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.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

Rising Covid fears will keep policymakers dovish

It is too early to judge how serious the B.1.1.529 variant will turn out to be, but it certainly reinforces the case for central banks to be ultra-cautious when withdrawing their policy support. We now think that at its next meeting, the ECB will make clear that even if it intends to end net PEPP purchases in March, it stands ready to start them again if needed. That in turn should help to keep bond yields and spreads low. Meanwhile, we are braced for some “shock” inflation numbers next week, but they should mark the peak and inflation is likely to fall quite sharply next year.

26 November 2021

European Economics Update

PEPP not guaranteed to end in March

The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, we agree with the ECB’s message that investors have got ahead of themselves by pricing in interest rates hikes for next year.

25 November 2021

European Data Response

German Ifo Survey (November)

The fall in the Ifo Business Climate Index (BCI) for November was in line with expectations and suggests that the German economy was struggling even before the recent tightening of Covid restrictions. Things will be much worse in December as coronavirus restrictions are tightened further.

24 November 2021

More from Jack Allen-Reynolds

European Economics Update

Investment to make sizeable contribution to growth

Business surveys suggest that global supply problems are becoming a drag on euro-zone investment, but these problems should fade going into 2022. As long as the Delta variant doesn’t halt the economic recovery in its tracks, investment should make a sizeable contribution to GDP growth this year and next.

25 August 2021

European Data Response

Euro-zone Flash PMIs (Aug.)

August’s PMIs suggest that growth slowed only slightly despite persistent supply problems and activity approaching more normal levels. They also imply that price pressures are no longer intensifying, though they aren’t easing significantly either.

23 August 2021

European Economics Weekly

Delta variant not yet putting brakes on recovery

The timeliest data show little evidence that concerns about the Delta variant are causing economic activity to fall outright. But with output getting closer to normal levels and the virus situation potentially weighing on the recovery, we expect the first business surveys for August, published next week, to show a slowdown in the pace of growth. Meanwhile, next Thursday the ECB will publish the account of July’s policy meeting, which might reveal more detail on the range of views about the Bank’s new forward guidance.

20 August 2021
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