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The ECB’s waiting game

07 May 2014

Robert Kuenzel; Chris Scicluna

Given the ECB’s aim to keep inflation “close to, but below, 2%” over the medium term, and with Draghi and his colleagues having repeatedly pledged to guard against a prolonged period of excessively low inflation, the steeper-than-expected decline in euro area CPI to a 4½-year low of 0.5%Y/Y in March and the weak April flash CPI estimate arguably demand a policy response. But when it meets tomorrow, the Governing Council looks to have enough excuses to continue to sit tight.

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UK property market: More still than sparkling

04 April 2014

Grant Lewis

The reignition of the UK housing market, led by London, has been a key factor behind the rapid recovery seen in the UK over the past year. Not only has it fuelled a renaissance in the UK’s recession-ravaged construction sector, boosting GDP growth directly, but it has also helped sustain, via confidence and wealth effects, what has been a surprisingly robust recovery in private consumption. But while this has fuelled a great deal of angst about a UK housing market bubble, as we point out in a special report on the UK’s housing market, a look at the data reveals that to be largely a function of London-based commentators reflecting their own experiences. It is definitely not the experience of the vast majority of the country. Look beyond Greater London and there are few if any signs of a housing market bubble.

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UK rates: No change in 2014?

27 January 2014

Grant Lewis

With data released last week having shown the unemployment rate in the UK falling to 7.1% in the three months to November, just a tenth of a percentage point above the MPC’s forward guidance threshold, an awful lot of rubbish has been said and written about how this highlights the failure of forward guidance in the UK...

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Italian and Spanish spreads: Further to fall?

22 January 2014

Grant Lewis

Following a 2013 that saw euro area peripheral government bond spreads fall dramatically, 2014 has seen further reductions in funding costs. Spanish and Italian 10Y spreads to Bunds are now around 200bps, having ended 2013 around 20bps above that level. That compares very favourably to the start of 2013, when Italian spreads were almost 320bps, while Spanish spreads were close to 400bps...

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Euro Banks: Time for another check-up

13 September 2013

Michael Symonds

The European Parliament yesterday passed legislation clearing the way for the European Central Bank to become the sole supervisor of the euro area’s largest banks next year, an early milestone on the long journey towards a euro area banking union...

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