ECB Dares to Ask If Crisis Stimulus Can Be Pared Back: Eco Week


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The European Central Bank will decide this week if it should dare to dial down emergency stimulus while the pandemic still menaces the euro-zone economy. 

The threat posed by the delta variant of the coronavirus could yet embolden policy makers on Thursday to keep up the “significantly higher” pace of bond purchases they adopted earlier this year. But advanced vaccination rates, a robust rebound and inflation that is already at the fastest in a decade are all reasons to consider a downward shift in gears. 


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Until now, the ECB has insisted that any surge in consumer prices is destined to be temporary, allowing officials led by President Christine Lagarde to keep crisis stimulus flowing. That contrasts with global counterparts such as the Federal Reserve, where policy makers may consider a move to scale back asset purchases in November or December, after Friday’s disappointing jobs report made action of this kind unlikely this month.

With inflation now at 3% in the euro region, ECB officials are diverging more on the outlook for consumer prices. Greek central bank chief Yannis Stournaras suggested to Bloomberg last week that officials shouldn’t overreact, advising “caution.” 

But in a hint of arguments to come, his Dutch colleague Klaas Knot said that the goal of the ECB’s crisis bond-buying program, of limiting the damage to inflation inflicted by the coronavirus, is almost achieved. He favors a more restrictive approach to stimulus after the measure’s scheduled end in March. 


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Read more: Global Gas Price Surge Threatens to Dent the Economic Recovery

Such remarks suggest that whatever officials determine about bond-buying for the coming months, this week’s decision is only the first of several likely skirmishes on the future of ECB monetary policy. 

What Bloomberg Economics Says:

“The easiest option for the ECB would be to keep buying bonds through PEPP at a ‘significantly higher pace’ until the end of the year. The central bank could begin tapering in January.”

–David Powell and Maeva Cousin. For full analysis, click here

Elsewhere, at least eight other central banks globally are due to deliver monetary decisions, including Australia and Canada. While most are likely to keep their stance unchanged, Russia and Ukraine could deliver interest-rate increases. 


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Click here for what happened last week and below is our wrap of what is coming up in the global economy.

Europe, Middle East, Africa

The ECB decision may be the policy highlight of the week in the region, but euro-zone data will also give investors plenty to chew on. 

Factory orders and industrial production from Germany, Europe’s biggest economy, as well as manufacturing statistics from France, Italy and Spain, will all show the strength of factory activity at the start of the third quarter in July, before global supply bottlenecks began to bite. 

The same might be said for the U.K., where industrial production will be released along with gross domestic product data that will show if the economy sustained a sixth consecutive month of expansion in its rebound from the pandemic as summer took hold. 


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Elsewhere in Europe, Riksbank Governor Stefan Ingves will deliver a speech on challenges facing the Swedish economy, while Norway and Denmark both publish inflation data. 

The Central Bank of Russia, which delivered its biggest hike since the 2014 ruble crisis in July, will reveal on Friday if it wants to add to that move after Governor Elvira Nabiullina said it was “premature” to suggest tightening had ended. Officials are wary at rising inflation expectations, but also softened forward guidance in their last statement. 

In neighboring Ukraine, the central bank is anticipated to raise its benchmark by a half-point to 8.5%. By contrast, officials in Poland and Serbia may opt to keep rates unchanged this week despite a pickup in inflation in both those countries. 


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South Africa publishes second-quarter GDP data on Tuesday, when the statistics agency will drop the focus on annualized growth and use 2015 as its new base year. 

For more, read Bloomberg Economics’ full Week Ahead for EMEA

Canada and the U.S.

The Bank of Canada is expected to produce a stand pat policy decision on Wednesday, wary of making any splashes in the middle of an election campaign with a vote scheduled for Sept. 20.

A poor run of economic numbers may tempt policy makers to downgrade the nation’s growth outlook and hint at slower unwinding of stimulus going forward. But a less rosy forecast would likely become a political issue just as Canadians prepare to go to the polls.

In the U.S. meanwhile, the economic data calendar is light during a holiday-shortened trading week, with figures on job openings and producer prices taking top billing. 


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Federal Reserve policy makers will also be on the speaking circuit including New York Fed President John Williams, Dallas Fed President Robert Kaplan and San Francisco Fed President Mary Daly.

For more, read Bloomberg Economics’ full Week Ahead for the U.S.


Reserve Bank of Australia Governor Philip Lowe has another opportunity to defer his bond tapering plans when the central bank meets on Tuesday as lockdowns Down Under look set to extend further. Last week’s growth data showing stronger-than-expected momentum in the economy as delta hit may give Lowe sufficient reassurance to stick to his gradual dialing back of stimulus. 

Aside from Australia, Malaysia’s central bank is the only other expected to deliver a decision in the region, on Thursday.


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Japan will likely revise up its GDP figures after stronger capital spending data showed firms are still looking beyond the pandemic despite a state of emergency that looks set to be extended yet again this week. Household spending numbers from July will shed further light on how much concerns over record virus cases in Japan are hitting consumption. 

China releases trade and inflation data for August — they’ll be closely watched after recent indicators have shown the recovery is losing steam. 

For more, read Bloomberg Economics’ full Week Ahead for Asia

Latin America

On Tuesday, August data may show a further narrowing of Chile’s monthly trade balance as the delta variant undercuts overseas demand and a white-hot domestic economy fuels import growth. On a 12-month basis, both the trade balance and copper exports hit record-highs in July.


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Just over a year since growth and inflation in the region plunged because of the pandemic’s demand shock, economies are seeing a range of recoveries. Consumer prices, on the other hand, have been uniformly too hot for policy makers. Four of five inflation-targeting central banks are now raising rates and the sole holdout, Colombia, may well join Sept. 30.

By close of business Thursday, all five will have posted August readings, with only Mexico’s inflation-to-target gap expected to narrow.

Peru’s central bank on Thursday meets with inflation at a 12-year high and over target. After raising the key rate from a record-low 0.25% by a quarter-point last month, many analysts see room for further tightening that still provides some stimulus amid headwinds from the pandemic and political uncertainly.

For more, read Bloomberg Economics’ full Week Ahead for Latin America

©2021 Bloomberg L.P.


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