• The pass through of higher energy prices to Euro Area inflation is much lower than feared. So far, only higher oil prices have meaningfully contributed to higher inflation;

• It's the same story with core inflation. While core inflation has increased to 2.5%, based on past elasticities we should have been at 2.7%. If core inflation doesn't edge higher (it doesn't seem to do so), core will end up below the ECB's forecast this year;

• All in all, ESTR swaps have overpriced ECB rates. I expect a final hike in September before Lagarde & Co call it a day.

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