In this week's blog, we focus on the interaction and conflict between inflation and growth, the dominant macroeconomic theme at the moment, and as we look ahead to next week, the interaction or conflict between inflation both its direct impact on consumer demand, and the results of monetary policy response, and what this implies for growth are the key things.

Firstly, in the UK, we start the week with monthly GDP data for February. Now, recent survey data has been more promising in the UK as services activity outperformed expectations, as the removal of all COVID restrictions drove consumption through March. GDP data from February may be too early to capture this bounce, but will be closely watched with reference to pre COVID levels and the ongoing recovery. Later in the week, we get a reminder of at least one of the headwinds to that recovery with inflation expected to rise to 6.7% year on year, with core rising to 5.4%. The combination of these two factors is key to the Bank of England monetary policy response. The current cost of living squeeze adding to the near term tax rises to the inflation pressure and uncertainty in the near term demand trajectory will certainly give the MPC something to ponder over their Easter eggs over coming weeks.

Secondly, in the US, we also get growth and inflation focus next week, with headline CPI expected to have risen to 8.4% year on year in March, taking the core levels to 6.6%. This is keeping the market and likely the Fed speaker narrative firmly focused on the strength of near term monetary response. Now inflation is the key driver of policy in the US. And we expect the Fed communication to continue to be firmly aimed at convincing markets of their ability to counter the destabilizing threat of inflation. Indeed, we're also open to the thesis that fed communication itself is an important fed tool in tightening financial conditions now, ultimately such the action needed later may not need to be so restrictive. Now growth and excess demand appear resilient in the US, at least in the near term. And Thursday's retail sales data for March will be closely watched as one indicator of consumer resilience, at this current complex juncture.

And then finally, ahead of the long Easter weekend, we get the ECB meeting on Thursday. In Europe growth indicators have started to weaken due to the war. German ZEW survey for April on Tuesday will be an important update to both current conditions and perhaps more importantly, expectations in this regard. However, inflation data has started to sharply surprise to the top side. Recent prints have shown headline inflation at 9.8% in Spain and an incredible 11.2% in the Netherlands. Last week, two minutes show a re widening of divergence of views on the Governing Council. I think this is very important, with Chief Economist Phillip lane, likely the lead policy architect maintaining the likelihood that inflation will converge below 2% at the forecast horizon, a conclusion that's described as surprising and even puzzling by other members of the governing council. Next week's ECB meeting will be closely watched. But we think given that headline inflation continues to surprise to the top side, the message will be that normalization remains appropriate, emphasizing the importance of the fiscal expansion to support the growth and the near term risks, but expressing a renewed vigilance towards second round effects. It's certainly a big week for the ECB and the euro with the first round of the French elections to get the week off to a flying start.