Eurozone: Focus on August unemployment and preliminary September CPI - BBH

Research Team at BBH, suggests that the Eurozone will report August unemployment and preliminary September CPI which is likely to be the main focal points this week.

Key Quotes

“Unemployment is expected to have slipped to 10.0%.  That would represent a new cyclical low.  The last time unemployment in the Eurozone was that low was June 2011.  The PMI surveys showed prices rising, and it does seem that the low point in the cycle is behind it.  CPI is expected to tick up to 0.4% from 0.2% in August.  This would match the January high.  Eurozone inflation has not been higher since June 2015. 

A key takeaway from such reports is that it may be difficult to forge a consensus at the ECB to do more than modestly tweak of its current orthodox and unorthodox measures.  After passing on the opportunity to decide to extend the asset purchases program earlier this month, the next opportunity comes in December with updated staff forecasts.  Even if tapering is announced, it would imply an extension beyond March 2017.  A conservative way to ease the anticipated shortage of securities is to modify the -40 bp limit (deposit rate) so that it applies to the average of purchases not to a single asset.”