The ECB could toughen its tone in the face of the growing risk of an inflationary spiral
The EUR/CHF price could rebound above parity in the coming weeks after failing to return above this threshold at the end of October. Indeed, the ECB could be even more hawkish in the coming weeks despite the growing risk of recession due to growing signs of an inflationary spiral in the eurozone.
Inflation, which began last year with a surge in consumer goods and energy prices, has spread to other parts of the economy since the start of the year, degrading the power household purchases. The price-wage loop now seems to be forming as employees react to this high inflation by demanding higher and higher wages.
Wage growth is thus accelerating to 4.1% over one year in the euro zone, its highest rate since at least 2010, which should push the ECB to adopt an even more restrictive monetary policy. If the ECB did not toughen its tone, not only would this risk an uncontrollable inflationary spiral, but the real rates in the euro zone would remain even lower than in Switzerland and the United States, which would accentuate the pressure on the single currency.
On the other side of the Alps, Swiss inflation remains moderate, at only 3%. The SNB is therefore not in need of accelerating its monetary tightening.
EUR/CHF daily price chart – key levels