Europe: Growth pessimism is overshooting - ANZ

Brian Martin, analyst at ANZ expects that for the euro area is likely to avoid a recession during the first half of 2019, before growth momentum gradually recovers later this year.

Key Quotes

“Substantial evidence exists that a modest broad based expansion remains in place, and that prevailing pessimism may be overshooting.”

“A recovery in growth, however, will not be sufficiently strong to generate rising inflation or inflation expectations. That means policy will remain very accommodative, with the risks skewed towards further easing.”

“An intensification of trade tension with the US would undermine our growth outlook. Low and falling inflation expectations are also a concern.”

“The ECB is optimising policy settings and may tier the negative deposit rate. The effect of that would be to cushion the effect on banks, keep rates lower for longer and possibly open up the lower bound for rates, if needed.”