ECB’s Knot: Highlights how US pandemic decisions were productivity-enhancing

Klaas Knot made an interesting point on US pandemic supports for the labor market compared to Europe. In the US, the policy encouraged widespread layoffs that included income support. In Europe, jobs were subsidized and people kept their jobs.

That softened the blow in Europe but in the US, as people went back to work, labor was reallocated in a more-productive way (though perhaps initially more inflationary). That’s a take we don’t hear about often and helps to explain some USD outperformance.

Other comments:

• I’m increasingly confident that inflation will come back to our target
• We’re seeing better signs on services
• June may be a good opportunity for first rate cut
• We will decide meeting by meeting after June
• It’s not likely we’ll move back to persistently low inflation and low rates

This article was written by Adam Button at www.forexlive.com.