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Now what, Mr Draghi?

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  • The Euro area is likely to be the focus. Having bravely forged the monetary policy Rubicon into a land of negative interest rates, the question facing ECB President Draghi is "now what?". Today's press conference is unlikely to answer that question.
  • Italy's second quarter of negative growth gives downside risk to Italy. It seems likely that some of the weakness reflects constraints on smaller companies' credit. The loan officers' survey signals easier future credit conditions in the Euro area, but the problems are real today.
  • The Bank of England faces a different dilemma from that of the ECB, with the economy continuing to grow above trend and limited spare capacity in the labour market. Now is not the time to be raising rates, however, with too many uncertainties in the next couple of months.
  • Risk aversion continues on the Russo-Ukrainian tensions, but there is no new information (simply the novelty of alternative distractions). The US is not helping in terms of limited distractions, with consumer credit the only real data release.

Listen to the audio version of this briefing.