The ECB will have to walk a tightrope to seem dovish enough to maintain monetary accommodation, but hawkish enough to be alert to the dangers of inflation. The council will be reviewing the pace of its bond purchases under the emergency pandemic program, but it’s anybody’s guess whether they will change anything.
Germany has been experiencing uncharacteristic political turmoil. The environmental Greens party surged ahead in polls after naming the 40-year-old Annalena Baerbock as chancellor candidate, but enthusiasm has waned after missteps by her and the party.
Sunday’s gains in a state election by Chancellor Angela Merkel’s Christian Democrats are seen shifting the momentum in the race in favor of their chancellor candidate, Armin Laschet, who looks bland and old-fashioned next to Baerbock, but heads the country’s most populous state and its biggest political party.
The yield on Germany’s 10-year bond, which had crested above minus 1% in May, is now within a whisker of minus 2%, as the country settles back into more traditional politics.
The Federal Reserve is widely perceived to be off the hook for talking about tapering its bond purchases after last week’s job report came in below expectations and eased investor concerns about a runaway economy forcing the Fed’s
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