The ECB met on 5 February. My view is simple: the next move in interest rates is more likely to be up than down. Markets still see some probability of a cut this year. I do not. Let me explain why. Earlier this year I estimated a reaction function for the ECB. It suggested that r* in the euro area is about –0.3% when core inflation is used to compute the real interest rate. That number is not unreasonable. At r*, inflation should be stable. Headline HICP inflation in the second half of last year fluctuated between 2.1% and 2.4%. Core inflation moved between 2.3% and 2.4%. So inflation has stabilised. That is exactly ... (full story)