Weak eurozone inflation boosts stimulus hopes; Yellen hints at rate hike - as it happened
While Mario Draghi considers more stimulus measures, Fed chair Janet Yellen could soon raise borrowing costs
- Yellen: Looking forward to raising rates
- eurozone inflation just 0.1%
- Citi predicts big moves from Draghi
6.45pm GMT
One last thing..... Bloomberg is reporting that the ECB will revise down its inflation predictions tomorrow.
That's very plausible, given today's inflation report was weaker than expected.
[BREAKING] ECB said to downgrade inflation forecast for 2017 to 1.6% from 1.7% in macro forecasts tomorrow according to Bloomberg sources
Bloomberg Reporting That ECB To Present Largely Unchanged Macro Economic Forecasts In Documents Sent To National Central Banks
6.43pm GMT
It's all over.....
And that's a wrap. To summarize, Yellen offered an upbeat assessment of the U.S. economic outlook at #EconClubDC https://t.co/YAr5PtObpV
6.32pm GMT
Janet Yellen is now taking questions in Washington:
She says the economy is on the road to recovery, and that "we're doing well". Another signal that she believes higher interest rates are needed?
Yellen: after Fed raises rates for first time "there is no plan to proceed over time in some mechanical or calendar-based way" #EconClubDC
6.18pm GMT
The WSJ are tweeting key points from Yellen's speech too:
Yellen: Risks to the outlook for economic activity and the labor market are "very close to balanced" https://t.co/EBqcv7Sa8G
Yellen: strong US$ and "weak growth in some foreign economies, has restrained the demand for U.S. exports over the past year." #EconClubDC
Yellen on potential for more Chinese stimulus: "China has taken actions to stimulate its economy this year and could do more if necessary."
Yellen: "some of those who report they don't want to work now could change their minds in a stronger job market." #EconClubDC
By not talking down a rate hike in December, #Yellen is effectively talking it up #FOMC #USD
6.15pm GMT
Here's a photo of Janet Yellen mid-speech:
6.12pm GMT
Josh Zumbrun of the Wall Street Journal has helpfully highlighted the important points from Janet Yellen's speech in Washington tonight:
Seems like this is key Yellen paragraph. She's confident that progress toward inflation and labor goals are in tact. pic.twitter.com/b796FZlXyw
6.09pm GMT
America's top central banker has dropped a hint that US interest rates are likely to rise at this month's policy meeting.
Fed chair Janet Yellen is telling an audience at the Economic Club of Washington that the labor market is recovering, and that headwinds from abroad that are hurting the US economy should become less of a problem in 2016.
"When the [Fed's rate-setting] Committee begins to normalize the stance of policy, doing so will be a testament ... to how far our economy has come."
"In that sense, it is a day that I expect we all are looking forward to."
Yellen says 'looking forward' to day when Fed can raise interest rates: https://t.co/KKALmmriqS
#BREAKING Yellen points to risk of waiting too long to raise rates
5.01pm GMT
After a fairly undramatic day, London's stock market has closed higher:
#FTSE 100 closes at 6420.93, up 0.40%
#FTSE 100 three biggest risers of the day: Merlin Entertainments (+2.41%), Shire (+2.35%), GlaxoSmithKline (+2.00%)
#FTSE 100 three biggest fallers of the day: Meggitt (-3.10%), Standard Chartered (-2.68%), Anglo American (-2.15%)
4.28pm GMT
In 24 hours we'll know exactly what Mario Draghi and co have decided.
In the meantime, City analysts continue to speculate -- and perhaps prepare the ground for some 'I told you so' action.
We have long argued that the ECB would need to add more stimulus before long, and the consensus has come round to this view following a series of dovish signals by the ECB. Accordingly, markets are now pricing in a cut of around 10bp to the deposit rate and polls show that most economists expect a a15bn increase in monthly asset purchases. We think the ECB will cut the deposit rate by 20bp, and increase its monthly asset purchases by a20bn.
3.06pm GMT
Thursday's ECB meeting could be quite combative, as some central bank governors are reluctant to provide more stimulus.
