The Eurozone economy seems to be slipping ever so slowly into a deflationary trap, which means that the European Central Bank (ECB) needs to react. The crowd’s expecting no less via a formal announcement later this month from the ECB. But the political pressure in Europe (primarily due to Germany’s hefty influence on monetary matters) suggests that a new phase of stimulus may be dead on arrival. As such, the global economy may be facing stronger headwinds this year if Europe’s malaise deepens.
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A markets-based estimate of US macro conditions has endured a volatile period in recent months, but the outlook remains positive in the new year. The Macro-Markets Risk Index (MMRI) closed at +7.2% on Friday (Jan. 9). The benchmark’s ongoing persistence above zero implies that business cycle risk remains low. A decline below 0% in MMRI would indicate that recession risk is elevated; readings above 0% imply that the economy will expand in the near-term future.
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● European Central Bank Policy Makers Divided on Bond Purchases | NY Times
● Germany-ECB dispute intensifies, court to weigh in this week | Nat’l Monitor
● Global markets hang on Germany’s next move | Telegraph
● Oil prices extend falls; Goldman Sachs slashes forecasts | Reuters
● Bank of France Keeps Q4 French GDP Growth Forecast at 0.1% | MNI
● Japan Raises FY 2015 GDP Forecast | RTT