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Even the Riksbank is now showing some concerns about the selloff in the krona.
Minutes from the February meeting released on Friday showed that “some board members also discussed the recent depreciation of the krona.” Deputy Governor Martin Floden even suggested that a weaker currency could play a part in him advocating for another rate increase already in two months.
“An increase in April could possibly be justified if the krona continues to be weak, if the three forthcoming inflation outcomes indicate higher inflationary pressures and if at the same time the economy develops well,” Floden, traditionally one of the board’s more hawkish members, said in the minutes. (Bloomberg – Continue Reading)
Headlines such as “Germany at the brink of a recession” remain the same but the just released details of 4Q GDP growth show that not all is doom and gloom in the Eurozone’s largest economy. According to the second estimate, the economy came to a halt in the fourth quarter.
On the year, GDP growth was still up by 0.9% (not-seasonally adjusted). More interestingly, the growth components actually show an economy that is running on almost all cylinders. Private consumption grew by 0.2% QoQ, government consumption was up by 1.6% QoQ, investments accelerated by 0.9% QoQ and despite all trade war fears even net exports remained flat.
With none of the traditional growth components being negative, the question arises why the economy is still on the brink of a recession? The answer is clear: cars are still blocking the road to a rebound. (ING Think – Continue Reading)
Frankfurt, 22 Feb (LS News) – German business confidence fell for the sixth straight month in February, stoking growth concerns about Europe’s largest economy.
The Ifo economics institute said its main gauge of German business confidence dropped to 98.5 from a 99.3 reading last month. The forward-looking expectations component fell unexpectedly to 93.8 from 94.3. The current situation component ease to 103.4 from 104.5. All January components were revised upward, the institute reported.
Business expectations “deteriorated sharply and turned pessimistic for the first time since December 2012,” Ifo said.
The February report has analysts preparing for more bad news. Thomas Gitzel, chief economist at VP Bank Group, said: “The alarm bells are ringing. The coming months will be suspenseful.” (LiveSquawk – Continue Reading)
The European Central Bank is seeking a quick decision on a new round of long-term bank loans, according to the account of the January meeting, and rate-setters reiterated their concerns about Eurozone growth.
On the subject of additional targeted longer-term refinancing operations (TLRTOs), the minutes said: “While any decisions in this respect shouldn't be taken too hastily, the technical analyses required to prepare policy options for future liquidity operations needed to proceed swiftly.”
ING Chief German Economist Carsten Brzeski said that phrasing “shows that the process to come up with some options has started.”
Commerzbank Economist Michael Schubert said the minutes were the first time the ECB has discussed the possibility of “cliff effects”. He noted that the euro-area central bank is under time pressure to decide on further long-term credit because in June the repayment date for the largest TLRTO will be less than a year away. This could create difficulties for some lenders under current liquidity requirements, he said.
Frankfurt, 20 Feb (LS News) – German business confidence is expected to drop for the sixth straight time when the Ifo economics institute releases its February poll results Friday (0900 GMT) after mixed views from investors this month.
In January, Ifo’s main gauge of German business confidence dropped to its lowest level in nearly three years and the headline number is expected to continue its decline with a fall to 98.9 from 99.1 last month, according to poll of economists. They said the forward-looking expectations component will nudge higher to 94.3 from 94.2, the lowest level since November 2012. The current situation component is expected to ease to 103.9 from 104.3. (LiveSquawk – Continue Reading)
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