Author Archive

A successful central bank should be boring

The ECB made no change to its monetary stance and policy guidance at its 13 September meeting. The end of quantitative easing (QE) was confirmed for after December, following a final reduction in the pace of net asset purchases to EUR15bn per month in Q4 2018. Much of the focus was on the updated ECB […]

Peak headline inflation for the euro area?

Although the European Central Bank’s (ECB) mandate is defined in terms of headline inflation (targeting an annual rate of “below, but close to 2%” over the medium-term), over the past few years, the central bank has been mainly focused on underlying consumer price dynamics, including core inflation. Looking forward, there are reasons to believe that […]

Euro area PMIs: still little good news below the surface

Although euro area flash PMI indices were roughly in line with expectations in August, some details were less positive than the headline numbers, suggesting that downside risks have not yet disappeared. True, at face value, the small rise in the euro area composite PMI index, from 54.3 in July to 54.4 in August, is consistent […]

Europe chart of the week – Turkey

The rapid depreciation of the Turkish Lira is raising concerns at the European Central Bank over European banks’ exposure to Turkey, according to recent press reports. Data from the Bank of International Settlements (BIS) show that the total exposure of foreign banks to Turkish assets was USD223 bn in Q1 2018, on an ultimate risk […]

Europe chart of the week – UK households

The latest UK sectoral accounts from the Office for National Statistics (ONS) has received considerable attention over the past few days as it shows UK households’ outgoings surpassed their income in 2017 for the first time in nearly 30 years. The ONS noted that, on average, each UK household spent or invested around GBP 900 […]

ECB: the end of constructive ambiguity

Based on its upgraded assessment of the inflation outlook, the ECB delivered the QE tapering that the market expected, signalling the end of net asset purchases in December 2018 following a final three-month extension of EUR15bn per month. Importantly, today’s decision is flexible and conditional, “subject to incoming data” confirming the inflation outlook. Still, the […]

Europe chart of the week—German new orders

German new orders were weak across the board in April, contracting for a fourth consecutive month and by a larger-than-expected 2.5% m-o-m following a downwardly-revised 1.1% drop in March. As a result, total manufacturing orders are off to an extremely weak start in Q2 (-3.3% q-o-q after -2.2% q-o-q in Q1). What is more, the […]

ECB gets ready to make the leap

Peter Praet’s hawkish comments on inflation this week did not surprise us in terms of substance but did in terms of timing. The view of the (usually dovish) ECB chief economist carries significant weight, and therefore an announcement on QE is now likely at the 14 June meeting. We expect the staff projections to be […]

Euro area inflation close to ECB target in May

At 1.9% in May, euro area headline inflation is back close to the ECB’s target of 2%. Importantly, it was not only energy and food prices that pushed inflation higher, but also core consumer prices (up 1.1% y-o-y). Looking ahead, headline inflation is likely to remain close to 2% for most of the rest of […]

Europe chart of the week – wage growth

For all the noise about Italian politics and the loss of economic momentum in the euro area, this week also brought some reassuring news that underlying inflationary pressure is gradually building. The ECB’s data series of euro area negotiated wages rose to a five-year high of 1.9% y-o-y in Q1 2018. The compensation per employee […]

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