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.