Asks how difficult it is to predict oil prices and the potential for $150 oil.
Francine Lacqua
Jari Stehn
Predicting oil is very difficult, so we think in scenarios. Baseline: 21-day disruption, oil at $110. 30-day: $130. 60-day: $150.
Asks about the impact on European inflation and growth.
Francine Lacqua
Jari Stehn
Headline inflation will get a big boost, growth will take a sizable hit. Downgraded GDP forecast by ~0.5%, upgraded inflation forecast towards 3%.
Asks how to know if shocks are big/persistent given it's a supply shock.
Francine Lacqua
Jari Stehn
Monitor persistence of energy prices, damage to infrastructure, and early signs of second-round effects like inflation expectations and pricing behavior.
Asks if differing market expectations for ECB vs. Fed are fair.
Francine Lacqua
Jari Stehn
Some difference is appropriate: US is a net energy exporter, Fed has a dual mandate and weakening labor market, Europe has a bigger scar from 2022. But current market pricing is probably too pronounced.
Asks if an ECB hike in April could look like a policy mistake.
Francine Lacqua
Jari Stehn
It's possible; the ECB has to balance scars from 2022 and 2008/2011. If they hike three times (Jun, Jul, Sep), they might unwind them next year as the economy weakens.
Asks about implications for the Bank of England.
Francine Lacqua
Jari Stehn
Surprised by the BoE's hawkish message. UK rates are still restrictive and the labor market is weaker, suggesting they have more time than the ECB.
Asks if protracted high oil levels lead to recession.
Francine Lacqua
Jari Stehn
Quite possible, but not our base case even in adverse scenario. The pre-war baseline was good, with fiscal expansion in Germany. The hurdle to recession is higher than in 2022.
Asks about the possibility of a diplomatic resolution making this much ado about nothing.
Francine Lacqua
Jari Stehn
That's also possible. It's hard to attach probabilities; you have to judge the conflict and how quickly flows normalize post-conflict.
Asks about impact on US consumer.
Francine Lacqua
Jari Stehn
This is a more global shock than 2022 (oil & gas), so it will also affect the US via inflation and affordability, though less than Europe.
Asks for key data points to watch for a turn for the worse.
Francine Lacqua
Jari Stehn
Focused on early surveys (ZEW, Sentix) and flash PMIs. President Lagarde's list included PMIs, not just inflation expectations, showing balance.