Europe: The Week Ahead (Mar 11-15)

By Steven Levine, Senior Market Analyst, Interactive Brokers

French and Euro Area Inflation: Les Misérables

The European Central Bank (ECB) Thursday committed to combatting continued muted inflation across the Eurozone, amid lower prospects for growth, with a more dovish stance on monetary policy.

The central bank lowered its expectations for annual HICP across the board due in large part to its “more subdued near-term growth outlook.” The ECB anticipates HICP inflation to come in at 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021. In mid-December 2018, the ECB expected those rates to register 1.6%, 1.7%, and 1.8%, respectively.

Euro area real GDP increased by 0.2% quarter on quarter in the fourth quarter of 2018, following growth of 0.1% in the third quarter on the back of a sharply weaker manufacturing sector. The ECB thinks real GDP will rise by 1.1% in 2019, 1.6% in 2020 and 1.5% in 2021, down from December’s outlook of 1.7% in 2019 and 2020.

Meanwhile, among the economic releases in the euro area in the week ahead, France is due to provide a picture of its inflation rate for February.

Thursday, March 14

  • France - CPI (Feb)

France’s Consumer Price Index (CPI) report, slated for release Thursday, March 14, falls at the heels of a slower rate of inflation in January, which contributed to stubbornly low levels across the broader euro area.

In January, France’s CPI fell back by 0.4% month-over-month, after having stabilized somewhat in December. Prices of manufactured products plunged 2.1%, accompanied by a deceleration in services and food costs. However, tobacco prices rose by 0.8%. Year-on-year, consumer prices slowed for the third consecutive month.

(Click on image to enlarge)

The lower rate of inflation appears symptomatic of the ECB’s struggles to lift prices across the continent.

In line with the ECB’s aim to ensure inflation remains on a sustained path towards levels that are below, but close to, 2% over the medium-term, the central bank Thursday elected to keep its key interest rates unchanged at 0.00% (main refinancing operations), 0.25% (marginal lending facility) and -0.40% (deposit facility), where they will most likely remain through the end of 2019.

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Disclosure: The author does not hold any positions in the financial instruments referenced in the materials provided.

The analysis in this material is provided for information only and is not ...

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