The German contingent are particularly concerned, as the Wall Street Journal explains:
Several officials have expressed skepticism that more stimulus is needed at this time, led by the ECB's two German officials, Bundesbank President Jens Weidmann and ECB executive board member Sabine Lautenschliger. Central bankers from Baltic euro members have also signalled resistance, making it unlikely that Thursday's decision will be a unanimous one.
5 Questions About the ECB's Thursday Meeting https://t.co/s57FZilZ5q via @WSJ
3.02pm GMT
Newsflash from Ontario: The Bank of Canada has left interest rates unchanged at today's policy meeting.
Bank of Canada holds rates at 0.5%
3.01pm GMT
Money is also flowing into eurozone government bonds today, on anticipation that the ECB will boost its QE programme.
This has driven the yield, or interest rate on German two-year bonds deeper into negative territory - which means the price is at a record high.
Expectations running high ahead of tomorrow's #ECB meeting. 2y German Bund yields hit fresh low at MINUS 0.445%. pic.twitter.com/kknNogCAkY
2.57pm GMT
The pound is tumbling on the FX markets today.
It just hit a new seven and a half-month low against the US dollar at $1.4979.
1.55pm GMT
Back to the eurozone.
Swiss bank UBS have produced a nifty chart showing the main options which the ECB could deploy tomorrow.....and the likely impact on the markets.
1.34pm GMT
A strong dose of US employment data has just increased the chances that the Federal Reserve raises interest rates in two weeks time.
A total of 217,000 new jobs were created by US companies last month, according to the ADP Research Institute.
So not only is the US ADP employment report for November strong we see October revised higher too...
Although the ADP survey has not proved a consistent forecaster of the official monthly government jobs numbers, they may soothe investors nerves ahead of an important period for economic data and central bank decisions.
US jobs growth accelerated in November - ADP https://t.co/pXm649aGGu
1.20pm GMT
The euro has fallen back today, in another sign that Draghi is expected to announce new stimulus measures tomorrow.
The single currency dropped back through the $1.06 mark against the US dollar today, which is a near eight-month low.
12.54pm GMT
This is a handy chart, showing the three main options in the ECB's toolbox, and the way they could be deployed:
What'll the ECB do Thursday? Cornerstone Macro's handy crib sheet: pic.twitter.com/qJZC402XKB
12.43pm GMT
There's no realistic chance that eurozone inflation will hit the forecasts drawn up by the ECB's own economists three months ago.
That's the view of Timo del Carpio, European Economist, RBC Capital Markets, who told clients:
The most recent staff projections from the ECB (published in September) revealed an expectation for HICP [inflation] to average 0.4% y/y over Q4/15 as a whole.
Taking into account today's outturn, this would require the headline rate to rise to at least 0.8% y/y in December in order for those forecasts to still be valid. Suffice to say, we think that is too tall an order, even taking into account the expected base effects from last year's oil price declines (expected to come into force primarily in December and January).
12.11pm GMT
It's all systems go for more ECB stimulus, says Jonathan Loynes, chief European economist at Capital Economics:
"November's weaker-than-expected eurozone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow's policy meeting."
11.18am GMT
Ruben Segura-Cayuela, a euro zone economist at Bank of America Merrill Lynch, believes the weak inflation report will have surprised the European Central Bank, in a bad way.
"It [the inflation report] is not consistent with the trend that the ECB was expecting.
We are expecting a one year extension on QE purchases and quantities to go up to as much as a70bn a month."
11.07am GMT
European stock markets are still rallying after the inflation data reinforced hopes of more eurozone stimulus:
10.56am GMT
Bloomberg's Maxime Sbaihi also expects significant action from the European Central Bank tomorrow:
EA inflation fails to pick up despite (minor) base effects. Weaker core/service illustrates #ECB problem: recovery too weak to lift prices.
The disappointing November inflation reading surely won't reassure #Draghi & colleagues. It illustrates the need for #ECB to go big tomorrow
10.53am GMT
Economist and ECB watcher Fred Ducrozet has found a chart showing how weak inflation will prompt extra QE from the European Central Bank.
