Lagarde Poised to End 2020 in Fanfare of ECB Stimulus: Eco Week
(Bloomberg) -- Christine Lagarde’s first full year as European Central Bank president is poised to end with the fanfare of another stimulus expansion for the region’s pandemic-crippled economy.
The ECB chief’s likely move this week to add emergency monetary aid and pledge ongoing support through an unprecedented crisis will mark a starkly different tone from her first press conference almost exactly 12 months ago, in what already seems a bygone age.
That day, Lagarde unveiled forecasts for modest growth in 2020 as she detailed the institution’s plans to spend the coming year reflecting on its strategy. The risk of economic disruption caused by disease didn’t feature on the list of threats she described, nor did it come up in a magazine interview published in early January.
When that horror materialized, the ECB found itself confronting financial-market turmoil that required a massive stimulus program to be quelled. Economists now predict the scope of that measure will exceed 1.8 trillion euros ($2.2 trillion) after the newest salvo this week -- along with huge provisions of cheap loans for banks.
The global rollout of vaccines in 2021 might offer Lagarde the hope that next December’s monetary decision will be less dramatic than this one. But that too seems a distant prospect for now.
What Bloomberg Economics Say...
“Many policy makers have already signaled a preference for focusing on the two main tools used so far in the ECB’s crisis response -- the Pandemic Emergency Purchase Program and Targeted Long-Term Refinancing Operations. We anticipate that both programs will be prolonged by six months to the end of 2021, but a nine or 12-month extension is a possibility.”
--Maeva Cousin, David Powell and Jamie Rush. For full PREVIEW, click here.
Elsewhere, European Union leaders continue to debate the bloc’s rescue fund and central bankers in Canada, Brazil and Ukraine are among monetary policy makers also meeting.
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
Europe, Middle East, Africa
Monthly U.K. GDP data on Thursday is set to show the economy grew a moderate 0.2% in October in what was possibly the last expansion of 2020 before renewed lockdowns took hold across the country to combat resurgent infections of the coronavirus.
In evidence of underlying resilience in Europe’s biggest economy despite the crippling effects of the pandemic, German industrial production probably recorded a fourth monthly gain in October, with an impressive jump of 1.5%. That follows on from Friday’s healthy jump in factory orders.
On Thursday, the Ukrainian central bank will decide on interest rates amid a strained budget and uncertainty over IMF aid. Serbia meets the same day and is predicted to hold.
In South Africa data on Tuesday that will likely show the economy exited its longest recession in almost three decades in the third quarter. Namibia’s central bank will probably hold its key rate on Wednesday, after its South African counterpart held in November. Namibia’s benchmark rate is 25 basis points higher than its neighbor’s, helping to protect the country’s reserves and currency peg.
- For more, read Bloomberg Economics’ full Week Ahead for EMEA
U.S. and Canada
The U.S. economic calendar is light this week. A government report Thursday is projected to show minimal inflation. The consumer price index probably rose 1.1% in November from a year earlier, while excluding food and energy, the measure is seen climbing 1.5%. Both median estimates represent decelerations from the prior month. Weekly jobless claims are also due.
On Friday, the University of Michigan’s consumer sentiment index is forecast to slip further in early December as the number of coronavirus infections increased.
The Bank of Canada meets Wednesday, with no change in policy expected.
- For more, read Bloomberg Economics’ full Week Ahead for the U.S.
China will release trade numbers on Monday that are expected to show continued strength in exports, and inflation data on Wednesday that’s likely to point to further moderation in prices.
Japan is expected to release official figures of a third extra budget to fund a new stimulus package amid an increase in virus infections. A raft of data out Tuesday will likely show the country’s sharp rebound from its pandemic trough was a tad stronger than initially estimated. Spending, wage and bankruptcy figures will give a more up-to-date take on the state of the world’s third-largest economy.
Elsewhere in the region, a Fintech conference in Singapore will feature policy makers from across Southeast Asia.
- For more, read Bloomberg Economics’ full Week Ahead for Asia
On Monday, Chilean policy makers are certain to keep their key rate at 0.5%, with their Peruvian counterparts likely to hold at 0.25% on Thursday.
Central bankers in Brazil, meanwhile, on Wednesday are widely seen voting to hold the benchmark Selic at a record-low 2%, though they have a bit more to consider than they might like: look for November data out Tuesday to show Brazilian inflation running above the 4% mid-point of the target range.
On Thursday, the Brazilian economy’s loss of momentum in the fourth quarter should show up in October’s retail sales report, with analysts forecasting a negative month-on-month figure.
In Mexico, data for November out Thursday will likely put inflation back inside the target range. The industrial output report Friday will highlight just how much slack remains in Latin America’s second-biggest economy.
- For more, read Bloomberg Economics’ full Week Ahead for Latin America
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