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Macro & Markets: Latent lags
Economic indicators are currently telling many different stories. We continue to believe in one where inflation proves to be relatively sticky, meaning that central banks have more work to do. Also clearer downside scenarios have emerged, though. “Our past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain.” – ECB monetary policy statement on 4 May 2023 That monetary policy affects the economy with considerable lags is a well-known fact. But estimating the exact duration of those lags ... (full story)