· As expected, ECB kept its key rates unchanged at 3 December meeting, leaving the 'refi' rate at 1% for the eighth month in a row.
· ECB sees positive real GDP growth in 2009 H2 and latest Staff projections revise growth upwards to +0.8% for 2010 and show 'moderate' growth of 1.2% for 2011.
· Inflation turned positive in November, with resumption of positive year-ago base effects, but projected to remain subdued, at 1.3% in 2010 and 1.4% in 2011
· Base effects overstate underlying pace of monetary expansion, while loans to households level off at a low rate of growth and negative growth of loans to non-financial corporations reflects lack of demand rather than supply constraints.
· ECB outlines exit strategy for enhanced credit support measures, implying modest unwinding during 2010 Q2 and gathering pace from Q3.
EZA Conclusion: The ECB is not likely to start raising rates before mid-2010 and is likely to want to see how market interest rates respond to the progressive withdrawal of its special support measures and, in particular, to the maturing of the EUR 442 bn 12-month LTRO on 1 July and the special smoothing operations that will be required around that time, before embarking on a progressive return to a more neutral interest rate stance.
Please see attached the regular post-meeting analysis from John Arrowsmith as a pdf file to read onscreen or simply print.
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
© Eurozone Advisors Ltd
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