Summary for the 15th of July


Economic indicators from China were released earlier today. The industrial production had increased, but the electricity production showed a weak growth. The fixed asset investments had increased, but investments in the manufacturing sector were still affected by the trade conflict with the US. Investments in the housing market were on the weaker side, but this was due to the tightening in regulations from the Chinese government to avoid an overheated housing market. Retail sales showed a small improvement. Overall, the economic growth in China is still not improved. The housing and manufacturing sectors are still weak, even with the Chinese’ government expansive fiscal policy.

ECB’s monetary policy meeting accounts released last week showed that the members in the Governing Council were all agreed that they needed to be ready and prepared to ease the monetary policy further by adjusting all of its instruments , as appropriate, to achieve price stability. Potential measures were the possibility of further extending and strengthening the forward guidance, net asset purchases and decreasing policy rates. The accounts showed that it wasn’t a matter of if the ECB would implement a further expansive monetary policy, but of how expansive the monetary policy would be. The financial market had already expected an interest rates cut of 20 basis points by the end of 2019, though whether there would be another quantitative easing by the end of this year was uncertain. The ECB had set a limit of maximum share of an issuer’ outstanding securities that it could buy. Currently the limit is at 33%. The ECB is at the moment holding 518 billion euro of German bonds, and can only purchase another 20 billion before it reaches the limit of 33% of all the German bonds. The ECB had adjusted this rule several times in the past.

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