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Europe against the United States



Coinciding with the end of the year, major investment banks and analysis houses publish their view of things for the coming year. It is opinions that, like those of official bodies, have their validity and that you always have to know how to interpret knowledge of the bias of one and the other. Experience teaches us that, of course, nothing is written in stone and that it’s always a good idea to add a dose of common sense to make up our place. As we’re about to come to an end, it looks like next year will continue to dictate what happens with inflation and what central banks do. Prices point, barring a capital surprise, to the fact that it’s going to get crowded everywhere, although the inertia in the US and Europe is not the same, which should end up making a difference. In American inflation, that which has to do with demand has so much weight—essentially the greater salary pressure—that, contrary to what it may seem now, it will be much more difficult for them to control. The European is primarily a result of increases in energy and food, so what central banks can do with monetary policy has less weight. As 2023 progresses, we will see how quickly inflation data improves by the base they are compared to but faster in Europe than in the US. The job market dynamics on both sides of the Atlantic have nothing to do with it, and that will make it even more difficult to put it on the right track there. And it is precisely the different response that central banks will give – and are already giving – that will make a difference in 2023. The greater force required by the Federal Reserve to act will have a greater impact on the more it may end up with a rate hike by the European Central Bank in Europe. Furthermore, it is important to stress that a lot of the economic concerns in Europe are caused by bad inflation data. Since they have been left behind, a strong rebound in confidence is expected, with the path they took back on track to be restored. In this case, the expected improvement in inflation data will allow the European Central Bank to raise interest rates less than the Federal Reserve and thus the European economy will regain its tone before the US economy, where monetary policy response should be more aggressive.

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