Central banks will be aggressive in the short term as they try to re-establish credibility, with the European Central Bank a case in point.

July meeting: The ECB hiked its three key interest rates by 50bp for the first time in more than a decade, bringing its rates out of negative territory.

Italian government crisis, likely outcome: snap elections the most likely outcome. Prime Minister Draghi would remain at the helm of a caretaker government, until a new one is formed after the elections.

The ECB is determined to tighten its monetary policy in the face of record high inflation levels.

The energy crisis in Europe, coupled with supply chain bottlenecks worldwide, and accelerated monetary tightening are the major headwinds for the Eurozone and for the Spanish economy.

The growth outlook for Italy has been revised down on tighter financing conditions and monetary policy normalization, coupled with the energy crisis in Europe and global value chain bottlenecks.

As crises unfold, structural and governance issues tend to become more and more important.

We expect central banks to remain on the hawkish side as long as inflation expectations remain on the upside, as central banks are afraid of losing their credibility.

We expect QE to end in Q3, as announced, followed by rate normalisation, which is likely to lift rates out of negative territory over the next few months, with two hikes before year-end, followed by another in Q1 2023