The timeliest data support our long-held view that the euro-zone economy will remain close to recession in the first half of the year. Beyond that, we think growth will be much lower than the consensus or the ECB are forecasting. However, the labour market remains tight, and with wage growth and services inflation still high, the ECB looks set to wait until June – at the earliest – to cut interest rates. Elsewhere, we suspect that against the backdrop of continued low inflation, the SNB will start loosening policy in March. The Riksbank is likely to respond to the deep recession in Sweden by cutting rates in Q2. And February’s inflation data from Norway were consistent with our view that inflation will fall sharply this year.
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