Author Archive

Euro bank credit still strong in spite of February weakness

The euro area M3 and credit report for February was slightly disappointing overall. Broad money growth (M3) eased from 4.8% to 4.7% y-o-y.  Bank loans to non-financial corporations fell back to 2.0% y-o-y in February, from 2.3% in January, as a result of weaker lending flows across the region. Notwithstanding this modest setback, the euro […]

Take-up of TLTRO loans is good news for euro bank credit

The fourth and final of the ECB’s Targeted Long-Term Refinancing Operations (TLTRO) today attracted EUR233bn in demand from 474 euro area banks, well above consensus (EUR110bn). Expectations of an ECB deposit rate hike may have boosted demand for this operation, as it provided a last opportunity for banks to secure four-year funding at a rate […]

Escaping from planet NIRP

The debate over the ECB’s exit strategy from its negative interest rate policy (NIRP) has started in earnest. Recent comments point to a possible reversal in the exit sequencing, with a deposit rate hike preceding the end of net asset purchases. A one-off adjustment in negative rates would have some merits, including for banks’ interest […]

ECB fine tunes communication as recovery broadens

The ECB delivered a fairly balanced, albeit more optimistic message at today’s press conference, echoing upward revisions to the staff projections for 2017-18 euro area GDP growth and inflation. Crucially, however, the 2019 projection for inflation was left unchanged at 1.7%. Looking ahead, the ECB’s four inflation criteria are unlikely to be fully met before […]

ECB preview: less reason to be dovish, but inflation battle not yet over

The latest economic developments are consistent with the ECB turning somewhat more hawkish – or, more accurately, less dovish. Business surveys have improved, pointing to annualised GDP growth of around 2% in Q1. Headline inflation returned to the ECB’s 2% target in February, for the first time in four years. The euro area composite PMI […]

Wage growth eases in the U.S. despite strong job creation

Non-farm payroll employment in the US rose by 227,000 month on month in December, above consensus expectations (180,000). The unemployment rate rose slightly further, to 4.8% in December while the broader U6 unemployment rate rebounded to 9.4%. Overall, however, the underlying picture remains one of ongoing improvement in US labour market conditions. As we highlighted in […]

Inflation and the ECB (part 1): the four criteria

Although euro area headline inflation jumped to 1.8% in January, the closest it has been to the ECB’s 2% target since Q1 2013, core inflation remained low at 0.9%. We continue to expect the ECB to wait until September before it announces a tapering of its asset purchases in 2018. A “sustained adjustment in inflation” […]

Patient ECB to wait for underlying inflation to improve

At today’s press conference following the GC meeting, ECB President Mario Draghi’s message was one of continuity, very much as expected. The stronger momentum in economic activity and headline inflation, he suggested, was no reason to declare victory as long as downside risks remain. Importantly, the ECB’s statement suggests that the GC will look through any […]

Solid US job figures, wages accelerate

Non-farm payroll employment in the US rose by 156,000 month on month in December, slightly below consensus expectations of 175,000, while payroll growth figures for the previous two months were raised by 19,000. The unemployment rate rebounded slightly to 4.7% in December, only partly reversing the sharp decline of the previous month. The broader U6 […]

Sizing up the changes in ECB’s monetary policy

In December, the ECB made important changes to its quantitative easing (QE) programme, deciding to extend it by at least nine months to December 2017 while scaling down the pace of its asset purchases from EUR80 bn to EUR60 bn from April. The ECB also announced the easing of technical constraints through the removal of […]

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