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Intesa Sanpaolo:  The European Central Bank and the monetary policy strategy

Intesa Sanpaolo : The European Central Bank has announced the outcome of its review of the monetary policy strategy.

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Weekly Economic Monitor – 09 Juli  2021

Intesa Sanpaolo – Research Department


The inflation target, which remains medium-term, becomes symmetrical around 2%, with the possibility of periods of “moderate” positive or negative deviations. The Governing Council retains ample room for discretion in this regard. In an attempt to raise inflation expectations, the ECB reports that periods of very low inflation could be offset by periods of above target inflation and will be met with forceful measures.

The situation of stress affecting international maritime shipping shows no sign of easing, and has in fact been made worse over the past few weeks by the emergence of Covid-19 infection clusters in some Chinese ports. The impact on inflation is transitory, but will not be irrelevant in the near term, considering the size and persistence of the price increases. Shipping bottlenecks will continue to hinder the replenishment of inventories over the next few months, and could slow the recovery of manufacturing activity.

The week’s market movers

It will be a rather quiet week in the euro area in terms of data releases. May data should outline a decline of industrial output in the Eurozone. The second estimate of consumer prices in June is expected to confirm the slowdown of harmonised inflation in Germany (2.1%) and in the Eurozone as a whole (1.9%), as opposed to an acceleration in France (1.9%) and Italy (1.3%).

The week is full of important data in the United States , with information on both prices and real activity. The focus will be on the June CPI, which should still be up by a solid change (+ 0.4% m/m for both the headline and core indexes) but slowing compared to the previous two months and still mainly driven by cars, recreational and hospitality services. For July, the first manufacturing surveys should signal further expansion, with possible indication of stabilization of price pressures, while consumer confidence should be picking up again. Among activity variables in June, industrial production is expected to increase solidly, mainly thanks to utilities and mining, with manufacturing slowed down again by the auto sector and retail sales are forecast to be up moderately excluding cars.


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Source: BONDWorld