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US Fed confirms wait-and-see approach (Martin Ertl)

25 Mär

Martin Ertl

US Fed refrains from raising interest rates in 2019 due to slowing business cycle momentum.Balance sheet normalization ends in September and the pace of normalization is slowing from May onwards.Last week the Federal Open Market Committee (FOMC) of the US central bank (Fed) has confirmed a more cautious approach towards monetary policy in 2019. New economic projections of FOMC members, which are released at a quarterly frequency, do not indicate any further changes in the federal funds rate in 2019. After four interest rate increases in 2018, the upper bound of the federal funds target rate stands at 2.5 %. With signs of the US economic expansion losing steam and the level of the federal funds rate within estimates of its longer-run neutral level, the Fed sees no need to further tighten monetary policy. At...     » Weiterlesen


U.S. central bank Fed adjusts to data-dependence (Martin Ertl)

19 Mär

Martin Ertl

Mixed data signals magnify uncertainty about the state of the U. S. business cycle.On Wednesday, the Fed is unlikely to change its growth and inflation outlook significantly, however, it will be interesting seeing how its expectations about policy changes evolve. After a solid economic expansion until the end of last year (real gross domestic product increased by 2.4 % in Q4), the expectations for the current quarter growth have gradually diminished. Real-time GDP estimates from the Atlanta and New York Fed signal growth of meagre 0.4 % and 1.4 % (q/q, annualized rate) for Q1 2019. Other coincidence indicators (for example, the leading indicator of the Conference Board) or forward-looking surveys, like the ISM manufacturing survey, confirm slowing economic momentum (Figure 1). In January, growth in nation...     » Weiterlesen


Romanian economy at a crossroads (Martin Ertl)

04 Mär

Martin Ertl

Economic growth slowed to 4.1 % in 2018 and is now more consistent with Romania’s longer-term growth potential.Increasing reliance on household consumption makes Romania’s growth structure rather unbalanced.Household consumption is fueled by a tight labor market and substantial gains in real wages. Yet, productivity growth cannot keep up with rising labor costs deteriorating Romania’s international cost competitiveness.The current account deficit has widened lately and the stock of foreign currency reserves, though remaining stable above 30 bn Euro, is declining relative to imports and short-term external debt.Romania is among the poorest countries within the European Union. The purchasing power of Romanian households is only 48 % of the Austrian level and 58 % of the EU28 average. Only B...     » Weiterlesen


Germany’s growth outlook and CEE’s resilience (Martin Ertl)

20 Feb

Martin Ertl

Germany’s growth outlookEconomic growth slowed significantly in H2 2018.A foregone opportunity: We discuss Germany’s lack of public investment.Germany’s real gross domestic product (GDP) stagnated during the last quarter of 2018 after it had declined by 0.2 % (q/q) in the previous quarter. In seasonally-adjusted terms, the year-on-year growth rate decreased to 0.6 % (after 1.2 % in Q3 and 2.0 % during H1 2018). Annual GDP growth slowed from 2.5 % in 2017 to 1.5 % last year. In non-seasonally adjusted terms, the annual growth rate of GDP was 1.4 % and, hence, slightly lower than reported in January (1.5 %) by the German statistics office (Destatis [1]).There were no expenditure details yet released by Destatis, however, it was noted in the press release that domestic demand contributed pos...     » Weiterlesen


Russia’s growth miracle & Czech monetary policy normalization loses speed (Martin ...

12 Feb

Martin Ertl

Russia’s growth miracle Russia’s statistics office released a large Q4 GDP growth surprise which lacks additional evidence so far.Central Bank of Russia assessing if further key rate hikes are needed to bring back inflation to the target. According to the release from the Russian State Statistics Service (Rosstat), the real gross domestic product increased by 2.3 % in the total of 2018 posting a big growth surprise against previous expectations around 1.7 % GDP growth and growth of 1.6 % in 2017. The rise was not predictable and does not match the numbers of the quarterly GDP releases for Q1-Q3. Rosstat did not yet revise quarterly GDP and the annual growth rate implies that Q4 GDP increased by 6.6 % (q/q, non-seasonally adjusted) and 3.8 % (y/y) (Figure 1). In Q3 y/y-growth was only 1.5 % and ...     » Weiterlesen

Martin Ertl

Chief Economist, UNIQA Capital Markets GmbH

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