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Eurozone: Inflation benign and political risks - Westpac

Analysts at Westpac explain that Eurozone surveys persistently suggest that regional activity is rising, but expectations (shifted 2Q’s vs confidence in chart) are moderating and ind. prod. in certain countries is also coming off recent highs.

Key Quotes

“ECB delivered a dovish taper and APP (halved to EUR30bn per month) to remain until at least end Sept. 2018 with NIRP to continue beyond that date.”

“Eurozone unemployment may have fallen below 9% but remains well above its 2007 low (sub-4%) and ECB staff suggest underemployment remains high and so there is still significant slack in Eurozone’s labour market.”

“Protracted German coalition negotiations indicate that the divergence in views between Greens and business friendly FDP may impair Merkel’s ability to provide any form of fiscal impetus.”

“The passing of Italian electoral reform means that elections could be called for mid-March (must call in end-May 2018) and bring back to the fore regional political tensions in addition to Brexit.”

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