27 October 2009

EZA 918 Report: ECB 8 October Council Post-Meeting Assessment

·        Predictably, ECB's key rates unchanged at 8 October meeting, leaving the 'refi' rate at 1% for the sixth month in a row, with its deposit and lending rates held at 0.25% and 1.75%.

·        ECB's analysis very similar to last month's, cautiously confident that the worst is over but with growth likely to be fitful before a steadier upward trend emerges around mid-2010.

·        Inflation still expected to turn positive in coming months but no early resumption of inflationary pressures and inflation expectations still seen as firmly anchored.

·        Falling away of M3 and credit growth may be coming to an end, with loan flows to households levelling off and new loans to non-financial corporations slightly positive.

·        Monetary policy measures seen as providing strong ongoing support to the economy, with their full effects still to feed through.

EZA Conclusion: This latest assessment further confirms us in our view - stated for several months now - that official interest rates are set to stay on hold at least to mid-2010, when the ECB's enhanced credit support measures could start to be unwound, allowing them to run off gradually at maturity. Interest rates likely to be raised cautiously, possibly one or two steps behind

Please see attached the full analysis from John Arrowsmith as a pdf to read onscreen or simply print.

BRIEFING OPPORTUNITY: EZA Senior Partner Michael Clauss will be visiting clients this week in London on 15^th/16^th October for personal briefings/Q&A on the political outlook for Germany post the elections and also ECB policy. If we have not already arranged a time please contact me and we will be happy to include you in his schedule.  

John Arrowsmith: ECB / Regulatory

Tel: +44 7720 59 1726

john.arrowsmith@eurozoneadvisors.com

 Discussion Partners

John Arrowsmith: ECB / Regulatory

Tel: +44 7720 59 1726

john.arrowsmith@eurozoneadvisors.com

Dr Michael Clauss: Germany Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046

michael.clauss@eurozoneadvisors.com

© EZA