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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 […]

Low loan demand: a bad omen for investment

A key question for the 2018 US outlook, and beyond, is whether US firms will finally open their purses and invest more after years of frugality. Investment is key to sustaining the current expansion. Recent buoyant business surveys like the ISM manufacturing index seem to point that way. However, a chasm has opened between what […]

Upward potential for oil prices is limited

Recent developments have brought noticeable changes to the outlook for the supply-demand balance. First of all, the steady decline in the value of the US dollar since the end of 2016 has been stopped. In fact, the dollar appreciated by 4% between end-September and 7 November. Second, world economic activity has gained steam. In its […]

US employment—It’s Goldilocks!

October payrolls showed the US economy remains in fine fettle, as underlying payroll growth remained firm. Robust labour-market signals echo recent solid business surveys, strong job opening data, and very low levels of initial jobless claims. Payrolls rose 261,000, reversing some hurricane-related weakness (payroll growth was only 18,000 in September). The unemployment rate dropped to […]

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 […]

Federal Reserve – New sheriff in town

On 2 November, President Donald Trump nominated Jerome (‘Jay’) Powell to succeed Janet Yellen at the helm of the Federal Reserve System, confirming recent press speculation. The next step before the new Fed chairman can enter office next February is Senate confirmation. This looks unlikely to be problematic for Powell. From a monetary policy perspective, […]

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 […]

Limited scope for further drop in euro against the dollar

The US dollar has appreciated against the euro since 8 September and is getting close to our short-term forecast of USD1.15 per EUR. This recovery has been mainly driven by supportive US data, monetary policy divergence and hopes of tax reform. In the short term, robust US economic activity, a Fed that is still in […]

Signs that US rental boom could slow

The US has witnessed a striking boom in the construction of rental residential units in recent years. This can in part be explained by the rising allure of downtown living among millennials and ageing baby boomers alike. The boom can also be explained by the lingering effects of the subprime crisis, and the restrained access […]

Euro area: solid growth, but inflation still under par

  According to preliminary Eurostat estimates, euro area real GDP increased by 0.6% q-o-q in Q3, slowing marginally from an upwardly-revised 0.7% in Q2. A breakdown by expenditure components will not be released until 14 November, but domestic demand was likely the key driver in the euro area’s solid momentum. At a country level, France […]

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