ECB Leaves Guidance Unchanged as Anticipation for Autumn Builds
The European Central Bank deferred the delicate decision of how and when to venture the next step toward policy normalization until later this year. The Governing Council repeated that it expects borrowing costs to stay at present levels for an extended period of time and that it is prepared to increase the size or duration of the asset-purchase program should the economy take a turn for the worse. Economists in a Bloomberg survey published earlier this week were split as to whether the ECB would revise its language on quantitative easing. The attention now turns to Draghi’s press conference at 2:30 p.m. in Frankfurt. Thursday’s announcement comes six weeks after the ECB took an initial step toward winding down unconventional monetary policy by dropping the wording on additional interest-rate cuts and stating the risks to the economic outlook had become broadly balanced. Yet officials face a conundrum because — as ECB President Mario Draghi noted last month — the region’s stronger economic growth has had an unusually muted impact on consumer prices. The headline inflation rate, which clocked in at 1.3 percent in June, remains a considerable way off the 2 percent price-stability goal.
U.S. weekly jobless claims fall to near five-month low
The number of Americans filing for unemployment benefits fell more than expected last week, touching its lowest level in nearly five months, suggesting strong job gains that should continue to underpin economic growth. Sustained labour market strength likely keeps the Federal Reserve on track to raise interest rates for a third time this year and announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, despite a recent ebb in inflation pressures. Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 233,000 for the week ended July 15, the Labour Department said on Thursday. That was the lowest level since February, when claims fell to 227,000, which was the best reading since March 1973.
Fitch says China’s regulation pledge could signal shift away from high growth targets
Fitch Ratings said on Thursday China’s renewed commitment to contain financial risks signals a possible shift away from high economic growth targets, though policymakers are likely to remain cautious about tightening too aggressively. Chinese regulators and officials emphasized their commitment to tighter financial regulations at the recent National Financial Work Conference. The once-in-five-years meeting typically sets the tone for policy for the subsequent few years. President Xi Jinping said at the conference that a new Financial Stability and Development Committee will be set up under the State Council, or cabinet, and the central bank will take on a bigger role in managing financial market risks. But there is still uncertainty over whether the drive to address risks will continue to take priority if the economy slows, Fitch said. “This could signal rising potential for a more decisive shift in policy focus away from hitting high growth targets, but there is still uncertainty over whether the drive to address risks will continue to take priority if the economy slows,” Fitch said in a statement.