Europe

European Economics Update

European Economics Update

ECB reinforces commitment to keep rates low

The ECB followed through on its strategy review today by raising the bar for interest rate hikes in language which was probably a touch more dovish than expected. The Bank made no change to its guidance on asset purchases, but we think it will continue large-scale purchases for at least the next two years.

22 July 2021

European Economics Update

Delta variant won’t trigger fresh lockdowns

The pick-up in the euro-zone’s vaccine rollout means governments are unlikely to reintroduce significant new restrictions even as cases rise. So while the Delta variant might take some of the gloss off the recovery, it won’t derail it. But international travel restrictions will push back the recovery in tourism.

21 July 2021

European Economics Update

ECB’s new strategy consistent with looser for longer

The details of the monetary strategy review were slightly less radical than had been suggested in parts of the financial media. But the changes announced today still amount to a historic shift away from Bundesbank orthodoxy and towards the mainstream.

8 July 2021
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European Economics Update

ECB’s new target marks death of Bundesbank tradition

If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may imply policy would be looser for longer.

8 July 2021

European Economics Update

EU vaccine passport won’t spark surge in tourism

The EU’s digital Covid certificate, which is being launched tomorrow, will have very little impact on European tourism this year. Non-essential travel is already possible, but most adults are not fully vaccinated and the Delta variant is making people and governments more cautious about the health implications of foreign holidays. We expect the tourism sector to remain very subdued this summer.

European Economics Update

Monetary Indicators Monitor (May)

The further slowdown in the money supply growth in May is due to big changes during the first lockdown dropping out of the annual comparison. Money supply data will be affected by the pandemic for a while, making them difficult to interpret, but the rebound in lending to the private sector in May is reassuring.

European Economics Update

Travel restrictions pour cold water on Spanish tourism

Lingering restrictions on international travel to control the spread of the Delta variant mean that Spanish foreign tourist revenues this year will probably be only half what they were in 2019. That will hold back the pace of the overall recovery, even as the vaccine rollout bodes well for a pick-up in domestic activity.

24 June 2021

European Economics Update

How likely is a hawkish surprise by the ECB?

Last week’s surprise change in the Fed’s guidance about how soon it is likely to raise its key policy rate raises the question of whether the ECB will follow suit. In our view, although the euro-zone faces similar inflationary pressures in the coming months, a hawkish surprise about its policy rate is highly unlikely.

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