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In Europe 23rd September 2014

Is low inflation to blame for Eurozone woes?

MADRID | J.P. Marín Arrese | Eurozone policy makers depict sluggish growth and low inflation as two sides of the same coin. This approach fails to grasp the subtle distinction between the two. Muted inflation undoubtedly stems from faltering demand linked to current stagnation. Yet it also reflects the ongoing real adjustment. Reviling it as the main wrongdoer, rather than treating it as a collateral victim, utterly misses the point in enforcing effective policy.

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In Europe 28th August 2014

ECB stimulus speculations keep circulating

MADRID | The Corner | The expectation that the ECB will finally announce a QE program after Draghi’s words at Jackson Hole and the confirmation that the ECB would have hired Blackrock for advice on launching a ABS program continue to nurture the Eurozone bond rally and thereby the credit one. Yesterday many bond markets in Europe returned to record lows with improvements in 10 years of 3bp (Germany), 2.5bp (Spain) and 2bp (Italy).

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In Europe 25th August 2014

Draghi’s speech marks a turning point in ECB rhetoric

MADRID | The Corner | Although it is not part of ECB’s mandate, last Friday in Jackson Hole, President Mario Draghi spoke about what needs to be done in the euro area to address the problem of high unemployment and weak economic growth. As Barclays analysts believe, the speech “represented a significant breakthrough in the ECB rhetoric and will probably have significant implications regarding the debate just about to start between European government on policies that need to be deployed to avoid a ‘triple-dip recession’ and a fall in outright deflation.”

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In Europe 29th July 2014

Growth and inflation outlooks diverging

LONDON | By Antonio Garcia via Barclays | Stronger-than-expected July PMIs suggest that the growth outlook is likely to improve in Q3 and are consistent with our forecast of 0.4% q/q. EA public debt levels have reached a new peak in Q2 14 at 96.4% of GDP, with three of the four largest EA economies above the EA average. We now expect July HICP inflation (next week) to edge down to 0.4% y/y and August inflation to decline further, to 0.3% y/y.

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World economy 28th July 2014

In some cases the central bank cannot control inflation…

SAO PAULO | By Marcus Nunes via Historinhas | …while in others it cannot promote it! Japan falls in the latter category. According to this article in the WSJ “Japan´s price target looks difficult.” The nationwide core consumer price index rose 1.3% from a year earlier in June, after adjustment for a recent sales-tax hike, below a 1.4% increase the previous month, according to government data released Friday. Inflation moderated in May and June due to falling energy prices and a stable yen, which has put the break on growth in import costs.

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World economy 24th July 2014

Will the Bank of Japan act again?

MADRID | The Corner | Will the Japanese Central Bank act again to raise inflation expectations and get inflation to reach its target of 2%? Some analysts believe the BoJ should allow the economy to overheat a little in order to promote higher inflation expectations. “Kuroda is convinced that the country will reach its inflation target of 2% in the FY2015,” experts at JP Morgan pointed out on Thursday, “but the help of the yen’s depreciation is fading since expectations of further monetary expansion are lowering too.”

inflation europe

In Europe 21st July 2014

Europe: Quo vadis inflation?

MADRID | The Corner | Although the eurozone final consumer price data for June came in line with their expectations, analysts at Barclays believe the common currency club may struggle to absorb “rising labour supply into employment given growth potential.” That is why further structural reforms to expand labour-absorption capacity are essential to avoid persistent disinflation on wages and, ultimately, consumer prices, they say. 

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In Europe 14th July 2014

What if we are in a 2% growth world?

MADRID | By The Corner | Experts at JPMorgan are less worried about near-term disturbances and flows and more about the medium-term outlook for economic growth. Over the past three years, the world economy has grown only at a 2.5% pace, below potential and thus not able to make up for what we lost in the recession. Each year, they keep forecasting that growth will rise to a 3% handle, but have been steadily disappointed.