ECB Expected To Leave Monetary Policy Intact This Week

The European Central Bank (ECB) is expected to hold fire at its monetary policy meeting this week, despite a shock fall in inflation reigniting deflation concerns.

It came as something of a shock to most economists – and likely the ECB – when official figures released last week showed that euro zone inflation fell more than expected in July.

Inflation rose by 0.4 percent compared to the same period last year, failing to match expectations of 0.5 percent. It was the lowest level seen since October 2009 and below last month’s reading of 0.5 percent.

The region’s continuing sluggish growth saw the ECB unveil a host of measures at its June meeting designed to give the euro zone’s recovery a boost.

But July’s disappointing inflation data has boosted concerns that the region is heading towards a period of deflation, with even French President Francois Hollande telling Le Monde newspaper on Monday: “There is a real deflation risk in Europe… The ECB must take all the necessary measures to inject liquidity into the economy.”

Despite calls for action by Hollande and numerous economists, ECB President Mario Draghi is unlikely to unveil any further stimulus at the bank’s policy meeting on Thursday, as he waits for June’s interest rate cuts and a new loan program – dubbed the TLTRO – to take effect.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza