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Just this weekend in Eurointelligence: Those second round effects - again
They are talking about inflation again. Yesterday Germany published some preliminary data for January inflation, showing a relatively moderate rise of 2%, but the rise of inflation in Belgium to 3.2% is quite spooky. Core eurozone inflation remains subdued, but is edging up above its long-run average. Two ECB board members, Lorenzo Bini Smaghi and Manuel  Gonzales Paramo went out yesterday to warn about the second round effects of commodity price hikes. Bini-Smaghi said a permanent and repeated rise in import prices would affect domestic inflation. The ECB is very obviously embarking on a verbal campaign to warn financial markets and wagesetters  that it will not tolerate a rise in inflation. Euro zone interest rate futures fell  yesterday, according to Reuters, and the yield on two-year German debt hit a 15-month high at 1.387%.
They've been complaining about talk of "second round effects" for the whole month of January, since it first became known that EU inflation had exceeded 2%...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Jan 31st, 2011 at 09:59:12 AM EST
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