ECB measures take account for prolonged uncertainty but recovery still seen intact

Domestic growth story still intact amid prolonged uncertainty: Against the backdrop of a surprisingly strong Q1growth the ECB saw no need to materially change its 2019 growth expectation. More fundamentally, the domestic growth story is still seen intact but the growth outlook for the coming years was slightly reduced.

Highlights:

  • The Governing Council’s major concern is about prolonged uncertainty but the base case of continuing growth is still seen intact while measures to protect the euro area economy are needed.
  • Within the Governing Council (GC) some members even opted for easing measures. In the end they unanimously agreed on the following:
          o To leave key rates constant “at least through the first half of 2020” thereby extending its forward guidance by six months.
          o In the forthcoming TLTROs the rate applied can at best be 10 bps above the average deposit rate prevailing over the life of the operation. This was less generous than anticipated by market participants.
  • The ECB has moved into a wait-and-see stance with heightened attention to downside risks. It has postponed policy normalization further and we now do not expect any rate hike until the end of next year at least.

Download the full publication below

ECB MEASURES TAKE ACCOUNT FOR PROLONGED
UNCERTAINTY BUT
RECOVERY STILL SEEN
INTACT

RELATED INSIGHTS

CHINA’S RECOVERY CONTINUED BUT A BIT SOFTER THAN EXPECTED
China's economic recovery continued in Q3 2020, although a bit softer than expected. Real GDP growth rose to 4.9% yoy, slightly below the Reuters consensus expectation of 5.2% yoy, but still a substantial upturn from the 3.2% yoy in Q2. On a quarterly base, growth dynamics softened to 2.7% qoq, after 11.7% qoq and -10% qoq in the two previous quarters.
Citywire video-interview with Peter Marber
Watch Peter Marber, fund manager of this global, non-directional, long/short approach to Emerging Markets debt, in a video-interview by Citywire.
COVID-19 FACTS & FIGURES
According to the IMF’s Managing Director, strong international cooperation on coronavirus vaccine could speed up the world economic recovery and add $9 trillion to global income by 2025. A WHO trial found that Remdesivir, Hydroxychloroquine, Lopinavir and Interferon have little or no effect on hospitalized Covid-19 patients. Gilead Sciences has questioned the findings of the WHO study saying data appeared inconsistent.