ECB minutes show rising inflation concern

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Published Date: 21 January 2022


  • Eurozone CPI was confirmed at 5.0% y/y in December, unchanged from the preliminary estimate and slightly higher than November's 4.9% reading. Core CPI was unchanged at 2.6% y/y. Separately, minutes from the ECB’s December meeting showed that some Governing Council members are becoming more concerned about broad-based accelerating inflation.  If inflation continues to surprise on the upside, the ECB may raise rates sooner than expected. The market is currently pricing a rate hike in Q4 2023.    
  • Initial jobless claims in the US rose by 55k to 286k in the week ending 15 January, a three-month high and well above what the market had been expecting.  Continuing claims increased to 1.64mn, also more than expected, in the week to 8 January. The data suggests that the rapid spread of Omicron in the US in recent weeks may have led to slower hiring and some layoffs. Seasonal adjustment factors may also have adversely affected the recent data. 
  • Existing home sales in the US declined by a bigger than expected -4.6% m/m, the first decline in four months. Low inventory was cited as the main reason for the decline, although higher mortgage rates likely contributed to softer demand. Home prices in 2021 increased by the most since 1999, with 6.12mn sales last year.   
  • Turkey's central bank kept its one-week repo rate unchanged at 14% yesterday, in line with expectations after inflation accelerated to a record 36.1% y/y in December.

Today’s Economic Data and Events

11:00 UK retail sales (Dec) forecast -0.6% m/m and 3.4% y/y

19:00 US leading index (Dec) forecast 0.8%

Fixed Income

  • US Treasuries rallied overnight as markets are likely taking stock of how far they have fallen so far this year ahead of the first FOMC meeting of 2022 next week. Yield on the 2yr UST fell 3bps to 1.0249% while the 10yr yield dipped 6bps to 1.8040%. Both bonds remain bid this morning, extending the drop in yields.
  • Elsewhere other developed market bonds rallied as well. Yields on 10yr gilts fell 3bps to 1.222% while bund yields dipped back below 0 to -0.029%. Emerging market bonds generally gained with both South African and Turkish 10yr bonds rallying. The CBRT left policy rates on hold overnight, helping to support Turkish assets more broadly.


  • The dollar recovered some ground overnight with the broad DXY index adding 0.24% to 95.735. EURUSD was the notable decliner among major peers, falling by 0.27% to 1.312 while USDJPY fell in favour of the yen to 114.11. GBPUSD was little changed, closing with a downward bias at 1.36 figure.
  • Among commodity currencies both CAD and AUD gained. USDCAD fell 0.1% to 1.2503 while AUDUSD added 0.2% to 0.7226. NZDUSD was the outlier, falling by 0.4% to 0.6757.


  • US equity markets sold off again overnight even as yields adjusted lower. The Dow Jones index fell 0.9% while the S&P was off by 1.1% and the NASDAQ dipped 1.3%. European markets generally fared better with the EuroStoxx 50 index up 0.7% and both the CAC and DAX rising. The FTSE 100 closed little changed.
  • In early trading today the Nikkei is down around 1.4% along with drops in both the Australian and Chinese markets.


  • Oil prices snapped their four days of gains yesterday in generally listless trading. Both Brent and WTI futures fell by 0.07% to USD 88.38/b and USD 86.90/b respectively. However, both are pushing much lower in trade today with Brent down almost 2% and WTI off by 3.6%.
  • Commercial crude inventories in the US rose by 515k bbl last week, their first increase since the end of November. Gasoline stockpiles rose by 5.9m bbl though, their third week of large increases. Total production in the US was unchanged at 11.7m b/d while product supplied added 1m b/d to 21.92m b/d.

Click here for charts and tables