We published our latest quarterly Euro-zone Economic Outlook this week, with the main message being that we now expect the euro-zone to experience an even more extreme case of stagflation. Otherwise, Giorgia Meloni will become Italy’s prime minister over the weekend. While she is unlikely to loosen fiscal policy aggressively, the vulnerability of Italy’s public finances means the risk of turbulence in BTP markets is high. Next week, we expect the ECB to hike its deposit rate by 100bp and data to provide yet more evidence that activity in the euro-zone has slowed very sharply in the past few months.
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