ECB kept its monetary policy unchanged
|Stephen Brown, European Economist at Capital Economics, on EU economy
The ECB kept its monetary policy unchanged. Though, strong economic recovery may encourage policymakers to start tight-ening monetary conditions. Do you share this point of view?
At this point, we agree that the Euro zone’s economy is strengthening. We have recently revised our forecast for this year, though I think the key point here is that the ECB has not really seen any reasonable signs of an economic recovery. We have seen a little bit stronger inflation earlier in the year due to energy effects; however, inflation is probably going to be lower this year than we thought six months ago. Even if the Euro zone economy is picking up steam, we certainly do not expect the ECB to start raising interest rates until 2019.
Experts suggest that new banking regulations will not weaken economic growth; however, EU bankers argue against new banking policies ahead of Brexit. In your point of view, what consequences will the EU financial industry face after the UK quits the bloc?
It is difficult to say at the moment, because that is probably a little bit beyond what we look at. Certainly, policymakers will keep an eye on financial conditions, however we do not really see any big dislocations to the financial system in the wake of Brexit, but what we do expect from the EU-divorce negotiation is that the transitional agreement will be reached before the estimated two-year period is up.
In your point of view, what could be the hurdles for the Euro in the long run?
Most of the experts expected the French Presidential Election to be one of the main factors that could hit the Euro badly, though we were not really concerned about the threat of the French Election. Instead, we are more concerned about the Italian Election which is due to take place early in 2018, because one of the parties in Italy has also pledged to hold a referendum on the Euro membership.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.