Using ECB's "elasticities" each 0.1pp deviation from target requires a125-250bn extra QE. Likely range a400-1000bn. pic.twitter.com/OjMpf9U9zC
10.41am GMT
Citigroup has predicted that Mario Draghi will make two serious announcements tomorrow.
1) They expect him to hit the banks with more severe negative interest rates, by cutting the deposit rate at the ECB to minus 0.4% (compared with minus 0.2% today).
Citi expects #ECB to cut depo rate by 20bps to -0.4% tomorrow, a15bn more of QE/mth from Jan2016 + extension of QE for 6 more mths to Mar'17
10.31am GMT
City traders are predicting that Mario Draghi will announce a significant increase in the ECB's stimulus measures on Thursday:
The feeling at the desks is that the lower inflation gives Draghi all the ammunition he needs to convince the ECB to go large tomorrow..
Weak EZ core inflation seems to seal the deal on significant ECB easing
10.18am GMT
This weak inflation report could provoke the ECB into a more dramatic stimulus boost at tomorrow's governing council meeting, says Jasper Lawler of CMC Markets:
He believes Mario Draghi could announce plans to buy more assets with newly printed money each month, rather than just run the quantitative easing programme for longer.
The euro plunged after data showed Eurozone inflation was stuck at a meagre 0.1% year-over-year in November, missing estimates of a slight rise to 0.2%.
The inflation miss adds to the case for stronger action from the ECB tomorrow. The data could be the difference-maker for the ECB choosing to increase the size of monthly asset purchases over just extending the end-date of the QE program.
10.15am GMT
The euro has fallen sharply, as investors calculate that the ECB is very likely to announce new stimulus measures tomorrow:
Euro falls as inflation stuck near zero reinforces Draghi's push for stimulus https://t.co/Cj772CPqFn pic.twitter.com/YzOBSWp4nl
10.11am GMT
Eurozone's inflation rate was, once again, pegged back by cheaper oil and petrol.
Here's the detail, explaining why inflation was just 0.1% last month.
10.06am GMT
Another blow - core inflation, which excludes energy, food and tobacco, only rose by 0.9%.
That's down from 1.1% a month ago, suggesting that inflationary pressure in the eurozone is actually weakening....
*EURO-AREA NOV. CORE CONSUMER PRICES RISE 0.9% FROM YEAR AGO
10.03am GMT
Here comes the eagerly-awaited eurozone inflation data!
And it shows that consumer prices only rose by 0.1% year-on-year in November.
Eurozone inflation data supports stimulus expansion
9.59am GMT
The pound has been knocked by the news that UK construction growth has hit a seven-month low:
9.51am GMT
Britain's construction sector is suffering from a lack of skilled builders, warns David Noble, CEO at the Chartered Institute of Procurement & Supply.
He says this is a key factor behind the sharp drop in growth last month:
"Suppliers continued to struggle this month, citing shortages in key materials, supply chain capacity and skilled capability as the causes.
But there is a question mark over the coming months as the housing sector, normally the star performer, may drag back on recovery along with the lack of availability of skilled staff."
9.45am GMT
The slowdown in housebuilding growth last month means that it was overtaken by the commercial building sector, as this chart shows:
"The UK construction recovery is down but not out, according to November's survey data. Aside from a pre-election growth slowdown in April, the latest expansion of construction activity was the weakest for almost two-and-a-half years amid a sharp loss of housebuilding momentum.
"Residential activity lost its position as the best performing sub-category, but a supportive policy backdrop should help prevent longer-term malaise. Strong growth of commercial construction was maintained in November as positive UK economic conditions acted as a boost to new projects, while civil engineering remained the weakest performer.
9.36am GMT
Breaking -- growth across Britain's construction sector has slowed to a seven month low, as builders suffer an unexpected slowdown.
Data firm Markit reports that house building activity expanded at the lowest rate since June 2013 in November.i
All three broad areas of construction activity experienced a slowdown in output growth during November. Residential building activity increased at the weakest pace since June 2013, while civil engineering activity rose at the slowest rate for six months and was the worst performing sub- category.
9.30am GMT
A new survey of Europe's businesses has found that, for the first time since 2009, they aren't struggling to get credit.
