Author Archive

Watch out for a rebound in euro area core HICP in November

This week’s final euro area HICP report has provided us and the ECB with greater clarity over the drivers of the surprisingly large fall in core HICP inflation, from 1.11% to 0.89% year-on-year in October. The drop was largely led by one-off moves in Germany (airfares, package holidays) and by education prices in Italy. Although […]

ECB, in search of a comprehensive strategy to tackle bad loans

The ECB has become under renewed pressure over its recent guidance on non-performing loans (NPL) and its plan to force banks to increase provisions against bad loans. The backlash, including at this week’s European parliament hearing of Danièle Nouy, Chair of the Supervisory Board, was fuelled by various gripes, including whether the ECB has gone […]

Laggards are catching up with the euro area recovery

The current leg of the euro area recovery is about both quantitative and qualitative improvement in the economic outlook. Trend GDP growth in France and Italy has risen to 2.2% and 1.8%, respectively, on an annualised basis. Those countries are catching up with the strongest member states, more than compensating for the moderate growth slowdown […]

BoE to proceed very cautiously following its first rate hike in a decade

The Bank of England (BoE) has raised rates for the first time in over a decade, while it hinted at a “limited and gradual” tightening cycle. Meanwhile, the assessment of the supply-side was downgraded once again amid “considerable risks” to the economic outlook. A 25bp rate hike alone is unlikely to have a material impact […]

ECB QE composition – some degree of constructive ambiguity

Arguably, the most important aspect of last week’s ECB quantitative easing (QE) announcement was that the programme will remain open-ended. As we have long suggested, the pledge to extend asset purchases beyond September 2018 can only be credible if there are enough German Bunds for the ECB to buy. Bund scarcity could be addressed through […]

Bend it like Draghi

The European Central Bank’s (ECB) decisions today were in line with our and consensus expectations, including a slower pace of asset purchases (rescaled from EUR60bn to EUR30bn per month), a longer and open-ended extension (until September 2018, or beyond if necessary), and stronger forward guidance (committing to keeping policy rates at present levels until “well […]

Small dip in headline PMI hides robust domestic momentum

The euro area composite flash PMI declined to 55.9 in October, from 56.7 in September, below consensus expectations, led by a drop in the services sector which offset an increase in manufacturing. However, survey details were fairly strong, especially in terms of job creation. In Germany, the survey points to robust private sector growth. The […]

ECB preview: slower, longer, stronger

Recent ECB communication has been remarkably consistent in signalling a ‘slower for longer’ QE extension into 2018. In light of these signals, we expect the ECB to announce at its 26 October meeting that asset purchases will be extended for nine months, until at least September 2018, at a reduced pace of EUR30bn per month, […]

Are French reforms for real?

The first major piece of President Emmanuel Macron’s agenda, the business-friendly labour market reform, was signed into law last month. Some Macron measures may have adverse effects in the short term and some others are not fully financed and difficult to quantify, but overall they should boost purchasing power, investment and productivity. The government has […]

Shifting prospects for the UK economy and financial assets

  Although the UK macro outlook has not changed much in recent weeks and considerable uncertainty remains in terms of the Brexit negotiations, the BoE’s hawkish shift has led to a material repricing of UK assets, including the currency and rates. In addition to monetary policy considerations, another driver of improved market sentiment has been […]

  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7