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Intesa Sanpaolo : European Central Bank and monetary policy

Intesa Sanpaolo : The European Central Bank has set the stage for a new loosening of monetary policy, that will probably be announced at the December 10th meeting.

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Weekly Economic Monitor – 30. October 2020 

Intesa Sanpaolo – Research Department


The new measures will surely include an expansion of the PEPP, although President Lagarde mentioned the possibility of a structured announcement, that will involve several instruments simultaneously.

US Election: last call! Biden ahead in the polls, Senate still uncertain, House likely Democrat. The certification of results will take time and could prove controversial. Fiscal redistribution and reflation if the Democrats sweep the board, more moderate measures under Biden and a split Congress, modest and ineffective stimulus if Trump is confirmed in office.

FOMC meeting overshadowed by the election. The Committee should leave monetary policy unchanged, stressing the risks tied to the worsening of the health picture, and to failure to pass new fiscal stimulus measures. The main development could be some mention of the debate under way on the asset purchase programme, ahead of possible changes by the end of December.

The week’s market movers

In the Eurozone , retail sales are expected to drop, while staying above pre-COVID levels. Data on German industrial output in September should outline a decent rebound, consistent with the indications provided by sector surveys, after the August setback. The second estimate of October PMIs will confirm a two-speed economy: ongoing recovery in the manufacturing on the one hand, acceleration in the pace of contraction of services on the other.

Next week will be an intense one in the United States , both in terms of events and data releases. Focus will be on Election Day on 3 November, when in addition to the new President, the House will be renewed, together with one third of the Senate. Information will be incomplete for a potentially extended period. The FOMC meeting is not expected to bring changes, although it should signal concern over the failure to pass a new fiscal stimulus package, and indicate that a debate is under way on the asset purchase programme. For what concerns data, the main indicators for October will be released. ISM indices should remain in expansionary territory, at around their September levels, with services possibly showing an improvement, as opposed to a retracement of the manufacturing index, whereas the Employment Report is once again expected to improve, outlining a further decline of the unemployment rate.


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