TOKYO | By Leika Kihara and Stanley White at Reuters | European Central Bank Governing Council member Christian Noyer said on Monday that interest rates have to remain low for an extended period and might go even lower if needed as officials try to ensure the euro zone does not fall into deflation.
LONDON | By Michael Pond and Chirag Mirani at Barclays | Some at the Fed believe that a higher inflation target could be a good strategy, though one that is difficult to communicate. Instead, in our view, it has an implicit near-term tolerance for above-target inflation; forward breakevens should be higher as a result.
LONDON | By Barclays analysts | Although Q3 GDP data for euro area countries indicated growth for the second consecutive quarter, thereby confirming the end of the recession after six quarters of GDP contraction, it also showed the recovery to be subdued, uneven, and fragile.
By Benjamin Cole at Marcus Nunes’ Historinhas | Recently Federal Reserve Bank President Charles Plosser opined that even periods of mild deflation could be welcome in the United States, and that Fed should have but a lone goal, and ideally that is zero inflation.
NEW YORK | By JPMorgan analysts | The Spanish economy has been showing clear signs of recovery since the summer, although from very low levels and we see no time for complacency for Rajoy’s government, a risk investors are already highlighting. There are some pending structural reforms in the fiscal, legal and pension sectors, while, in the banking sector, we would encourage a final cleanup to prevent a Japanese-style downturn, regarding which the October deflation data may be a warning. In our view, a more stable legal environment is also necessary for investors in regulated sectors, where banks and utilities are likely to be most affected.
MADRID | By JP Marin Arrese | Draghi is becoming a popular target for the German press. He presented himself as a tough defender of the established order in monetary policy when canvassing for the top job in the European central bank. But as soon as he secured his coveted goal, he shifted away from orthodoxy.
MADRID | By Miguel Navascués | There is a harsh disagreement in the euro zone: when Mario Draghi tries to do something, he finds the opposition of Germany and its allies. It seems obvious that Europe won’t get out of the hole with such travel companions.
MADRID | By Fernando G. Urbaneja | In a surprising move, the European Central Bank cut interest rates on Thursday. This is just a sign of the multiple fears shared by the institution and Mr Draghi: the ghost of deflation, the need for credit or the European prices and asset inflation. But both Mr Draghi and the ECB’s credibility have been boosted lately. What are they scared of then?
[Video by FT: “Is Europe getting deflated?”]
MADRID | By Luis Arroyo | Germany prevents the monetary expansion in the country (and within the rest of the euro zone) by controlling the ECB. If the central bank had the minimal amount of money necessary for the area, all of it would go to Germans, who would spend more, thus accelerating the recovery of their European partners.
LONDON | By Barclays analysts | In a surprise move, the ECB cut the refi rate by 25bp to 0.25% and left the deposit rate unchanged at zero. It also extended its fixed-rate, full-allotment facility to all refinancing operations by one year, at least until mid 2015. The ECB clearly signalled that it is concerned about persistently low inflation, even if deflation risks are contained. We will only know more about how long the ECB thinks low inflation will last next month when it publishes its macroeconomic forecasts. We see euro area inflation in 2014 dropping to 1.0% from the forecast 1.4% this year.