Daily Insight
Group Economics Macro & Financial Markets Research
22 April 2016
ECB ready to ease again if necessary Nick Kounis Head Macro & Financial Markets Research Tel: + 31 20 343 5616
The ECB kept policy on hold …
…but the door is still open for further policy easing if necessary
We expect a further step-up and extension of the QE programme in the second
nick.kounis@nl.abnamro.com
half of this year Aline Schuiling Senior Economist Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
ECB on hold but keeps the door open for further policy easing ... The ECB kept policy on hold in its April meeting, which was no surprise as the meeting followed so soon after the March stimulus package. ECB President Mario Draghi said the March measures had led to an improvement of broad financing conditions. Moreover, ”the pass-through of the monetary policy stimulus to firms and households, notably through the banking system, was strengthening”. However, “global uncertainties persist”, while “the risks to the euro area growth outlook still remain tilted to the downside”. Mr Draghi emphasized that the “Governing Council will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate”. According to Mr Draghi “in the current context, it is crucial to ensure that the very low inflation environment does not become entrenched in second-round effects on wage and price setting”.
Eurozone inflation and target % yoy
4 3 2 1 0 -1 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Total Core rate ECB target Source: Thomson Reuters Datastream
Insights.abnamro.nl/en
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Daily Insight – ECB ready to ease again if necessary – 22 April 2016
… we expect extra QE to be announced in the second half of the year The ECB President hinted at three potential triggers for further policy easing action: the emergence of second round effects on inflation from the current lowflation period, an unwanted tightening of financial conditions or the materialisation of global risks. We think the ECB will probably need to do more as inflation is still set to undershoot its target for a long time and the recent easing of domestic financial conditions will likely not be sufficient to change this picture, especially since the euro has risen. However, we do not think further monetary stimulus measures will come until the second half of the year (likely in September). This reflects that two of the main measures the ECB announced in March (the TLTRO II and the corporate sector purchase programme) will not even be implemented until June. We think that eventual further easing will take the form of a step up and extension of QE. Although we think further modest deposit rate cuts are possible, this step may only be taken if there is a significant uptrend in the euro. When asked if helicopter money could be part of the ECB’s policy tool kit, Mr Draghi answered that this could not be expected any time soon. He said the ECB had not discussed this policy and that it was ‘fraught with operational difficulties’ though he did not rule it out completely.
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Daily Insight – Who cares about Doha? – 21 April 2016
Day
Date
Time
Country
Monday Monday Monday
18/04/2016 18/04/2016 18/04/2016
14:30:00 14:30:00
US US US
NAHB home builders' confidence index Apr Fed's Dudley (voter) gives opnening remarks at Economic Conference Fed's Kashkari (non-voter) speaks in Minneapolis
Tuesday Tuesday Tuesday Tuesday Tuesday
19/04/2016 19/04/2016 19/04/2016 19/04/2016 19/04/2016
10:00:00 11:00:00 14:30:00
US KR EC DE US
Fed's Rosengren (voter)speaks Policy rate - % ECB Bank Lending survey ZEW index (expectation economic growth) Housing starts - % mom
Wednesday Wednesday Wednesday Wednesday
20/04/2016 20/04/2016 20/04/2016 20/04/2016
06:30:00 10:30:00 13:00:00 16:00:00
NL GB TR US
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016 21/04/2016
07:30:00 08:45:00 10:30:00 13:45:00 13:45:00 13:45:00 14:30:00 14:30:00 16:00:00
Friday Friday
22/04/2016 22/04/2016
10:00:00 10:00:00
01:00:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
58
59
59
Apr-19 Q1 Apr Mar
1.50
1.50
1.50
11.2 -8.8
8.3 -0.9
9.0 0.0
Consumer confidence - index Change in claimant count - thousands Repo rate - % Existing home sales - % mom
Apr Mar Apr 20 Mar
1 6.7 7.5 5.1
-11.5 7.5 3.4
NL FR GB EC EC EC US US EC
Unemployment rate - % Business confidence manuf. - index Retail sales - % mom Main Refinancing rate - % Deposit Facility rate - % Marginal Lending Facility rate - % Initial jobless claims - thousands Philadelphia Fed - business confidence - index Consumer confidence
Mar Apr Mar Apr 21 Apr 21 Apr 21 Apr 16 Apr Apr P
6.4 104 -1.3 0.00 -0.40 0.25 247 -1.6 -9.3
EC EC
PMI manufacturing - index Composite PMI output
Apr P Apr P
51.6 53.1
-2
3.5 6.5
101 -0.2 0.00 -0.40 0.25
0.00 -0.40 0.25
7.6 -9.4
-9.3
51.8 53.2
51.9 53.2
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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