×

Week ending 10th September 2021.

13th September 2021

As with the Fed, the financial markets have become obsessed with the outlook of the ECB monetary policy given a number of ECB policymakers have recently stated that they favour a tapering of the ECB’s QE program.

Interestingly, while the ECB will be reducing the amount of bonds they are currently buying from €80bn a month to between €60-70bn a month, Christine Lagarde, the ECB President, claimed this was a ‘recalibration’ rather than a taper!

While we understand that Christine Lagarde is trying to walk a tightrope between the ECB hawks and the need to support the Eurozone economy, this week’s decision is clearly a tapering.

Although we can argue about the semantics (recalibration or tapering), the underlying message was clear: low Eurozone interest rates are here to stay, as a reduction is akin to simply removing your foot from a car’s accelerator – tapering (or ‘recalibration’ as Christine Lagarde put it) certainly doesn’t mean stopping QE (i.e. putting your foot firmly on the brake pedal), let alone reversing QE (i.e. selling the bonds the ECB has previously purchased).

Consequently, the ECB is still going to be pumping massive amounts of money into the Eurozone economy – it is just that its pace will simply be less than it is currently.

It wasn’t a too dissimilar situation in the UK this week after the BoE Governor, Andrew Bailey, warned on Wednesday (8 September 2021) that a tighter monetary policy lies ahead, only for today’s (Friday 10 September 2021) GDP data to show that the UK’s economic recovery had ground to halt – thanks to the current supply disruptions and the spread of the Delta variant.

We have long argued that higher interest rates in the UK is a long way off – and today’s data further cements our conviction.

Looking ahead to this coming week we have UK employment (unemployment rate and weekly earnings); US & UK CPI inflation; US, UK & Chinese retail sales; and US, Eurozone & Chinese industrial production.

Additionally we have the Empire State Manufacturing Survey and the University of Michigan Consumer Sentiment Index.

Investment Management Team

The latest market updates are brought to you by Investment Managers & Analysts at Wealth at Work Limited which is a member of the Wealth at Work group of companies.

Links to websites external to those of Wealth at Work Limited (also referred to here as 'we', 'us', 'our' 'ours') will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Any hyperlinks or references to third party websites are provided for your convenience only. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.