Reuters blog archive
After today's surprise ECB move it is safe to forget the code words former ECB President Jean-Claude Trichet never grew tired of using - monitoring closely, monitoring very closely, strong vigilance, rate hike. (No real code language ever emerged for rate cuts, probably because there were only a few and that was towards the end of Trichet's term.)
His successor, Mario Draghi, has a different style, one he showcased already at his very first policy meeting, but no one believed to be the norm: He is pro-active and cuts without warning. Or at least that's what it seems.
Today's quarter-percentage point cut took markets and economists by surprise.
When asked about the ECB's communication strategy by somewhat flabbergasted journalists at the post-meeting news conference, Draghi said: "I will abstain from judging markets. This is one of the hardest things and it is usually useless, because they do what they want, no matter what," he said, setting off some chuckling in the room.
The clue everybody had overlooked in the previous introductory statement had been the condition of an "unchanged overall subdued outlook for inflation", Draghi helped his audience along. "Since the last time I read this statement, there have been changes and these changes have been judged to be of significance."
Brazil inflation jumped above expectations in February, despite a steep cut in electricity rates. It was not the first time, though; inflation has been running higher than consensus forecasts since July, considering the market view one month before the data release:
The total gap between market consensus and the actual inflation figures amounts to 1.19 percentage point - about one quarter of the inflation rate reported. Reuters polls conducted a few days before the official numbers come out have also proved wrong since July, with a total error of 0.37 point.
Latin America has defied one of the most elementary rules of macroeconomics in the past decade, Citigroup economists Joaquin Cottani and Camilo Gonzalez found in a report.
Lower interest rates reduce the cost of money and therefore should encourage businesses and consumers to borrow, as we've repeatedly heard from analysts and government officials for decades. Puzzlingly enough, credit growth accelerated after central banks in countries like Brazil and Peru raised rates, and slowed when borrowing costs fell. Why is that?
Forecasts about the future for the euro zone economy are starting to resemble a multiple-choice novel. Are you an economist working for an Anglo-Saxon institution? Then turn to p.65 -- "Recession for the euro zone". A German bank? Go to p.80 -- "Happy days are here again!"
That simplifies the case slightly, but there's more than a grain of truth in it. We've noted repeatedly that predictions about the euro zone are coloured heavily by whether someone works for an employer based inside the currency union or not.
Angela Merkel's visit to Greece today was anything but low key. Greek police fired teargas and stun grenades at protesters in central Athens when they tried to break through a barrier and reach the German chancellor. There are lots of differences between the two countries. Here's a look at some of the main ones:
The euro zone economy may be doing far worse than most economists want to believe. That’s not good news for a central bank trying to rescue the single currency through a hotly-contested bond purchasing programme that has yet to get started.
The latest flash purchasing managers’ indexes, which cover thousands of euro zone companies, suggest the third quarter will mark the euro zone’s worst economic performance since the dark days of early 2009, according to Markit, which compiles them.
By Rahul Karunakar
The spread between 2- and 10-year U.S. Treasury yields will shrink to 180 basis points in a year according to the latest Reuters bonds poll - the narrowest margin since August 2008, the month before Lehman Brothers collapsed.
Historically, that spread has been a key indication of what investors and traders are thinking about the economy's prospects: the narrower it gets, certainly with short-term rates already at rock bottom, the darker the outlook.
It’s already been established that economists’ predictions about the euro zone’s future hinge largely on where their employer is based. Euro zone optimists tend to work for euro zone banks and research houses, and euro zone sceptics for companies based outside the currency union.
It somewhat undermined the idea their analyses are based purely on hard-headed economics, and less on national factors.
Despite all their years of experience and complex mathematical models, for economists the question of the euro zone’s survival really has them at the mercy of national bias... at least in terms of where their employer is based.
One of the key points from the latest Reuters poll was that a majority of economists from banks and research houses around the world – 37 out of 59 – expect the euro zone to survive in its current form for the next 12 months.
Following on from Nigeria's rebasing of its GDP numbers, giving it a huge growth boost on paper, it is Israel's turn to tinker with the numbers. This time, though, the end result was not positive.
The country's Central Bureau of Statistics said on Monday that the first-quarter jobless rate was 6.7 percent. This a good 1.3 percentage points higher than the announced fourth-quarter figure.