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EMU CommentGrowth outlook a little weaker; but acknowledges wage growth

  1. Little new information
  2. Growth outlook a little weaker, but rising wages noted
  3. December policy meeting possibly a bit more interesting
Little new information
As widely expected, the ECB policy meeting offered little new information. The central bank retained its guidelines from the June policy meeting, including ending the asset purchase programme by the end of 2018 and seeing unchanged key rates, at least through to the summer 2019.
Growth outlook a bit weaker, but rising wages noted
If anything, the ECB was a little more downbeat about the growth outlook; the economic staff's projection was revised down a notch for 2018 and 2019 (see table). While the risks to the growth outlook were still viewed as broadly balanced, risks related to rising protectionism, emerging markets and financial market volatility have gained prominence. Private consumption was seen to be supported by rising wages (not added before) and Draghi saw the fiscal policies of several countries as representing upside risks. As expected, the ECB kept its inflation forecast of 1.7 percent for the next three years flat, but added rising wage growth as a contributor to gradually rising underlying inflation.
December policy meeting could be a bit more interesting
The ECB therefore continued its string of uneventful policy meetings since the June meeting. It could very well be more or less on autopilot for some months yet, unless some risks grows more prominent. The December meeting could have some interest, as new macroeconomic forecasts emerged from the ECB's staff and the ECB is in the process of closing down the APP, which could potentially have an effect on financial markets. Perhaps we could glean some information about the ECB’s reinvestment strategy here. We keep our forecast of the ECB raising the deposit rate in the third quarter of 2019.


Source: The ECB


Rasmus Gudum-Sessingø

Senior Economist


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