Inflation and central bank outlook (with Tom, Anna)

Catherine Nice views chip/Apple price rises as a relative price shock, not generalized inflation, but acknowledges more frequent asymmetric shocks will keep inflation above target for longer. Central banks are more aligned than expected, with ECB likely done after one more hike.

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Catherine Nice 7.5

Inflation and central bank outlook (with Tom, Anna)

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More frequent asymmetric upside shocks to inflation mean central banks will keep rates higher for longer, but not in a prolonged hiking cycle.

Asks whether chip and Apple price rises add up to inflation.

Tom
Catherine Nice

This is likely a relative price shift, not generalized cost-push inflation. Energy prices are coming off and economies outside the US are sluggish, so underlying inflation isn't zooming away. It just takes longer to get back to 2%.

Memory price gains may be partially offset by other elements. The situation is different from post-COVID demand boom that amplified price rises.
Asks about divergent central bank stories between US (hiking) and Europe (on hold/cutting).

Anna
Catherine Nice

Post-Warsh, central banks are more aligned than thought. The ECB is likely done after one more hike. The divergence story has partly corrected itself. Bigger, more frequent asymmetric shocks mean central banks want optionality.

Central banks in Europe were more hawkish earlier, so they can unwind sooner. The ECB doesn't need to 'go nuts' about inflation.

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