Frankfurt Letter, week beginning June 6

-The European Central Bank

At last Thursday’s meeting in Vienna, the Governing Council of the European Central Bank (ECB) decided that interest rates on main refinancing operations, on marginal lending facility and on deposit facility would remain unchanged at 0.00 percent, 0.25 percent and -0.40 percent respectively.

Speaking after the rates decision, ECB President Mario Draghi, said if needed, the ECB is ready to take further action to bring low inflation back to the targeted level just below 2 percent.

The Euro area's inflation which is at minus 0.1 percent, remains well below the ECB's target raising concerns about a deflation scenario.

-Economic data

The Euro area annual inflation is expected to be -0.1 percent for May 2016, up from -0.2 percent in April but still in negative territory, according to a flash estimate from Eurostat, the statistical office of the European Union.

In contrast, in terms of labor markets, the data was relatively positive. The euro area seasonally-adjusted unemployment rate was 10.2 percent in April 2016, stable compared with March 2016, and down from 11.0 percent in April 2015.

And the unemployment rate in the European Union (EU) was 8.7 percent in April 2016, down from 8.8 percent in March 2016, and from 9.6 percent in April 2015.

-News from Germany

The German National Bank (Bundesbank) cut its German inflation and growth forecasts last Friday.

The bank now sees GDP growing at 1.7 percent this year, below a December projection for 1.8 percent, and 1.4 percent in 2017, down from 1.7 percent seen earlier. In 2018 expected growth is deemed as 1.6 percent.

According to the Bundesbank, German inflation is expected to remain subdued this year, with consumer prices rising by just 0.2 percent, accelerating to 1.5 percent next year and 1.7 percent in 2018.

Germany's adjusted unemployment rate fell to 6.1 percent in May, its lowest level since German reunification in 1990, the Federal Labor Office (BA) said.

-The weak ahead

This week, the global markets will monitor the Eurozone industrial import prices and GDP and main aggregates data, as well as the news from the ECB.


07 Jun,2016