Five Things to Know After Europe's Central Bank Thursday
December 14 2017 - 10:42AM
Dow Jones News
By Paul Hannon
Four of Europe's central banks announced policy decisions
Thursday, the day following a fifth rate rise by the U.S. Federal
Reserve, with promises of more to come in 2018. Each of the four
showed continued caution, leaving policy unchanged. There were
hints in Norway of an earlier move to follow the Fed, while
European Central Bank President Mario Draghi hailed an improvement
in the outlook for the eurozone economy even as inflation remains
muted. Here are five takeaways from a busy, but ultimately passive
day for the continent's monetary policy makers.
1. Post-crisis
Mr. Draghi repeatedly stressed that what the eurozone is
experiencing is no longer a mere "recovery" but instead an
"expansion," a signal that for policy makers, the years of crisis
management are definitely over. The central bank's economists see
that expansion continuing at a strong pace in coming years, raising
their 2018 growth forecast to 2.3% from 1.8%, and their 2019
forecast to 1.9% from 1.7%.
2. Missing inflation
Despite that stronger outlook, Mr. Draghi once again had to
acknowledge that the inflation outlook is "muted." Indeed, the
ECB's economists don't expect the inflation target of just below 2%
being reached in either 2018 or 2019. This isn't an ECB-specific
problem, but it helps explain why interest rates are set to stay
where they are "for an extended period."
3. BOE
The U.K.'s central bank raised it's key interest rate for the
first time in a decade last month, and Thursday confirmed it isn't
in any hurry to follow that up. Policy makers face a unique
challenge in the U.K.'s departure from the European Union in 2019,
and the path for rates is therefore more uncertain than elsewhere
in Europe.
4. SNB
Swiss policy makers are keeping an especially close eye on the
ECB, since the franc's exchange rate against the euro is a key
factor in the outlook for growth and inflation. A rise in the SNB's
key rate is therefore unlikely before the ECB lifts its deposit
rate. "To be very clear, it's too early to talk about normalization
in the case of the Swiss National Bank," said Thomas Jordan, who
heads the institution.
5. Norges Bank
Norway's central bank left its key interest rate unchanged at a
record low of 0.5%, but signaled it is anticipating an earlier
start policy normalization than previously. Policy makers said they
now expect to raise the key rate for the first time in the second
half of 2018, having previously said that was unlikely to happen
before 2019.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
December 14, 2017 10:27 ET (15:27 GMT)
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