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Eco Focus

Eco Focus is an aperiodic publication providing up-to-the-minute analysis of a current topic.

USA – July FOMC Preview: No policy changes expected

  • Edition July 22, 2015

    No rate hikes are expected in July. Our base case remains a September lift-off. Fed officials are looking for more evidence that economic growth is sufficiently strong and labor market conditions continue to firm enough to return inflation to the Committee's longer-run 2% objective over the medium term before beginning the process of rate normalization.

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USA – Piecing together the productivity puzzle: What's behind the slowdown?

  • Edition July 20, 2015

    US annual productivity growth has slowed since the 1970s, with a pronounced slowdown occurring during the recovery from the Great Recession. Weak productivity growth appears to reflect a combination of cyclical and structural factors as well as measurement issues.

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ECB - calibrated support

  • Edition July 17, 2015

    Yesterday's decision by the ECB to increase ELA, even incrementally, is a positive surprise in terms of timing and a supportive signal to Greece. On the crucial assumption that Greece remains a member of the Eurozone, the ECB should continue to do just as much as it takes to keep Greek banks afloat through a further carefully calibrated ELA lift (as well as potentially loosening collateral haircuts) starting next week.

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ECB - Business unusual

  • Edition July 13, 2015

    Were it not for Greece, the ECB would be enjoying a gradual, domestically-driven, QE-boosted Eurozone recovery while keeping a cautiously optimistic tone at its regular policy meeting on Thursday. Instead, the focus will remain firmly on the ECB's next move on ELA. A gradual, step-by-step increase in ELA looks likely, starting this week, conditional on the implementation of prior actions by the Greek government. Either way, capital controls are expected to be maintained.

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Greece – Politics the art of the possible: pre- and post-referendum scenarios

  • Edition July 1st, 2015

    Alexis Tsipras's surprise decision to call a referendum on proposals by Greece's creditors marked the end of negotiations. An agreement in principle on a number of issues had been found, but one key component was missing: the conditions governing a further debt restructuring. Tsipras is doing a balancing act between pressures from Syriza's left wing and the creditors, and in doing so is gambling his political survival.

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Sweden – Rate cut likely postponed, but not currency war

  • Edition June 26, 2015

    The positive surprises provided by Swedish inflation data in May and the rebound in inflation expectations have lowered the odds of a rate cut from the Riksbank at its next meeting (1 July, announcement of decision on 2 July). We expect the Riksbank to leave the repo rate unchanged at -0.25%. We have delayed our expectation of a 10bp cut in the repo rate to September.

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US – June FOMC: gradual rate rise expected with lift-off later this year

  • Edition June 18, 2015

    There was no change in the fed funds target range (0 to 0.25%) or the FOMC's portfolio reinvestment policy at today's meeting. The FOMC continues to anticipate that "it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."

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ECB : keep calm and carry on

  • Edition June 12, 2015

    Draghi's "get used to volatility" comment should not be misinterpreted as an inflexible ECB stance. The ECB has kept a dovish bias, which suggests that it would respond to unwarranted monetary tightening eventually in case bond yields (especially real yields in the periphery) and potentially the EUR continue to grind higher.

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US – June FOMC preview: No policy changes expected

  • Edition June 11, 2015

    No rate hikes are expected as policymakers continue to assess progress towards the conditions conducive to lift-off. Those include (1) a continued improvement in labor market conditions and (2) reasonable confidence that inflation will move back to its 2% objective over the medium term. We believe the Fed is close to meeting its employment mandate. However, the Fed is likely to require more evidence before being reasonably confident that inflation will rise towards its 2% objective over the medium term.

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ECB – A dovish aftertaste

  • Edition June 3, 2015

    The ECB delivered no particular surprise at today's meeting, but we are left with a sense of dovishness following Draghi's allusion to "a slight loss of economic momentum" and, to a lesser extent, the small revision to 2017 GDP growth, from 2.1% to 2.0%. The ECB's commitment to QE remains unchallenged. He did not hint at any change to QE modalities either in response to greater volatility. Draghi called for a "strong agreement" with Greece.

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