Could The U.S. Economy Grow By 7% This Year?

ECB keeps interest rates unchanged, pledges increase in bond purchases

Turning to Europe, Roach noted that markets were very tuned into whether the ECB would maintain its ultra-accommodative policies, despite the recent increase in eurozone yields, during the central bank’s March 11 policy meeting.

“The ECB’s announcement that interest rates and the overall size of its €1.85 trillion bond-buying program would remain unchanged proved to be reassuring to markets, in addition to the central bank’s formal commitment to significantly increase the pace of its bond purchases in the coming months,” she stated. The step-up in purchases will be undertaken with the aim of preventing a tightening in financial conditions that could derail the region’s recovery, she noted. Roach added that recent decisions by the Bank of Australia and the Bank of Canada have also reinforced the view that global central banks are likely to remain dovish for quite some time—perhaps well into the expansion.

U.S. consumer prices point to muted inflation

Switching to the latest economic data, Roach noted that there’s quite a bit of variability in the numbers from around the world as different regions transition to different stages of reopening. Key takeaways from the week of March 8 include a decline in both German industrial production and Japanese household spending, increasing consumer confidence in Australia, and a rise in U.S. small-business optimism, she said. In addition, February’s U.S. employment report is indicative of more job openings and increased voluntary turnover—a sign of greater confidence in the overall recovery, Roach explained.

One of the more significant data points of the week pertained to U.S. inflation, she noted. “The Labor Department’s core consumer price index (CPI) for February—which excludes volatile food and gas prices—increased by 0.1% from January and 1.3% on a year-over-year basis, which shows that inflation still appears fairly tame,” Roach stated.

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