The Financial & Risk business of Thomson Reuters is now Refinitiv

All names and marks owned by Thomson Reuters, including "Thomson", "Reuters" and the Kinesis logo are used under license from Thomson Reuters and its affiliated companies.

August 17, 2018

News in Charts: ECB to tighten policy as Italy plans to buck the trend

by Fathom Consulting.

Fathom’s Macroeconomic Policy Indicator (FMPI) weights together both fiscal and monetary policy to give an overall measure of the degree of macroeconomic stimulus in any given economy.

Refresh the chart in your browser Edit chart in Datastream

The degree of monetary policy looseness across the euro area is already substantial and will remain so while interest rates are on hold. In terms of when we will see the first interest rate rise, the ECB’s Governing Council explicitly stated in its accompanying statement to the June meeting that rates would be on hold until “at least through the summer of 2019”.

Refresh the chart in your browser Edit chart in Datastream

Want more charts and analysis? Access a pre-built library of charts built by Fathom Consulting via Datastream Chartbook in Thomson Reuters Eikon.

As a result, we have pushed back our rate hike expectations from two 25 basis point increases in 2019 to one in the third quarter of 2019, with another in the first quarter of 2020.

While the ECB is planning to tighten monetary policy, Italy is considering loosening fiscal policy. The ruling coalition has signalled that it has bold spending plans — a move which has spooked investors, unleashing a fresh wave of volatility in Italy’s bond market. Italy has also reportedly held talks with the ECB to discuss the country’s ongoing debt crisis, and fixed income investors have not taken the news well. The yield on Italy’s ten-year government bond has again broken through the 3% mark, the highest level since the formation of the coalition in June.

Refresh the chart in your browser Edit chart in Datastream

The upshot of all of this will probably be higher growth and inflation in the short term. Italy is already one of the most indebted countries in the currency bloc, and the solution to too much debt is rarely more debt.

Refresh the chart in your browser Edit chart in Datastream

All of these charts, along with additional country coverage are available via Thomson Reuters on the Datastream Chartbook.


Thomson Reuters Datastream

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Thomson Reuters offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.


Get In Touch