- No new policy decision expected from ECB
In the Eurozone last week, markets particularly focused on GDP data and IHS Markit PMI surveys.
Seasonally-adjusted GDP rose by 0.6 percent in both the euro area and the European Union during the third quarter of 2017, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2017, GDP grew by 0.7 percent in both areas.
The final IHS Markit Eurozone PMI Composite Output Index posted 57.5 in November, up from 56.0 in October and unchanged from the earlier flash estimate. The headline index had signaled expansion in each of the past 53 months.
Eurozone inflation is one of the most important factors that play a decisive role in the policies of the European Central Bank (ECB) and consequently are watched closely by the markets.
The latest data from the Eurozone indicated that while its economic recovery is becoming increasingly strong and broad, price pressures remain subdued - an important factor in determining the ECB's decisions in the Eurozone.
The Eurozone, which includes 19 EU members that adopted the euro as their common currency, in the past, struggled with very slow inflation and low growth rates but a gradual recovery was made.
Now, according to Eurostat’s flash estimate, the Euro area annual inflation is expected to be 1.5 percent in November 2017, up from 1.4 percent in October 2017. This means that Eurozone annual inflation has fallen back below the European Central Bank's target of just under 2 percent.
The ECB, which is responsible for managing monetary policy in the euro area, is targeting inflation in the region of just below but close 2 percent to maintain price stability in the region. As a result, the bank is implementing measures, including an asset purchase program and low-interest policy.
Furthermore, ECB President Mario Draghi recently declared four inflation criteria the ECB is looking for. These criteria are; inflation needs to return to 2 percent over the medium-term, the convergence must be durable, self-sustained, and concern the whole of the region.
The ECB Governing Council will meet in Frankfurt on Dec.14 after which Draghi will make an announcement of the bank’s interest rate decisions taken.
At this meeting, the ECB will likely reference the previously announced criteria at the October meeting for the inflation target, but a new decision is not expected. The bank will be in “wait and see” mode for a while.