"Further improvement" in SME financing. "Willingness of banks to provide credit increased across most countries". https://t.co/HuDQ4OZfKy
9.17am GMT
It's six weeks since the last ECB meeting, when Mario Draghi dropped a loud hint that the central bank was ready to do more stimulus if needed.
Since then, European stock markets have climbed steadily, and are heading for a three-month high today.
Europe's stocks rebound, heading for 3-month high ahead of ECB meeting https://t.co/9rPwEIBGph pic.twitter.com/dofSDwuKOU
9.12am GMT
Latvia's central bank governor has apparently told a local newspaper that the ECB's quantitative easing programme is "better than doing nothing".
That's via Bloomberg. The interview took place with the Neatkariga Rita Avize newspaper - but there's only a teaser online.
#EUR | #ECB Rimsevics:QE Program Better Than Doing Nothing - Bloomberg citing interview with Neatkariga Rita Avize - https://t.co/slxKaCMYGw
#ECB | ECB's QE Programme Better Than Doing Nothing, Rimsevics Says ...just wow
8.49am GMT
There's a bit of edginess in the markets this morning, as investors wait for November's eurozone inflation data to arrive in 70 minutes time.
Economists expect a small uptick, from 0.1% to 0.2% -- while core inflation (which strips out volatile factors like energy and food) might hover around 1.1%.
Given that the region's failure to reach its inflation targets is one of the main reasons the Eurozone's central bank is considering another injection of QE, this Wednesday's figures perhaps carry slightly more weight than they have of late.
8.34am GMT
8.27am GMT
This chart shows how investors expect the ECB to impose deeper negative interest rates on commercial banks.
That would discourage them from leaving money in its vaults rather than lending it to consumers and businesses:
Mkt is currently pricing in a 15bp cut in the depo rate. Will ECB be able to match or exceed mkt expectations again? pic.twitter.com/eHw7QvH89a
8.16am GMT
It's possible that the European Central Bank disappoints the markets tomorrow.
If that happens, there could be some disappointment in the markets.
8.06am GMT
Ding ding - European markets are open for trading, and shares are rising.
The German DAX, French CAC, Italian FTSE MIB and Spanish IBEX are all up around 0.4%, ahead of tomorrow's ECB meeting.
8.00am GMT
You'd think that printing banknotes would be a safely lucrative business (losing money? Just make some more!).
7.50am GMT
There could be ructions in Wolfsberg his morning, as the billionaire owners of Volkswagen face workers for the first time since the emissions cheating scandal broke.
The Porsche-Piech have been criticised for keeping a low profile since the VW crisis erupted. But today, several members of the group will make the trip to the carmakers headquarters to show solidarity with workers - who are being forced to down tools over Christmas because sales have weakened.
Wolfgang Porsche, chairman of family-owned majority shareholder Porsche Automobil Holding SE, will address thousands of workers in hall 11 of Volkswagen's huge factory in Wolfsburg, Germany. He'll be flanked at the 9:30 a.m. staff meeting by the other three supervisory board members who represent the reclusive clan: Louise Kiesling, Hans-Michel Piech and Ferdinand Oliver Porsche.
The Porsche-Piech family has been asked by labor leaders to signal their commitment to workers, now facing two weeks of forced leave during the Christmas holidays as the crisis begins to affect sales.
Volkswagen's billionaire owners will address thousands of workers Wednesday in Germany https://t.co/EmiDzpNc8z pic.twitter.com/pbwA4i8anG
7.35am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There's a 'calm before the storm' feeling in the markets today. Investors are bracing for Thursday's European Central Bank meeting, where it is widely expected to boost its stimulus programme.
Stocks set to rebound in Europe as ever closer to @ecb rate decision.100% economists surveyed see more stimulus pic.twitter.com/xyvAZg5GeO
Our European opening calls: $FTSE 6419 up 24 $DAX 11292 up 31 $CAC 4925 up 10 $IBEX 10396 up 17 $MIB 22649 up 68
#eurozone #inflation data today -- too little too late to keep @ECB from easing? https://t.co/IROuSrTHkt @mariatad pic.twitter.com/Et28mZJUyc
Continue reading...