Welcome to your weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last week.
ECB amends inflation target, but division grows over the appropriate rate of QE
At the European Central Bank (ECB) meeting last week, committee members agreed to maintain the current level of emergency bond purchases at €1.85tn. However, there was division as some members were in favour of scaling back monetary stimulus as economic data continues to improve.
The communication also revealed that the ECB is set to change its inflation target of “close to, but below, 2 percent” to adopt a symmetric target. This would be similar to that of the Bank of England and the US Federal Reserve. This shift falls short of the US commitment to allow inflation to run above the 2% target to make up for periods of low-price growth, but it still represents a dovish shift in the ECB’s positioning.
Global equity markets fell from the recent record-high last week, although there was a significant degree of regional variation. US equity markets, measured by the S&P500, rose slightly to make a new record-high, whereas Japanese and Chinese markets fell. Japan’s weakness came on the news that Tokyo was to be subjected to a state of emergency just weeks before the start of the Olympics. In China, regulators’ action to remove the ride-hailing app DiDi from the country’s application stores was the latest sign that Chinese regulators are becomingly increasingly strict on Chinese technology companies. This comes in the same week that DiDi decided to fast-track its listing on the New York stock exchange. It has prompted the theory that the action could be seen as an implicit warning to Chinese tech companies who are considering listing in foreign markets. Shares in DiDi were down over 20% following the news.
Look out for next week’s update, where we’ll be focusing on Chinese Q2 GDP and US inflation data.
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