By Abdulselam Durdak
Frankfurt Letter, week beginning Dec. 26

-ECB's new inflation forecast

The European Central Bank (ECB) has announced that headline inflation rates in the Eurozone are likely to rise above 1 percent at the beginning of 2017.

The ECB's monthly economic bulletin report indicated that at its monetary policy meeting on Dec. 8, ECB’s Governing Council conducted a comprehensive assessment of the economic and inflation outlook and monetary policy stance. This was based on regular economic and monetary analysis.

The report also states that headline inflation rates were likely to rise above 1 percent next year mainly due to the annual rates of change in energy prices.  According to the report, supported by ECB's monetary policy measures and expected economic recovery in the Eurozone, inflation rates are expected to increase further in 2017, 2018 and 2019.

-Ifo: Italy’s exit would be the beginning of the end for Eurozone

A large majority of German economists opposes Italy’s exit from the Eurozone: 61 percent are against it and 29 percent are in favor of it.

These are the latest results of the Economists Panel jointly conducted by the Ifo Institute for Economic Research and the Frankfurter Allgemeine Zeitung. Around 52 percent of the economists surveyed state a possible exit by Italy could negatively impact the Eurozone’s stability. About 23 percent believe it could have a “very negative” impact.

“Italy’s exit would be the beginning of the end for Eurozone,” warned Niklas Potrafke, Director of the Ifo Centre for Public Finance and Political Economy.

“The key question is: what would be the implications for the EU’s stability if Italy were to leave the euro,” noted Potrafke.

-News from Germany

German companies plan to recruit additional staff in December. The Ifo Employment Barometer rose to 111.8 points in December from 111.1 points in November, marking a new historic record since the inclusion of service providers in the survey in 2002. The number of jobs continues to rise unabated and there is no end in sight to the employment boom.

On the other side, the Ifo Business Climate Index rose in December to 111.0 points from 110.4 points in November. Assessments of the current business situation improved, reaching their highest level since February 2012. The business outlook for the first half of 2017 is also slightly more optimistic.

-The week ahead

The markets are expected to be quiet this week due to the Christmas holidays. No significant data is expected to be released.

27 Dec,2016