29/08/2018 - ECB Concerned Over Years of Economic Expansion

EUR

Yesterday the ECB’s chief economist Peter Praet said that the risks associated with the European Central Bank’s ultra-easy monetary policy have to be “closely monitored” after years of economic expansion. Praet’s warning was likely to be taken as a sign the ECB was becoming increasingly aware of the side effects of its policy of massive bond purchases and ultra-low interest rates, which many expect the bank to slowly dismantle in the coming months.

This would be a victory for policymakers from Germany and other richer euro zone countries, who have long complained about inflated property and bond prices. Purchasing 2.6 trillion euros worth of debt over nearly four years, the ECB has brought down borrowing costs to stimulate lending in the euro zone. But economic growth has softened this year and the expansion in lending has also appeared to level off, suggesting that the bloc’s growth cycle has peaked.

Analysts expect the central bank to stop buying bonds at the end of this year but would keep interest rates at their current, record low “through the summer” of next year.

Key Announcements

13:30 – USD: Preliminary GDP expected to fall to 4%
15:30 – USD: Crude Oli Inventories