Caixabank Research | The experience of the Riksbank highlights the doubts over negative interest rates: despite a worsening economic outlook for Sweden, it raised the interest rate from –0.25% to 0% in December and abandoned its policy of negative rates.
Would inflation rates in the Eurozone increase, if owner-occupied housing costs were introduced? Analysts at DWS doubt it. They put more faith in wages, which play an important role in the price of services (excluding rents).
The sudden rise in covid-19 cases in Italy changes the picture for the European economy. Indeed, the activity restrictions already imposed by the national and regional authorities will be implemented in some of the country’s most crucial regions in terms of output. Lombardy, Veneto and Emilia-Romagna alone account for 40% of Italian GDP and 6% of total Euro area GDP. AXA IM suspect that the demand-side effects will emerge in the next batches of data and discuss options for the ECB.
Europe is experiencing a tech-boom that attracts funders that were previously focused on Silicon Valley. If the trend continues, Europe could finally rival the Californian tech-hub with its own innovations. The region currently boasts 99 unicorn companies, compared to only 22 such companies in 2012.
In its latest monthly report, the European Central Bank has published an interesting study on the recent evolution of the wealth of European families.The monetary authority’s objective is to relate families’ net wealth component (assets less debt) to their spending decision. It’s a fact that, in theory, net wealth accumulated with job prospects are both key for household consumption. In addition, wealth also has theoretical consequences for the design of monetary policy.
Yesterday, ratings agency Standard & Poor’s published a report where it calculates that China’s coronavirus crisis will subtract one or two tenths off economic growth, both in the Eurozone and in the UK, in 2020. This is due to the impact on exports to China and on business investment. In Spain’s case, the figure may be excessive. This is because the impact on imports from China must also be taken into account and will work in Spain’s favour.
Political uncertainty about the Brexit procedure caused the United Kingdom’s (UK’s) gross domestic product (GDP) to stagnate in the fourth quarter of 2019. However, the strong decrease in political uncertainty since the 12 December parliamentary election should allow the UK economy to rebound back to growth during the first quarter of this year, explains Janwillem Acket, chief economist at Julius Baer.
With a monetary policy that has already used up almost all of its ammunition, the only factor that could restart the inflation would be a powerful tax stimulus. There is a path that is not being given enough attention and that could well be the missing link: the sustainable tax stimulus.
The ECB purchased €20.3bn of QE assets over Jan. Only 61% of the purchases were done in public sector bonds, much lower than the 80% average over 2016-18. This confirms the view of BoA Global Research that QE will now be more focused on corporates & covereds. The country breakdown of monthly PSPP is much more volatile now. In CSPP there are interesting secondary and sectorial flows.