Eurozone stagflation risks and ECB policy (with Tom, Jamana)

Catherine Neiss is more concerned about growth than inflation in the Eurozone. She expects inflation to peak at 3.5% this summer, but sees the energy shock as primarily an economic activity shock. She believes the ECB will hike 25bps in June but in a dovish way, giving themselves room to cut if the economy deteriorates. She warns that political uncertainty in the UK is extending uncertainty for the rest of the year.

explicit

NDX

RUT

Oil

Metals

USD

PGIM 7.8
Asset Manager $1400.00B
Catherine Neiss 8.0

Eurozone stagflation risks and ECB policy (with Tom, Jamana)

yields

The ECB will hike 25 basis points at their June meeting.

3/13/2026 9:58:26 PM	short term up	7 days later	+2.70%	+2.70%
1/7/2026 1:57:49 PM	medium term cautious up	20 days later	+1.63%	+0.81%
1/5/2026 10:58:21 PM	medium term up	20 days later	+0.81%	+0.81%
12/4/2025 5:57:16 AM	medium term up	21 days later	-0.07%	-0.07%

Show all 4 yields results

Tom

Asks if she is more concerned about inflation or growth in the Eurozone.
Catherine Neiss

Growth, 100%. This energy shock is different from 2022; it will be a real economic activity shock, and inflation will be relatively contained.
Tom

Asks when and how the demand story will cap inflation.
Catherine Neiss

Peak inflation is expected this summer at around 3.5%. The direct effects of energy prices are baked in, but there are no signs of second-round effects yet. Real activity indicators are flashing amber.
Jamana

Asks if an ECB hike in June would be a policy mistake.
Catherine Neiss

The ECB will hike 25bps in June, but in a dovish way, giving themselves scope to cut if the situation changes. They are mindful of not repeating the 2011 mistake.
Jamana

Asks if her inflation forecast would change if the Strait of Hormuz remains closed for longer.
Catherine Neiss

The marginal news since February makes second-round effects less likely. The real economy weakness will be the break on inflation.
Tom

Asks how quickly the data story can turn around if the Strait reopens rapidly.
Catherine Neiss

I'm worried it won't rebound. Repeated shocks make consumers and investors more cautious. Investment in Europe has been really low.
Jamana

Asks about the impact of political uncertainty on the UK economy.
Catherine Neiss

Markets don't like uncertainty. A leadership challenge creates knock-on uncertainty around the fiscal situation and the ability to deliver an autumn budget. This extends uncertainty for much of the rest of the year.

SignalTube

markets at a glance