own risks. National governments find it convenient to renounce any responsibility for EU-wide policy co-ordination; opposition parties would accuse them of giving in to Brussels. The divisive finger-pointing at other member states, which the pandemic somewhat tamed, could easily intensify again. Something like this is, though, the most likely outcome if governments cannot agree on the third option: to change the rules outright. The reason this is so difficult is that there has been little clear thinking about what the rules are supposed to achieve. The traditional economic arguments seem outdated: inflationary spillovers from excess spending have proven less of a risk than beggar-thy-neighbour austerity; interest rate pressures from national borrowing are nowhere to be seen; and there are now rescue funds to address refinancing crises.Similarly, the current rules do little to address the greatest economic challenges today, which, like it or not, call for a more activist state policy and arguably more public borrowing than when the rules were first drawn up. The best prospect for reform is for leaders first to agree on what the rules are for, and derive new ones from an understanding of what economic policies would achieve the broader sense of sustainability they are now committed to. France and Italy’s proposal to favour some types of investment has the merit of doing just that. It is incumbent on those who oppose it to do the [email protected] More

Statistics come in different kinds and each can be used to tell its own story. Rising inflation has made such variations even more obvious. Movements in the consumer price index — the UK’s main measure — aim to capture changes in the value of money. The CPI does less to highlight the specific challenges facing poorer households. Soon, though, access to digital data offers the prospect of producing statistics that paint a more complete picture of cost of living rises and directly represent more people’s experience.Statistical measurements of the cost of living have been thrust on to the political agenda by anti-poverty campaigner Jack Monroe. Famous for her shoestring budget recipes, Monroe has lambasted the media for focusing solely on the average experience — missing the pressures on the very poorest. They, she says, have seen even tighter squeezes on their spending power thanks to steeper price rises for the most basic and low-cost food items.Monroe has a point. It is possible to make generalised pronouncements about the cost of living from the CPI, the headline measure, but it will tend to over-represent the experience of richer households. Inflation is an economy-wide figure that looks to capture the purchasing power of pounds by tracking how they are spent through time. Richer households do a disproportionate amount of the aggregate spending in the UK, so the headline figure will always have more relevance to their purchasing patterns.What is clear from the CPI is that the costs of necessities are increasing. A rise in the energy price cap in April will enable energy suppliers to start passing on steep price rises in wholesale markets to consumers. While this may be good for the viability of energy companies, it could be disastrous for the poorest households. Unlike many of its peers in Europe, the UK government is yet to unveil any scheme for helping the poorest; a mooted delay to the planned national insurance increase would do more for wealthier groups.The Office for National Statistics on Friday rushed to restart publishing experimental data — suspended early in the pandemic when some key prices were temporarily unavailable — that showed prices in UK shops are rising at “similar” levels for both poorer and richer families; the cost of some more luxury categories is rising quickly too. But while weighted differently, the price points used to come up with these numbers are for the same items used to calculate the CPI — chosen to be representative of what average households buy, not the poorest.In 2017, though, the Digital Economy Act gave the ONS permission to demand access to data held by certain businesses. Soon, it will use this power to gather prices directly from checkouts. This will give the statistics agency hundreds of millions of data points to track changes to food prices, including goods that tend to be purchased by the poorest in society. In time, and with ingenuity, the vast quantity of data available from this and other sources may make it possible to tie government payments and services to an index that more closely represents the lived experience of inflation.Whether this possibility is realised or not will depend on whether politicians wish to ease cost of living pressures or to save money. Unfortunately, they do not have a great record on this front. UK student loan interest, inflation-linked bonds and train fares are all pegged to the discredited retail price index. It is to be hoped that this time is different. But while statistics can be used to tell many more stories, that alone is unlikely to stop politicians from only choosing their favourite. More

With surging inflation exacerbating a cost-of-living squeeze, the government has faced growing pressure, including from some of its own Conservative lawmakers, to delay or cancel a new health and social care levy that will see the rate of National Insurance rise by 1.25 percentage points.Some British newspapers have speculated that Johnson, who faces a possible no confidence vote https://www.reuters.com/news/picture/london-police-move-to-limit-downing-stre-idUSKBN2K20L9 over social gatherings at Downing Street during COVID-19 lockdowns, might seek to shore up support by scrapping the rise.Writing a joint article in the Sunday Times newspaper, Johnson and Sunak said: “We must continue to be responsible now, as we deal with Covid aftershocks — and above all with the Covid backlogs in healthcare … We must go ahead with the health and care levy.”Britain racked up its biggest budget deficit since World War Two, equivalent to 15% of gross domestic product, in the 2020/21 financial year. The pair said that while they are “tax-cutting Conservatives” they need to be responsible with public finances.”We believe people are the best judges of how to spend their money. We want to get through this phase and get on with our agenda,” they wrote.”With healthy finances we will continue to drive business confidence, and with record investment we will lay the foundations for a sustained, long-term, jobs-led recovery.”British inflation in December was its highest in nearly 30 years at 5.4%, with rising energy costs adding to the pressure on household budgets.Johnson and Sunak said they would continue to look at the best way to support people through the post-pandemic economic recovery and were considering the best medium and long-term plan to improve the security of Britain’s energy supply. More

