The report on the last monetary
policy meeting of the European Central Bank (ECB) was released yesterday. While
this does not have the effects on the markets that come with the corresponding release
in the US, of the Fed minutes, it is nonetheless interesting to note the
standpoint of Mario Draghi and his colleagues to the economic situation.
It would be fair to say that the
report was characterised by a cautious optimism. While the members would prefer
a faster rise in inflation, they do seem confident that it is heading in the
right direction. They confirmed that Quantitative Easing (QE) will continue for
as long as it is deemed to be necessary.
The impression given from reading the
report is that Greece is no longer an issue. It is to be hoped that this assessment
is correct.
The members do see threats to the
global economy coming from China, the economy of which is losing steam (the
members of course knew nothing of the recent Chinese currency devaluation when
this meeting took place). They also see a possible downside to the effects of rising
interest rates in the US, especially where these will impact emerging
economies.
On other fronts, such as bank
lending, jobs and wages, they seem to be content with the manner in which
developments are progressing while, as mentioned, the bugbear of deflation is,
they believe, also under control.
The latest Eurozone GDP and Eurozone
Consumer Price Index figures will be released later today.
Good
reports in US, but US dollar drops anyway
Yesterday’s initial jobless report in
the US, while indicating a small rise for the week, also showed that the
average of claims for unemployment assistance for the past month has fallen to
its lowest level in 15 years. This is surely music to the ears of the Federal
Reserve. In addition, retail sales showed a rise in July that was unexpected.
As consumer spending accounts for as much as 70% of US economic output, this is
important for the decisions that must be made with regard to interest rate
rises.
The US dollar initially showed a rise
against the Euro on the release of the retail sales figures, as would be
expected, but then fell back. It would appear that the recent upward tendency
of the Euro was too strong to be overcome by these results.
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