ECB focuses on strategy review

The ECB Governing Council formally launched a comprehensive monetary policy review that shall be completed by end of 2020.

Highlights:

  • The ECB Governing Council formally launched a comprehensive monetary policy review that shall be completed by end of 2020.
  • The review will not only be confined to issues like the quantitative definition of price stability but also covers topics like financial stability, employment and environmental sustainability.
  • The ECB acknowledges reduced downside risks mainly because of the US/China Phase 1 deal and looks for a stabilization of near term growth dynamics amid a moderate increase in underlying inflation.
  • As widely expected, the monetary policy stance was unchanged and apparently no topic of major discussion at today’s meeting. We continue to expect the ECB to stay on hold for the time being.

Download the full publication below

ECB FOCUSES ON
STRATEGY REVIEW

RELATED INSIGHTS

CHINA’S Q4 GDP GROWTH SURPRISED ON THE UPSIDE, BUT RISKS TO THE OUTLOOK HAVE INCREASED
This morning, China published its Q4 GDP growth alongside with December monthly activity data. Q4 growth accelerated to 6.5% yoy which lifted total 2020 GDP to 2.3%. December real activity data were more mixed. While exports came in strongly, important domestic demand components were a bit unsteady.
COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
EQUITIES: STAY POSITIVE WITH A VALUE-CYCLICAL TILT
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.