Should the ECB hike sooner to avoid past mistakes, given second-round inflation effects?
Anna Edwards
David Rees
We were optimistic on European growth pre-war, but energy shock brings stagflation. Rate hikes don't make sense as weaker growth offsets price impulse. Focus is on high-frequency activity data.
Is the inflation hit lower than 2022?
Lizzie Burton
David Rees
Yes, magnitude is different. Energy prices not as high, and global economy state is different. In 2022, we had strong post-Covid demand juiced up.
Can the Fed look past a 4-6 week conflict's energy impulse?
Tom Mackenzie
David Rees
Yes, if it's 4-6 weeks. Energy prices elevated for a period, inflation upside hit, but by end of summer impulse subsides. Fed can look through and concentrate on core inflation and labor market.
How does Powell thread the needle today?
Anna Edwards
David Rees
Powell not in play for changing rates anymore unless things get really bad to upside. Our view: new governor (Warsh) comes mid-year with easing bias, tries to cut in second half.
Do you agree AI will create more jobs than it destroys?
Anna Edwards
David Rees
Let's wait and see. In extreme AI adoption, unemployment could go to 10% easily with 3% productivity growth. Not obvious in labor data today that AI is causing weakness.