EURO ZONE

摘要

Q4 GDP (released after our survey deadline) managed a 0.3% (q-o-q) gain but consumption slowed from 0.5% in Q3 to 0.2%. By contrast, retail activity in the Euro zone has been decent, jumping by 0.4% (m-o-m) in January following a 0.6% surge in December and 0.1% gain in November. Going into 2016, the focus of attention has shifted from China and emerging market weakness towards Europe as indicators point to a slow start. Industrial production ended December on an especially weak note (-1.0% m-o-m), while February's manufacturing and composite PMIs eased to one-year lows. With consumer prices having fallen by-0.2% (m-o-m) in February, the ECB threw caution to the wind on March 10 and aggressively loosened policy across many fronts. The target refi rate was unexpectedly slashed from 0.05% to 0% and the deposit rate cut to -0.4%. The QE program was expanded by €20bn to €80bn a month, and the bank will now buy investment-grade corporate bonds on top of government debt. The ECB also announced a new long-term bank lending programme, TLTRO, in order to encourage cheap lending and kickstart inflation and growth. This is a huge expansion of its monetary mandate, above and beyond what markets had been expecting. However, if these measures do not work, the ECB may well reach a limit in terms of policymaking.