Today we were dealt surprise news that French unemployment is falling for the first time since the crisis. A day ago Markit’s manufacturing index for the Eurozone beat expectations (despite falling to a year-to-date low).
In addition, according to a Reuters poll, economists expect the European Central Bank (ECB) to hike its GDP growth forecasts today. Thing is, even some better news on the economic front is unlikely to spur higher interest rates from Europe until the end of 2011, based on consensus:
All 78 economists in a Reuters poll predicted the ECB would leave rates at a record low 1 per cent for the 16th month in a row in September and the median expectation is for no change until the fourth quarter of 2011.
The ECB’s 22-member Governing Council is likely to decide to keep lending banks unlimited funds until early next year at the meeting which began as scheduled at 0700 GMT (3 a.m. EDT), maintaining the lifeline relied on by banks in countries like Spain, Ireland and Greece.
Most economists in the Reuters poll expect growth for 2010 to be revised up from June’s mid-point of 1 per cent but for the outlook for 2011 to remain around 1.2 per cent.
The message is clear in both the U.S. and Europe — monetary policy will remain ultra-loose even if the economy is growing moderately. Central banks are at pains to err on the side of caution, which is good news for whatever benefits from low rates.