Swapping Frankfurt for the milder climes of the Med, ECB policy-makers meeting in the Maltese capital Valletta today are expected to keep the door open for more monetary stimulus but stop short of giving it, awaiting more evidence on the outlook for euro zone inflation. The Bank has got some outside help recently in the form of a slight rebound in oil prices, while the expected delay in the Fed’s rate hike also buys it some time. Yet the growth outlook is still poor – witness the German Finance Ministry’s overnight assessment of the impact of China’s slowdown on the euro zone’s top economy – and the euro is still a bit too strong for the ECB’s liking. December’s publication of the ECB’s staff forecasts may be the moment when the arguments for action become louder.
After months of speculation and delay, the chances the U.S. Federal Reserve raises interest rates this year are only 60 percent, according to Goldman Sachs chief U.S. economist Jan Hatzius.
China GDP releases are starting to look like near-perfect landings each and every time, in all kinds of weather conditions and visibility.
European Union leaders have offered Turkey a possible 3 billion euros in aid, the prospect of easier travel visas and “re-energised” talks on membership in return for its help stemming the flow of migrants to Europe. This is all a pretty good win for Turkey’s Tayyip Erdogan two weeks before the early elections he hopes will cement his authority. And what about the EU’s oft-stated concerns over human rights in Turkey? Doused by realpolitik. “In our neighbourhood, we are not asking any more for fundamental rights after the Arab Spring,” said one EU official. “We are asking for stability.”
The global economic slowdown shows a clear risk of extending into next year, along with an even more prolonged period of disinflation, according to the overwhelming majority of nearly 300 economists polled by Reuters around the world.
Only a few weeks ago he was the butt of much EU criticism over his authoritarian behaviour. Now Turkey’s Tayyip Erdogan is being courted assiduously by the bloc’s leaders as an essential part of the solution to the migrant crisis. Tonight’s EU summit will review plans under which it is hoped Turkey will cooperate to stem the flow of refugees west from its territory; in return Ankara will want easier visa access to the EU, more aid and a new push on its EU membership bid. Significantly, Germany’s Angela Merkel will be heading to Turkey for talks this weekend.
Wage inflation is supposed to pick up once unemployment gets down to a level at which scarcity of labour means companies are forced to pay more for top talent. This time, at least so far, the theory is either not working so well, or taking its time to kick in. Or perhaps the modest rise we’ve seen is the best we’re going to get.
With Bank of England policymakers ready at a moment’s notice over the past several years to warn anyone who will listen that a rate rise is closer than we think or just around the corner or soon coming into sharper relief, the main instrument it targets – inflation at 2 percent – is having nothing of it.
One of the week’s biggest numbers is out at 0900 GMT with the ZEW report on sentiment in the German economy in October. This could give a first glimpse of perceptions on whether the VW emissions scandal is hurting the wider economy and comes after last week’s data signaling a drop in exports and weak industrial orders, largely down to a slowdown in China and other emerging markets.