Prices running hot

Both French and Spanish inflation figures came in higher than estimated in February and show that the CPI trend is again to the upside in Europe. In France, price increases were driven by an faster growth in food and services. We believe that this will leave the ECB no choice but to continue on their path of rate increases. An increase of 50 bps of the benchmark rate to 3% at the March meeting appears a done deal. Another 50 bps increase could be in the pipes for later this year. No wonder the 2 year German Bund is now at 3.12%, its highest level since the great financial crisis in 2008.