Karim writes:

  • Claims drop to new cycle low of 368k; prior week revised down to 388k from 391k.
  • No special factors cited

Trichet Introductory Statement KeyLine:
It is essential that the recent rise in inflation does not give rise to broad-based inflationary pressures over the medium term. Strong vigilance is warranted with a view to containing upside risks to price stability. Overall, the Governing Council remains prepared to act in a firm and timely manner to ensure that upside risks to price stability over the medium term do not materialise.

In the 2005-7 rate hiking cycle, ‘strong vigilance’ or ‘vigilance’ was used in the introductory statement in the month prior to all 8 rate hikes in that cycle. Base Case: Look for the ECB to start raising rates 25bps every 3mths until they get to 2%, likely starting next month. Other key messages were ‘act in a firm and timely manner’ and the absence of the phrase ‘rates are still appropriate’.