Will an ugly jobs report deter the Fed from aggressive rate rises?Hiring in the US is expected to have slowed in January, with some economists cautioning that the economy shed jobs as the fallout from the Omicron coronavirus wave became more widespread. The US economy is projected to have added 175,000 jobs at the start of the year, compared with 199,000 in December, the labour department is expected to say on Friday. The unemployment rate is forecast to hold steady at 3.9 per cent, according to Bloomberg estimates. Average hourly earnings are expected to rise 5.2 per cent from a year ago, compared with 4.7 per cent in December.However, economists are continuing to revise their estimates and some caution that there is a risk payrolls contracted in January as the highly transmissible Omicron variant hit leisure and hospitality, healthcare and other service-related industries. Economists at Jefferies note a “high probability” of a negative print, while those at Pantheon Macroeconomics have predicted the US will shed 300,000 jobs. “The jobs report won’t do much to alter the Federal Reserve’s bullish view on the labour market,” Lydia Boussour, senior US economist at Oxford Economics, said. The Fed is squarely focused on tamping down on rampant inflation and Fed chair Jay Powell this week said, “I think there’s quite a bit of room to raise interest rates without threatening the labour market.”“Fed officials see a very tight labour market and they are likely to look through the temporary weakness in job creation,” Boussour said. Mamta BadkarWill the Bank of England start unwinding its bond-buying programme?The Bank of England is widely expected to raise interest rates for a second consecutive month at its meeting this week. That means investors are looking beyond an increase in borrowing costs to 0.5 per cent — which is broadly priced in by markets — to see whether this triggers the start of the process of winding down the central bank’s £875bn holdings of government debt purchased under its quantitative easing programmes.Back in August, when it laid out its strategy for tightening monetary policy in the wake of the coronavirus pandemic, the BoE signalled it would begin to shrink its balance sheet when rates reached half a per cent. It would do so by not stopping the reinvestment of the proceeds of bonds that it holds as they mature, “if appropriate given the economic circumstances”. With a dramatic surge in inflation since last summer, that moment looks poised to arrive sooner than investors, or the BoE itself, expected.If BoE rate-setters decide a rate rise is appropriate, they are likely to judge that starting to unwind QE is appropriate too, according to Nomura economist George Buckley.“With governor Bailey’s previously expressed desire to reduce the balance sheet, a move sooner rather than later seems reasonable,” Buckley said. That would mean the process of so-called “quantitative tightening” would begin in March, when a £28bn gilt held by the central bank falls due.There is still a chance, however, that the BoE gets “cold feet”, said Ruth Gregory of Capital Economics. It could also water down its previous guidance that it will “consider” actively selling bonds in its portfolio once rates reach 1 per cent, according to Gregory.“This would feel like a dovish development,” she said. Tommy StubbingtonWill the ECB signal any changes to monetary policy at its January meeting?Many economists expect no policy change from the European Central Bank at its first 2022 policy meeting on Thursday, despite the eurozone facing surging inflation. The time for a possible rate hike at the ECB “has not come, yet,” said Carsten Brzeski, global head of macro at ING.He pointed out that the Federal Reserve has moved closer to its first pandemic-era rate rise, but the US economy had already expanded well above what it produced when the health emergency struck. In contrast, the eurozone economy is expected to have just recovered to about pre-pandemic levels in the fourth quarter, when data is released on Monday.This week’s ECB meeting is unlikely to bring any policy changes, Brzeski noted. “Instead, the central bank will have to master a new communication challenge regarding inflation: avoiding any apparent shift from patience to panic,” added Brzeski.George Buckley, economist at Nomura, similarly expects no major changes to policy or guidance, and thinks that the ECB will be in a position to begin a slow normalisation of policy rates from June 2023. But “the risks are on the upside to our rate view,” warned Buckley.Eurozone inflation rose at an annual rate of 5 per cent in December, its highest since the creation of the euro and over double the ECB’s target of 2 per cent. The ECB expects the inflation peak to have passed during the fourth quarter. Ellie Henderson, economist at Investec, said that the release on Wednesday of a flash estimate for January’s harmonised indices of consumer prices “will give a first clue” of whether that forecast “is playing out.” Valentina Romei More