Euro-zone GDP & Employment (Q2)

With revised data showing that the euro-zone economy performed even better than previously thought in Q2, the ECB is sure to revise up its GDP forecasts on Thursday. That said, even if it reduces the pace of its PEPP purchases slightly, the Bank will stress that very loose monetary policy is still required.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

A fresh start for the Bundesbank?

Other than Mr Weidmann’s abrupt departure from the Bundesbank, the news this week has been dominated by the twin problems of rising inflation and slowing economic growth. There is more bad news to come, including a further increase in inflation in October (data due next Friday). However, the ECB is sure to leave its policy unchanged at next Thursday’s monetary policy meeting and will reiterate its view that the inflationary pressures will be largely transitory. We agree with this, but there are growing risks that the increase in inflation will be larger and last longer than either we or the ECB are currently forecasting.

22 October 2021

European Data Response

Euro-zone Flash PMIs (Oct.)

October’s euro-zone PMI surveys suggest that supply problems in the manufacturing sector are getting worse, weighing on output and causing price pressures to intensify.

22 October 2021

ECB Watch

ECB insisting that inflation is largely transient

Nobody expects the ECB Governing Council to make any policy changes at next week’s monetary policy meeting. However, Christine Lagarde will address concerns about rising inflationary pressures and we expect her to reiterate that, even if they are stronger than anticipated, they are likely to prove temporary. She will probably also stress that the ECB’s current guidance implies that rate hikes are further away than suggested by financial markets. Otherwise, the focus will be on when and how to end the PEPP, decisions on which are scheduled for December.

21 October 2021

More from Jack Allen-Reynolds

European Economics Update

Delta variant not weighing on Italian recovery

Data released today confirmed that the Italian economy grew strongly in Q2, supporting our above-consensus forecast for the year as a whole. Timelier data suggest that concerns about the Delta variant have not crimped the services recovery, but supply chain problems could hold back Italian industry.

31 August 2021

European Data Response

Euro-zone Flash HICP (Aug.)

After rising to a near-10-year high of 3.0% in August, we suspect that euro-zone inflation will rise even further in the coming months. But this is due to temporary forces that should fade next year, leaving headline and core inflation well below 2% by the end of 2022.

31 August 2021

European Economics Update

Monetary Indicators Monitor (July)

Year-on-year money and lending growth has fallen sharply this year and we think it will decline further. With the subdued level of economic activity also weighing on consumer prices, we don’t think that money growth poses a significant upside risk to inflation.

26 August 2021
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