ECB preparing for action and perhaps a new target

The account of the ECB Governing Council’s July meeting, published this week, confirmed that policymakers are planning to loosen policy in September. Meanwhile, the flash PMIs for August suggested that euro-zone GDP growth will stay weak in Q3. Looking ahead, we are braced for more gloomy business surveys next week and expect to learn that headline inflation remained subdued in August. Finally, whatever solution is reached in the short-term, we suspect that Italy will go back to the polls fairly soon.