After the Federal Reserve wound up its bond-buying programme, as
expected, and the Bank of Japan sprung a surprise by sharply increasing
the pace of its money-printing, this week the European Central Bank
takes its monthly bow and will probably come up with nothing new.
Over the past week there have been some glimmers of hope for the euro
zone. European bank stress tests came up with a largely clean bill of
health, though whether the demand is there for more credit remains to be
seen.
Inflation edged up for the first time in many months. It might have
only gone from 0.3 percent to 0.4 but that was against a backdrop of
tumbling energy prices which could have pushed the headline figure yet
lower.
Much of the evaporation of business confidence has been due to events
in and around Ukraine and now a deal, brokered by the European Union,
has been struck whereby Moscow will resume supplies of gas to its
neighbour over the winter in return for payments funded in part by
Kiev’s Western creditors. That eases concerns that a new “gas war” could
disrupt winter supplies of energy to EU states.
But these are skeletal green shoots. Today, manufacturing PMI surveys
across the euro zone are expected to show factory activity is barely
growing but there is little prospect of the ECB adding to its arsenal of
measures until a second round of cheap loans to banks – given on the
basis that they lend on into the economy – are offered in December.
Take-up at the first round in September was poor but that was before the stress tests were complete.
There is a good chance that the “TLTRO”, together with purchases of
bundled-up asset backed securities (starting later this month) and
covered bonds (which have begun with a whimper), won’t prove sufficient
to jolt the euro economy into life.
2014/11/03
Fed and BOJ Showed The Impact of Rate Divergence Last Week
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