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News

ECB preview: A general repetition no one really needs

25.04.2018
Company: Amcham

Thursday's ECB meeting will again be one of those most of their officials would rather skip if they could. It should only serve as the prelude to the first QE showdown in June

When the ECB gets together this week, the Eurozone’s central bankers will look at an economy which is currently showing signs of a slowdown and very little evidence that the latest inflation projections are more than just wishful thinking. In fact, the first two months of the year were two months to forget. While the weakening of several confidence indicators could still be filed away as a leveling off from record-high levels, the slide in hard data is more worrisome. It would already need very strong March readings to avoid a disappointing first quarter

Still, despite this short-term weakening, it is far too early for the ECB to sound the alarm bells. The optimistic tone of recent months should continue albeit with somewhat more emphasis on downside risks and uncertainty.

As for inflation, there is very little evidence that the ongoing divide between wish and reality will change any time soon. While the ECB remains confident that inflation should pick up, hard data are telling a different story. March inflation only accelerated due to seasonal effects and core inflation remained unchanged at extremely low levels. Also, there seems to be very little price pressure in the production pipeline as producer price inflation has come down significantly from its early 2017 highs. If it was not for traditional cyclical and survey indicators, which still point to an acceleration in headline inflation, there would be very few arguments supporting the ECB’s own projections of headline inflation at 1.7% in 2020.

More information here.

 

Source: ING Bank

Tags: Economics | Finance |

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