At its Governing Council meeting today, the European Central Bank is expected to confirm the termination of the asset purchase programme by the end of December 2018. The expiry date had so far been subject to incoming data and the medium-term inflation outlook. While incoming data in the past weeks has been rather disappointing, economists at Julius Baer see the solid credit activity as a valid reason to stop asset purchases.
The ECB will not start the normalization of its monetary policy in 2019. This is the bet of Philippe Waechter, chief economist at Ostrum AM (affiliated to Natixis AM). He also thinks that the interest rate level will remain stable, that the refi rate and the deposit rate will remain at the current level in 2019.
Israel Rafalovich (Brussels) | Mr. Draghi urged action through organisations such as the WTO to address variations in tax regimes, take a stand on labour regulations and put in place tougher rules for cross border finance. Mr. Draghi pointed out that in order to accomplish that the EU would have to strengthen it own institutions including setting up a country risk sharing institution for the of the 19-country euro zone.
From 2019 it is possible that Spain will have difficulties financing its public debt, which is definitely not only the official figure of 98.3% of GDP. Rajoy’s increase of this debt by €649 billion has been financed at very low interest rates, thanks to the ECB’s quantitative easing. On the other hand, Pedro Sánchez has announced substantial spending increases, which will inevitably increase debt in 2019.
The twentieth anniversary of the creation of the ECB coincides with renewed financial tensions in the Eurozone. According to Caixa Research, the irreversability of the single currency requires ambitious advances in the European project.
For a long time, Spain has had a “debt pending” in terms of budgetary stability. And, for the time being, the current scenario leads us to think that balancing the public finances is a difficult objective to achieve in the medium-term. Added to that problem is the high level of government debt.
Francisco Vidal | The demand for credit from households continues to rise in the EMU and, in particular, consumer credit. Entries for lending of M3, once the figures have been seasonally-adjusted and the effect of certain changes in the perimeter have been factored in, showed that loans to households are growing at a rate of 3.0% annually, led by those earmarked for consumption (+ 7% annually)
J.L.M. Campuzano | Financial integration is a relevant factor for financial stability and facilitates the transmission of monetary policy. A few days ago, the ECB published an update on financial integration.
Miguel Navascués | When the signs of an incipient slowdown in the European economy begin to multiply – the matching indicators suggest that industrial production slowed in 2018 – the case for reaching an agreement on Brexit and refocusing attention on unifying the capital markets becomes increasingly more powerful and urgent.
Yesterday, April 19, after being flat for months, with no pulse, the Euribor finally showed signs of life. It moved from the range of -0.190% (average for April) to -0.189%. One basis point.