Christina Dykes | On July 2, The Economist had a surprisingly alarmist cover-page heading. “Anarchy in the UK” it read, a claim it justified in an editorial that said the United Kingdom “has seldom looked so wildly off the rails.” Having backed the Remain campaign, the magazine is either a bad loser or it has been blinded by its own narrative. It is not the country that is off the rails—it is the political class. And that has become evident.
J.L.M. Campuzano (Spanish Banking Association) | Investors believe that the decision to cut UK interest rates again has only really been postponed. They also believe that it is only a matter of time before the ECB cuts the deposit rate again at the same time as it extends the deadline for asset purchases which is initially set for March 2017.
After Brexit, what could be more natural than for the UK to strengthen ties with the US than with Europe, which has miraculously survived thanks to the intervention of the Anglo Saxons in two wars in Europe. Perhaps one kind of Transatlantic Trade and Investment Partnership is dead: but the Europeans cannot stop another one being formed between the US and the UK.
This week Inditex approved the appointment of Baroness Denise Kingsmill to its board of directors, as well as a long-term incentive plan, in cash and shares, for up to 600 company executives, including chairman Pablo Isla. The company also said it will not alter any plans it has for the UK despite Brexit.
George Soros via Caixin | Europe’s leaders must seize the moment to push forward reforms that can reshape the EU into an organization that people want to be a part of. Until the British public voted to leave the European Union, the refugee crisis was the greatest problem Europe faced. Indeed, that crisis played a critical role in bringing about the greater calamity of Brexit.
As the Brexit initial turmoil little by little abates, the ECB has no immediate reason for acting. Its room for manoeuvre already seems extremely tight. Running negative rates allows a most limited scope for driving down the money price. The Euro slide provides on its own enough impetus to the economy. The case for further loosening lacks of enough ground. The wait-and-see stance by the Federal Reserve suffices to shore up the ailing pound.
The next general election in the United Kingdom will take place in 2020. If the Article 50 notice is served in 2017, it is possible that the process of UK withdrawal from the European Union (EU) will not be concluded before the election. That might allow the UK electorate to take a second look at their decision on June 23 to leave the EU.
BofAML | We have been among the most bearish on Euro Area inflation, expecting 0.9% post-Brexit inflation in 2017, versus consensus at 1.3%. This also applies to core inflation, where we expect a very mild trend over the next two years that would leave core inflation slightly above 1% by 2018. Still, markets are pricing declining inflation over the next few years.
James Alexander via Historinhas | One of Scott Sumner’s great contributions to economics (blogging) has been his oft-repeated mantra of “not reasoning from a price change”. Probably its most familiar usage is related to the oil price, although there are many, many more.
Last week the Council decided that Spain and Portugal’s recent efforts to reduce deficit were not enough. This lead to the two countries being fined, the first time this happens since the inception of the euro.