Recent Blogs




ECB Preview: Will Draghi rise to the occasion?

For Draghi not to prove a big disappointment tomorrow, he needs at least to maintain the language he used at Jackson Hole as well as provide strong hints of further action to come. Failure to do either would be bad news for euro area government bonds and good news for the euro. And it would also signal that his attempt in Jackson Hole to bounce the Governing Council into QE had failed, for now at least, leading to a general downgrading of the probability of QE that has been priced in post-Jackson Hole.

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UK Bank Rate: Slackers hold the key

The performance of the UK labour market over the past year or so has confounded all expectations. And today’s data showed a further drop in the unemployment rate, to just 6.4% in the three months to June. But the MPC also today revised down its estimate of the equilibrium unemployment rate and its forecast of wage growth. As such, Mark Carney was able to stick to his mantra that increases in Bank Rate, when they come, will be very gradual, and that the eventual resting point for Bank Rate will be significantly below what had been usual in the pre-crisis period.

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TLTROs: Never Mind the Placebo

The ECB’s TLTRO programme begins next month. While the funding should allow banks to refinance more cheaply, is it really much more than a placebo for the euro area’s economic ills?

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Euro area outlook: Firmer growth, subdued inflation

Our latest economic forecast shows a gradual strengthening of euro area GDP growth over coming quarters, as well as a narrowing of growth differentials between the major economies. This should help to keep deflation at bay. But it will not suffice to push inflation significantly higher either: CPI will remain some way below the ECB’s target over the coming two years. And, of course, the risks are skewed to the downside. 

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Sizing up the ECB’s policy package

Three weeks ago, the ECB announced several new measures to ease financial conditions, boost bank lending, push inflation higher and support the euro area’s feeble recovery. But have they had any meaningful effects so far? 

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