WASHINGTON | By Pablo Pardo | Mark Zandi is chief economist at Moody’s Analytics, the department in charge of consulting, advising and providing services for businesses and financial institutions. Among its many activities, the firm advices several European banks with regard to the EBA’s and ECB’s stress tests. Moody’s created this department in 2007, after buying Economy.com –Zandi’s analysis company.
MADRID | The Corner | Inflation in Brazil hit the upper limit of the government’s target for the first time in a year in June: consumer prices rose by 6.52% yoy (IPCA index), airlines’ fares skyrocketed because of the World Cup (almost 22% in June from May). But let’s be fair: only half of the monthly inflation came from the football competition. And prices will remain far from the 4.5 percent target beyond 2015 unless the central bank rises rates further.
WASHINGTON | By Pablo Pardo | The Monty Python are back in London, and one of their most famous sketches revolves around the phrase “nobody expects the Spanish Inquisition.” The Bank of International Settlements (BIS) is like the Spanish Inquisition, only less funny and more predictable than the British surreal comedy group: it is the bearer of orthodoxy, even if it means sending everybody to the stake. Its prescriptions are suicidal in economic terms, wrong from a moral point of view, and unjust from a societal perspective.
ZURICH | By The Corner | As expected, the ECB did not unveil any new policy measures on Thursday. Although the Bank maintains an easing bias, it signalled that it wants to wait and see how the monetary stimulus delivered last month unfolds. UBS’ base case scenario remains that ECB rates will stay on hold for the foreseeable future and that QE will not be deployed. The key news from ECB’s meeting was more of a technical nature.
MADRID | Bankinter Analysis | 3Q Perspectives. Economic cycle speeds up and, mostly, gains soundness and reliability. Global growth will consolidate in 2014/2015 by +3%/+4% with positive news for developed countries and less favorable surprises in emerging markets. Japan and India are the exception to this rule. Spain will also amaze and main economic risk will lie in regional regional integrity issues whose aftermath may be undervalued, regardless the final scenario.
ZURICH | By UBS analysts | On 5 June, the ECB delivered a comprehensive monetary policy package, comprising cuts in the refi rate (from 0.25% to 0.15%), the deposit rate (from zero to -0.1%) and the marginal lending facility (from 0.75% to 0.4%). The ECB also rolled out the ‘full allotment mode’ – the commitment to supply unlimited liquidity (against adequate collateral) at the refi rate – from July 2015 to December 2016, and it will inject liquidity by ending the sterilisation of the Securities Markets Programme (SMP) portfolio.
MADRID | By Luis Arroyo | What good does it do a falling debt if nominal GDP is increasing? According to the Real World Economy in Greece, the households’ debt went as shown in the chart. That is, the nominal value of the existing debt has dropped, but it has increased in relation to the income or the GDP with which it is paid. And this, ladies and gentlemen, is the best expression of the Debt Deflation concept.
BERLIN | By Alberto Lozano | The ECB and ‘peripheral’ countries cannot do all the work by themselves. The eurozone needs to move away from deflation and to emerge definitely from recession with a sustainable growth. As the International Monetary Fund recently concluded about Germany, the EU biggest economy could “strengthen its role as an anchor of regional stability.” But could more investment in Germany have a real impact in their neighbour’s economies?
MADRID | The Corner | Despite markets’ euphoric celebration of Mario Draghi’s last words, some remain skeptic about them being the panacea for inflation and the lack of credit in the eurozone. Check the graph above: 5-year swap rates show that inflation expectations have only gone from 1.21/1.24 in May to 1.28/1.24. in June. Nothing to go crazy about, huh?
MADRID | By Luis Arroyo | The ECB spoke up on Thursday during one of its most expected conclaves. For months, the European institution had been announcing expansive measures if things didn’t change, and it finally made a move. How should we interpret it? Let’s see first why the central bank had to do something “special.”