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Nord Stream fears pile more pressure on the ECB

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Robert Alster, CIO, Close Brothers Asset Management comments:

“With inflation at 8.6%, it’s easy to see why the ECB have pledged to tighten monetary policy later this week. However, our attention will be on the Nord Stream pipeline, expected to re-open on Thursday following annual maintenance. Markets fear the closure could be extended due to the war in Ukraine, potentially throwing Europe into a gas crisis.

“Although Europe is expecting a surge in tourism this summer, boosting the real economy, the key concern for the rest of the year will be around energy supply. An energy shortage would lead to price regulation or potentially rationing, both of which will negatively impact GDP and increase the chances of a recession, particularly for industry-intensive countries, where household supply will be prioritised. The pipeline flow needs to resume for the ECB to be able to deliver a sustained programme of monetary tightening, as a recession will undermine the case for tightening in 2023.“

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