In its latest monthly global economic outlook report, the research team at Nomura noted that they have above consensus on euro area growth.
We see growth of 1.8% this year (above consensus) falling to 1.5% in 2018 and 2019 as Brexit materialises.
Inflation is set to rise thanks to sterling’s depreciation, though we think the spike will be short-lived.
As such, the Bank of England should look through rising inflation and leave rates (and QE) on hold until H2 2019.
We are relatively optimistic on the Eurozone outlook and expect further positive data surprises.
On monetary policy, we expect the ECB to announce a tapering programme in H2 2017 to commence in early 2018.
We do not believe a large political shock will emerge this year that would destabilise Europe’s economies.
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