ECB may not agree taper until December

The account of the ECB’s July meeting confirms that a minority of Governing Council members objected to the dovish shift in the Bank’s interest rate guidance. Partly because of this, we now think the Bank is more likely to take until December to agree when and how to “taper” its PEPP purchases.
Andrew Kenningham Chief Europe Economist
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European Economics Update

Further thoughts on Italy’s presidential vote

Italy’s presidential election, which will begin next week, threatens to reignite political uncertainty that has been quiescent since Mario Draghi became prime minister last year. While we agree that losing Mr Draghi as prime minister would put the Recovery Plan at risk, there are some reasons for comfort. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.

21 January 2022

European Data Response

Euro-zone Consumer Confidence (Jan.)

January’s broadly unchanged reading for consumer confidence suggests that household spending might be holding up fairly well, despite a surge in Covid cases. We expect consumption to recover quickly once the Omicron wave fades and restrictions are eased. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.

21 January 2022

European Economic Outlook

Inflation falling but rates may rise to zero

We expect consumption to rebound from the Omicron wave within a few weeks, lifting euro-zone GDP to its pre-pandemic level in the first half of the year. But GDP will remain below its pre-pandemic path for the foreseeable future. Meanwhile, more stable energy prices will cause headline inflation to come down sharply, but the lingering effects of the pandemic will prolong supply-chain problems and wage inflation is likely to rise. As a result core inflation will stay above the ECB’s 2% inflation target throughout 2022. And against that backdrop, the ECB will end its net asset purchases by December and prepare the ground to raise its deposit rate to zero by the end of 2023.

21 January 2022

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European Data Response

German Ifo Survey (August)

The second successive decline in the Ifo Business Climate Index in August provides further evidence that Germany’s recovery is losing some momentum, partly due to supply chain difficulties in the manufacturing sector and the Delta variant. That said, GDP should still increase sharply in Q3.

25 August 2021

European Economics Update

Germany’s recovery taking longer than expected

Data published today show that the weakness in German GDP in Q2 was due to the low level of household spending. Consumption should increase sharply in Q3. But with manufacturers struggling, the economy will probably not regain its pre-pandemic size until Q4 this year at the earliest.

24 August 2021

European Economics Update

German election result in the balance

After a sharp rise in support for the SDP the election result looks set to be very close. Whatever the outcome, economic policy will not change very much, but fiscal policy may be slightly less conservative, and Germany may be more open to European integration, if the Greens have a role in government.

24 August 2021
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