We think the risk of a large and sustained rise in energy prices is low so we remain happy with our forecast that the ECB will cut rates by 125bp this year. If energy prices were to jump very sharply and remain high indefinitely, the ECB would still cut rates this year, but perhaps a little less than we are currently forecasting. Separately, German Chancellor Scholz’s trip to Beijing earlier this week underlined that any de-coupling of the German and Chinese economies is likely to be very slow.
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