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Inflation trap

Spanish CPI for the month of May has risen 10.2% YoY. Eurozone CPI is expected to be above 8% for the same period. Energy and food prices are the main contributors to the indexes. Meanwhile, the #ECB balance sheet keeps growing, and the expected #ratehike for July is…0.25%. It looks like someone is trying to cut a tree with a plastic knife, hoping the tree will fall out of its own weight. The problem is, of course, that faster hikes will push the eurozone into recession and that in the case of Europe, EU breakup voices will start popping up as 10 year bond yields in the periphery continue to widen. An economic problem is morphing into a social problem that will turn into a geopolitical problem.


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Source: Bloomberg



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