At its latest meeting in December, the ECB turned more cautious, lowering its growth forecasts but showing no sign of panic regarding the loss in euro area economic momentum. Risks were considered as “broadly balanced”, but moving to the downside. Since the December monetary policy meeting, data (PMI and national surveys, industrial production) have deteriorated […]
In our central scenario, we expect the 10-year Bund yield to rise gradually to 0.8% by the end of next year from 0.26% on 17 December. Underpinning this upward movement is our expectation of a cumulative deposit rate hike of 40 basis points (bps) by the ECB, against current market expectations of only 10 bps. […]
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 […]
Read the full report here The 10 March ECB meeting was all about bold action and strong signals. The main message from the 21 April meeting was one of continuity, consistency and cohesion. The ECB’s assessment of economic conditions has not changed materially in the past few weeks, with the view that existing and upcoming […]
Read the full report here The ECB’s April Bank Lending Survey (BLS), conducted among 141 banks between 11 and 30 March 2016 and released today, revealed a net easing of credit conditions for companies for the eighth consecutive quarter. The demand for loans from non-financial corporations actually moderated somewhat in comparison with Q4, but levels are […]
Read the full report here The ECB is facing a complex, albeit not completely negative, macro-financial environment following its impressive policy package announcement on 10 March. Nevertheless, barring some new shock, beyond some fine-tuning measures, the ECB should remain on hold at its next policy meeting on 21 April. Instead, we expect different aspects of […]
The ECB announced a series of new Targeted Long-Term Refinancing Operations (TLTRO II) as a key element of its March policy package, with the aim of lowering bank funding costs and supporting bank lending. Critics like to cite the old dictum “You can lead a horse to water, but you can’t make it drink” – […]
Euro area business surveys (PMIs and IFO) showed renewed signs of life in March after the drops seen in the first two months of the year. Surveys also highlighted the contrasting trend between the manufacturing sector, dented by a subdued external environment, and the services sector. Flash PMIs above consensus expectations According to Markit’s preliminary […]
Ahead of the December 2015 meeting, we used a simple method based on the ECB’s leaked models in the German press in order to guestimate the impact of QE on inflation, and thus the potential for additional easing based on the ECB’s own forecasts. We use the same framework to assess the potential macro impact […]
The ECB’s Governing Council delivered a comprehensive policy package that exceeded market expectations by a large margin. The 10bp deposit rate cut to -0.40% was expected but other measures were not, including a 5bp ‘refi’ rate cut (to 0%), a EUR20bn increase in the pace of monthly asset purchases (to EUR80bn), the inclusion of non-bank […]
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