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LGT Navigator: ECB between corona and inflation

September 9, 2021

The European Central Bank will decide today on the future direction of its monetary policy. In particular, the new economic forecasts will be eagerly awaited against the backdrop of a cooling economic recovery and increased inflationary pressure. Meanwhile, the Fed has stated in its Beige Book that the US economy has weakened somewhat recently.

ECB between corona and inflation

The ECB's interest rate decision will be at the center of events today. In view of the high degree of uncertainty, particularly regarding the pandemic development, central bank head Christine Lagarde could be forced to refrain from reducing the multi-billion bond purchases for the time being. At the same time, however, the ECB will have to take account of the rapid increase in inflationary pressure. At the very least, the central bank will have to raise its inflation forecasts now that the inflation rate in the euro area has reached the 3% mark much faster than expected. The question is how significantly and for how long? The likelihood is probably high that the ECB will lean on the Fed and hold out the prospect of tapering but make it dependent on further developments in the economy and the pandemic. However, an adjustment of the key interest rates will not yet be an issue.

On the New York Stock Exchange, stock prices did not get off the ground in midweek. The Dow Jones Industrial gave up -0.2% to 35'031.07 points and traded at times below the mark of 35'000. The market-wide S&P 500 lost -0.13% and went out at 4'514.07 points. The Nasdaq 100 closed -0.35% lower at 15'620.85 points, after the technology index had reached a new record high the day before. Economic concerns and the continuing uncertainties regarding the pandemic development had a negative impact. In addition, several banks were more cautious in their assessment of further stock market developments. In Asia, most stock indices followed the slightly negative guidance from overseas this morning with the same arguments.

Fed Beige Book: US economic growth has weakened

According to the regular economic report from the twelve districts of the Federal Reserve System, economic growth in the US weakened slightly from the beginning of July to August. The economy grew at a moderate pace, the Fed attested in the Beige Book. Previously, the wording was “moderate to robust growth.” The background to the slowdown, it said, was the spread of the delta variety and supply chain disruptions, as well as labor shortages in some sectors. Regarding inflation developments, the Fed reiterated that inflationary pressures are driven primarily by transitory factors and are therefore likely to be temporary. Together with the weak labor market data published last week, the Fed is likely to remain very cautious before initiating the monetary policy braking maneuver (tapering).

Shortage of materials in German industry is worsening according to Ifo

In a recent survey, the Munich-based economic research institute Ifo found that problems in the procurement of materials have worsened. Against this background, costs are rising and are increasingly being passed on to customers. The procurement crisis poses a real threat to the upswing, comments Ifo. Of the industrial companies surveyed, 69% reported bottlenecks in intermediate products and raw materials. Among car manufacturers and suppliers, around 90% reported shortages of semiconductors and microchips.

 

Economic Indicators September 9

MEZ Country Indicator Last period
08:00 GE Exports (July, m/m) +1.3%
08:00 GE Imports (July, m/m) +0.6%
13:45 EZ ECB monetary policy announcement
14:30 EZ ECB press conference
14:30 US Initial Jobless Claims (weekly) 340,000

 

Earnings Calender September 9

Country Company Period
GE Merck KGaA Capital Markets Day
USA Oracle Q1
USA Moderna Research & Development Day

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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