By Abdulselam Durdak
Frankfurt letter, week beginning Oct. 24

- ECB’s December meeting significant for coming months

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

With regard to non-standard monetary policy measures, the Governing Council confirmed that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

Speaking after the rate decision, ECB President Mario Draghi said the ECB has not discussed either extending or tapering the bond buying program.

Draghi signaled that the December meeting will be important. "Decisions taken at the next meeting will tell you what we’re going to do in the coming months,” he said.


- Annual inflation up to 0.4% in the euro area

The Euro area annual inflation was recorded as 0.4 percent in September 2016, up from 0.2 percent in August. In September 2015 the rate was -0.1 percent, according to Eurostat, the statistical office of the European Union

The European Union annual inflation was also 0.4 percent in September 2016, up from 0.3 percent in August. A year earlier the rate was -0.1 percent.

Eurozone headline inflation remains well below the ECB’s target of close to but below 2 percent.


- ECB's Survey of Professional Forecasters

According to results of the fourth Quarter ECB Survey of Professional Forecasters, inflation expectations have been revised marginally down for 2016 and 2018, but are unchanged for 2017. However, longer-term inflation expectations are unchanged.

Real GDP growth expectations have been revised up for 2016, but down for 2018 and further ahead. Unemployment rate expectations also have been revised down.


-The week ahead

This week, markets will continue to monitor the ECB's Governing Council Members’ speeches.




24 Oct,2016