Frankfurt letter, week beginning Feb. 29

Inflation in the euro zone has fallen short of the European Central Bank’s (ECB) goal of just under 2 percent. Thus, the "stubborn inflation" in the 19-nation euro area puts pressure on the ECB to take further additional policy actions. 

The ECB is expected to review and possibly loosen its monetary policy and even to cut rates at its March 10 meeting in Frankfurt.

It is also likely to see a downward revision on the macroeconomic outlook in the updated staff projections.

However, Bundesbank President and ECB Governing Council member Jens Weidmann warned the ECB against further easing.

According to prepared remarks for presentation on the annual report of the Deutsche Bundesbank, Weidmann said "it would be dangerous to simply ignore the longer-term risks and side effects of loosening already highly accommodative policy.”

European stocks

Last week, the European markets followed a fluctuating course. After having losses during the first three trading days of the week, the markets climbed on Thursday and Friday.

There was a new development when the London Stock Exchange Group (LSEG) and Deutsche Borse, announced this week that they are conducting merger talks.

Both parties confirmed that they agreed on further key terms in relation to the potential merger to form a new combined group.

Economic data

According to research firm Markit, the Eurozone purchasing managers’ index (PMI), dropped in February to a 13 month low of 52.7. The survey provides an firm judgment as to the outlook of the Eurozone economy.

Refugee crisis

The refugee crisis is still on the top agenda of Europe and Germany.

Only seven percent of German companies are currently employing refugees or have employed them in the past two years, according to the results of a survey of over 1,000 personnel managers conducted jointly by the Ifo Institute and the recruitment agency Randstad, which were published on Thursday.

Next week ahead

The global markets will monitor the Eurozone inflation and unemployment data this week, as well as the press conference of the ECB.

01 Mar,2016