Is the ECB over-optimistic on growth?

The ECB made significant upward revisions to its GDP forecasts last week, presumably encouraged by the recent experience of other economies. The Bank also seems to have come round to our view that the pandemic will not leave deep, lasting scars on the economy.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

Euro-zone GDP barely grew in Q4, inflation risks rise

Data released this week suggest that our assumption that euro-zone GDP rose by 0.2% in Q4 could be too optimistic, but we still think that the economy will grow in Q1. Meanwhile, rapid house price inflation adds to the case for the ECB to, in Jay Powell’s words, start thinking about thinking about raising interest rates.

14 January 2022

European Data Response

German GDP (2021)

Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will expand by less than the consensus expects this year too.

14 January 2022

European Economics Update

ECB likely to raise rates to zero in 2023

With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise its deposit rate to zero by end-2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

More from Jack Allen-Reynolds

European Data Response

Euro-zone Retail Sales (May)

Euro-zone retail sales rose back above their pre-pandemic level in May. And as Covid restrictions continue to be lifted, spending in the services sector is recovering very rapidly, which will provide a significant boost to household consumption and GDP.

6 July 2021

European Data Response

Euro-zone Flash PMIs (June)

The further strengthening of the euro-zone Composite PMI to a 15-year high in June underlines that the economy is rebounding quickly. Alongside this recovery, price pressures are continuing to build. But we still think that they will fade in 2022.

23 June 2021

European Data Response

Euro-zone Hourly Labour Costs (Q1)

Average hourly labour cost growth slowed in Q1, and we expect wage growth to remain subdued over the coming years. This will keep underlying inflationary pressures down.

16 June 2021
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