Italy Bows, Fed Sees Muted Prices, Central Bank Guide: Eco Day

(Bloomberg) -- Welcome to Wednesday, Europe. Here’s the latest news from Bloomberg Economics:

  • Italy’s government will bow to European Union pressure to reduce its budget deficit to 2 percent of gross domestic product in 2021, reversing plans to maintain a bigger shortfall for the next three years, Corriere della Sera reported, citing a Cabinet meeting
  • Crystal clear: Finland’s Olli Rehn joined key European Central Bank decision-makers including Benoit Coeure in stressing the need for flexibility in preparing investors for eventual increases in borrowing costs
  • Europe’s outlier: A surprise slowdown in inflation is leaving Poland’s central bank increasingly out of step with the march toward monetary tightening across Europe
    • Romania too is set to prolong a pause in interest-rate increases, diverging from other central banks as forecasts suggest inflation will ease
  • Alarm bells: As the risk of a no-deal Brexit looms larger and nearer, Japanese companies aren’t waiting around to find out whether Prime Minister Theresa May can deliver. Instead, a growing number of them are shifting operations out of the U.K. or threatening to scale back if the country crashes out of the EU without a deal
  • End of easy money: Global central banks are gradually withdrawing easy monetary policy a decade since they began racing to the rescue of a world economy skidding into recession
  • Muted prices: Federal Reserve Chairman Jerome Powell welcomed recent increases in wages while expressing confidence that low unemployment won’t spur a takeoff in prices that would force him to hike interest rates aggressively
  • Aussie stimulus. Australia’s currency is delivering the interest-rate cut for the economy that the central bank has proven unwilling to provide
  • Tax breaks. Indonesia is weighing proposals to cut the levy on gains from its sovereign bonds and extend tax breaks to exporters to help shore up its weakening currency
  • Outlook worsens. Expectations for Argentina’s economy deteriorated last month amid a central bank leadership shakeup and a revised IMF deal aimed a propping up the government’s finances

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