L'Hebdo Eco du 17 avril 2019

Macro Highlights - 4/17/2019

Highlights of the week

Economist insights: The ECB remains very dovish, another Brexit delay

European Central Bank

  • The ECB kept its monetary policy unchanged following its April meeting, as expected
  • It also maintained a very dovish tone, suggesting that it could use its new refinancing operations, the TLTROs III, to increase the degree of monetary easing…
  • … and reiterating that it could implement measures aiming to reduce the effects of negative interest rates on the profitability of European banks…
  • … which underpins our scenario of a durable extension of the ECB’s status quo on interest rates, including the deposit rate

United Kingdom

  • A no-deal Brexit was avoided on 12 April, with European leaders granting the UK a postponement of the deadline for leaving the EU to 31 October 2019
  • But the risk of a withdrawal without an agreement remains, which is likely to sustain the wait-and-see attitude of companies and could lead to a sharper slowdown in the UK’s GDP growth in 2019

Focus US: The deterioration in the US current account balance should remain limited in 2019

  • Despite the tax reform implemented in January 2018, the US current account balance remained stable, as we expected
  • In 2019, while private and public consumption is likely to accelerate, the slowdown in business investment should limit the deepening of the current account deficit
  • As a result, external financing needs should not increase significantly...
  • ...which should contribute to limiting the downwards pressure on the dollar and reducing the risk of an abrupt rise in US yields

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