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Eco Focus

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

September FOMC: Forward guidance maintained with rate trajectory tweaked higher

  • Eco Focus - Edition September 18, 2014

    The fed funds target range was maintained at 0%-0.25%. The FOMC announced a $10 billion reduction in the pace of the Fed's asset purchases to $15 billion. Beginning next month, the Fed will buy $10 billion of longer-dated Treasuries and $5 billion of MBS. Asset purchases are expected to end next month. The economic assessment noted economic activity expanding at a moderate pace but significant underutilization of labor resources remains. Inflation expectations are stable but inflation is running below the Fed's longer-run objective.

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September FOMC meeting: It's all about the guidance

  • Eco Focus - Edition September 12, 2014

    We look for no change in the fed funds target. Another $10 billion reduction in QE3 asset purchases is expected, split equally between Treasuries and MBS. QE3 purchases are still expected to end in October. The current reinvestment policy is likely to be maintained until after the rate lift-off next year.

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ECB cuts rates and announces ABS purchases

  • ECO Focus - Edition September 4, 2014

    The ECB unexpectedly cut all policy rates today, bringing the Refi rate down to 0.05% and the deposit rate to -0.20%. The TLTROs will therefore be conducted at 0.15%. This time the ECB has reached the lower bound as Draghi promised there would be no more rate cuts. The other announcements (an ABS and covered bond purchase programme, with operational details coming in October) and changes to the official statement and staff forecasts were broadly in line with our expectations.

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United Kingdom: housing market outlook

  • ECO Focus - Edition 1st September 2014

    In this Focus, we look at the degree to which prices are overvalued in the UK real estate market in light of standard household solvency indicators. A significant geographical disparity in trends in these indicators suggests that the existence of a housing bubble is limited to London and the south of the country.

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UK: Commercial real estate

  • ECO Focus - Edition August 26, 2014
    The commercial real estate includes mainly three categories of assets: office, retail and industrial. Each one of these segments corresponds to a market in itself, in each town of the UK, as location remains crucial for real estate. A focus is presented on the market in London, where some assets like prime office and prime high street retail have shown strong capital value growth. These high valuations induce a risk of downturn, even if the outlook remains favorable for the time being.

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ECB: the EUR1trn TLTRO hope

  • ECO Focus - Edition July 4, 2014
    The ECB sounds confident that the June package will work its way towards bank lending and the real economy, helping to bring inflation back to levels consistent with price stability over the medium term. Consistent with this objective, the TLTROs' conditions look very generous, allowing deleveraging banks in particular to borrow extra cash at the ECB from 2015 onwards.

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FOMC : Slightly higher near-term rate path expected but...

  • ECO Focus - Edition June 19, 2014
    The FOMC reduced the pace of its asset purchases by $10 billion to $35 billion as expected. Beginning next month, it will buy $20 billion of longer-dated Treasuries and $15 billion of MBS. The current Fed funds target range (0 to 0.25%) was maintained as was the forward guidance in the statement. 12 out of 16 Fed policymakers expect the lift-off in rates to occur next year.

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The EUR400bn TLTRO question

  • ECO Focus - Edition June 10, 2014
    The success of the ECB's TLTROs will be judged against banks' demand for cash, the level of interest rates on new private-sector loans and, eventually, the amount of net lending to the real economy. Ongoing constraints on banks' balance sheets will remain a drag on net lending but, on balance, we believe there is scope for TLTROs to attract decent demand (north of EUR300bn, initially) and to gain traction over time.

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ECB: over-delivery

  • ECO Focus - Edition June 6, 2014
    Who said the ECB would disappoint? The bottom line of today's policy meeting is that it may have proved most critics wrong. It will take time for observers and market participants to digest the consequences of today's easing package fully, but there is a good chance that the real economy, and the Eurozone periphery in particular, will benefit from easier credit conditions. The main justification for the ECB's decisions, which were taken unanimously, was the further deterioration in the inflation outlook, as reflected in the lower staff forecasts up to 2016.

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France: lacklustre recovery

  • ECO Focus - Edition May, 13 2014
    Our French growth scenario is unchanged for 2014 relative to the previous forecasting exercise in January. We are forecasting annual volume GDP growth of 0.9%, driven by all components of GDP. The improvement will, nevertheless, be gradual, as there are significant limiting factors for the rebound in activity. These limiting factors are likely to ease in 2015.

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