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  • ECB: December's inflation is so overrated

    Edition January 5, 2017

    Inflation rates in the Eurozone surprised to the upside in December 2016, and we forecast that inflation will continue to rise over the next few months, coming close to 2% before receding below 1.5% during the summer. There have been voices calling for monetary tightening following these inflation figures. Calling for ECB tightening today is to misunderstand the inflation trend, the macroeconomic outlook in the Eurozone, the ECB's mandate and the way the ECB understands its mandate.

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  • ECB 2017 outlook: take a break Mr Draghi

    Edition December 21, 2016

    After two and a half years of active and changing monetary policy – ABSPP, CBPP 3, TLTRO I, PSPP, PSPP extension, PSPP expansion, TLTRO II, PSPP reduction, PSPP extension and change in modalities – the ECB has set the conditions for a period of unchanged monetary policy.

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  • World - Macroeconomic Scenario for 2017-2018: "Hope is a risk you have to take"

    Edition December 20, 2016

    US risks are likely to materialise in an increase in long-term rates, an appreciating dollar, and, if the expansionary fiscal policy suddenly propels the nominal GDP growth rate well beyond its potential rate, in a far more aggressive monetary policy, especially from 2018 onwards. In 2017, the Eurozone is less likely to be impacted by real transmission channels than by financial ones, due to the tightening of financial then monetary conditions in the United States, resulting in upside pressure on interest rates, to which will be added pressures from its own political risk. In this way it will be up to the ECB alone to provide minimal visibility and steer interest rates. It will need to soothe anxious, volatile markets with the hope that, in 2018, once those national political deadlines are behind it, Europe will exist in a manner other than through its monetary policy alone.

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  • The ECB and the Italian Referendum: within its mandate

    Edition November 30, 2016
    Since July 2012, the ECB has been seen as the potential saviour of the Eurozone – and especially the weakest part of it – and consequently it has been seen as somewhat of a powerful demiurge creating financial stability and confidence in the currency. As the Italian constitutional referendum approaches there is renewed speculation about what the ECB can, should and will do.

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  • France - 2016-2017 Macroeconomic scenario: A fairly feeble recovery

    Edition October 25, 2016

    We are expecting a slight improvement in economic growth in 2016, with volume GDP growth of 1.3%, compared with 1.2% in 2015 (slightly below the Eurozone average), a rate that should continue through into 2017.

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  • Portugal vs DBRS – Hanging by a thin thread

    Edition October 19, 2016

    Because of an illegitimate, disturbing and – let us say it – highly contestable monetary-policy framework from the ECB, the economic, financial and political future of Portugal lies in DBRS's hands. On 21 October, DBRS will update its opinion on Portugal. If it downgrades the country's credit rating by one notch then Portuguese bonds will no longer be eligible as collateral at ECB refinancing operations nor for QE. Our base-case scenario is that DBRS will not downgrade Portugal and that it will keep its outlook unchanged (stable).

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  • World – Macroeconomic Scenario for 2016-2017: That elusive missing link

    Edition October 3, 2016

    At a time when world trade is flagging – for reasons that are as much structural as cyclical – and when it is no longer a growth driver, households continue to be growth's chief pillar. They consume and they invest. Following a period of deleveraging, the improving labour market, the steady – if sluggish – rise in wages, positive wealth effects and low inflation – which is driving gains in purchasing power – constitute a series of fundamentals that, so far, is proving resilient.

    Although the drivers do not all have the same power, they should nevertheless allow both the US and European economies to grow at a rate of 1.6% in 2016. That rate is respectively close to and much higher than those economies' potential growth rates of 1.6-1.7% in the US and 1% in the Eurozone. That said, we cannot see any recovery in productive investment, which is clearly not at the level we could have hoped for. It is also futile to hope for a sharp increase any time soon in what (in the olden days…) used to constitute a ‘growth engine'.

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  • ECB: think different

    Edition September 9, 2016

    The ECB did not officially extend QE, but they clearly pointed towards a change in the modalities over the near-term ("tasked the relevant committee"); we see it as a step towards an official extension in October or in December this year, along with an easing of purchase modalities, probably a removal of the deposit rate floor.

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  • ECB QE bond scarcity (3 of 3): your move, Mario

    Edition August 16, 2016

    We have analysed the scarcity issue for German bonds as it is the most obvious impediment to the smooth running of the purchase programme until a suitable end time. Our conclusion was not extremely reassuring as it pointed to difficulties for the ECB starting this winter.

    Extract

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  • ECB - can Mario Draghi be boring?

    Edition July 22, 2016

    The ECB press conference has been in line with expectations: Mario Draghi only gave us a rendezvous in September, when the ECB will publish its new macroeconomic projection and when the consequences of Brexit on the Eurozone will be clearer. We agree with the ECB that the Eurozone does not need an acceleration of monetary easing and that the Brexit does not change things dramatically. We maintain our view that the ECB will extend QE by six months and that it will be announced in September. This extension will probably come with an easing of the purchase modalities to face the bonds scarcity.

    Extract

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