ECB's Coeure: Missing transmission from wage costs to consumer prices is a bit puzzling
Further comments by Coeure in his interview with Frankfurter Allgemeine Zeitung
- Businesses are apparently accepting narrower profit margins
- But that cannot go on forever, at some point they will raise prices
- Choice of next ECB president should be based on competence, not nationality
- ECB does not expect a recession
- But it is true that economic slowdown in Germany is stronger than expected
In the interview, he also notes that markets pricing in a rate hike by the ECB only in late 2020 is reflective of a different assessment shared by the governing council with regards to downside risks faced by the Eurozone. He argues that the central bank values these expectations/pricing as an important input but they are not led by them.
Also, he also hints at further changes to the ECB's economic projections in two months' time by acknowledging current forecasts and says that they "will be revised in June". The full media interview can be found here.
As for the rate hike debate, the ECB's current message is that they will stay on hold until at least the end of 2019. But unless economic data starts to turn around significantly in 2H 2019, it's hard to imagine that they can go through with one in early 2020 so it's not to say that markets are 'wrong' to price in current expectations of a late 2020 rate hike.