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Intesa Sanpaolo : Monetary policy meeting on 11 March

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Weekly Economic Monitor – 5. March 2021

Intesa Sanpaolo – Research Department


with explicit reference to the activation of the PEPP to correct the unwelcome tightening of financial conditions. However, the movement has been reabsorbed in part. Furthermore, not all the members of the Governing Council agree on opposing the movement.

At its monetary policy meeting on 11 March, the press release and the statements made by President Lagarde could be changed, to signal the possibility of a temporary acceleration of PEPP purchases in the event of rate increases not tied to an improvement of the growth and inflation outlook in the Eurozone. But we do not expect any new formal policy step.

In Italy , final data on net borrowing and debt in 2020 beat expectations, despite rising sharply compared to 2019. Going forward, simulations on the trajectory of debt highlight the need to stimulate potential GDP. On the other hand, the increasingly important role played by the European institutions as debt-holders, reduces risks tied to the volatility of financial markets.

The week’s market movers

In the euro area , data on industrial output in January in the Eurozone, Germany, Italy, and France: we expect a rebound of activity in monthly terms, that could be followed by further output growth in February. The final reading of 4Q Eurozone GDP should confirm the advance estimate at -0.6% q/q. The second reading of consumer price data for February should confirm the stability of year-on-year inflation in Germany (+1,6% y/y).

This week, only a few noteworthy data releases are lined up in the United States , with focus on February inflation. The CPI is forecast higher, with the headline index on the rise by 0.4% m/m, and the core index by 0.2% m/m. The February PPI will be a market mover, in the wake of its surge in January, that should be followed by another solid change, driven by upside pressures stemming from commodities, and supply bottlenecks in many sectors. PPI sub-indices to watch will be the prices of goods, but also of services, after the clear acceleration observed in January in the healthcare sector.


Appendix
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Source: BONDWorld