MADRID | By The Corner | Barclays analysts highlight the scarce impact of the European Central Bank’s measures on the inflation expectations. This is the chart that Barclays uses to show the inflation expectations one year before and one year after ECB’s decision.
MADRID | The Corner | After a sluggish start, growth seems to pick up in the euro area. The 18 countries sharing the common currency showed an industrial production rise of +0.8% in Apr 2014 over Mar 2014, and +1.4% over Apr 13, according to Eurostat.
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?
LONDON | By Barclays analysts | ECB is going to cut its policy interest rate and/or announce targeted liquidity measures, with a view to support bank lending at the 5 June Governing Council meeting. In his remarks at the ECB Forum on Central Banking being held in Portugal, ECB President Draghi highlighted the risk of a negative spiral between low inflation, falling inflation expectations and credit for the euro area.
SAO PAULO | By Marcus Nunes | (Note to generation y: The Rat Pack was the name given to a group of actors led by Frank Sinatra Dean Martin and Sammy Davis Jr) In 2005 Edward Nelson, at the Research Department of the St Louis Fed, wrote a very interesting paper entitled “Monetary Policy Neglect and the Great Inflation in Canada, Australia and new Zealand”.
MADRID | By Jaime Santisteban | Feel like investing in Spanish real estate? It’s apparently the time, according to Bankinter analysts, as European prices continue their upwards trend, financing costs are low and we see price recovery signs in big cities like Madrid and Barcelona. They suggest direct investment assets with a horizon beyond 3-5 years. Also, the EU announced on Monday that the Eurozone’s GDP will grow by 1.2% this year and by 1.7% in 2015. As for Spain, Brussels is less optimistic than the Spanish government in its forecast.
MADRID | By Luis Arroyo | Which came first, the chicken or the egg? Does the credit decrease because the demand is weak or because banks don’t offer any? Requirements imposed by banks to lend money (excluding to the public administrations) are aggressive both in real and collateral interest rates. Meanwhile, the possibility that the ECB increased rates would further collapse bank credit.
LONDON | By Michael Gapen at Barclays | Persistent improvement in US labor markets has caused the Fed to continue tapering and to alter its quantitative policy rate guidance in favor of qualitative language indicating that the committee is prepared to maintain the current target rate for the federal funds rate for “a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal.”
SAO PAULO | By Marcus Nunes via Historinhas | The Fed’s (and central banks in general) preferred tactic is “wait-and-see”, usually expressed in the form of “we will monitor closely”! Instead of becoming a focal point for the coordination of expectations, inflation has become a barrier to getting the economy’s recovery back on track.
LONDON | By François Cabau at Barclays Capital| The ECB stayed on hold this month. Keeping its easing bias, the Governing Council had a “very rich” and “ample” discussion on possible further easing measures. In our view, if expectations of a rebound in April HICP are not met, affecting the medium-term price outlook, the ECB may need to ease further.