EcoWeek

- Overview: "If China falls asleep?"
- ECB: managing liquidity: "Despite the EUR442 bn 12-month LTRO matured on the 1st of July, liquidity in the Eurosystem isstill above needs by more than EUR 130bn. The ECB injected EUR 243bn through a 3-month LTRO and a 6-day FTO. While short-term interest rates, therefore, are expected to remain moderate, given the amount of liquidity present in the system, tensions could appear on maturities longer than 3 months. The Security Market Program (SMP), under which the ECB is buying debt securities in the secondary market, has not yet reached its end and, given persistent tension in financial markets will probably be expanded further over the coming months."
- Eurozone: Fragile recovery and low inflationary pressures: "Buoyed by a strong rebound in industrial output, GDP growth probably accelerated in Q2 2010. Yet growth could ease in the coming quarters as persistently tough labour market conditions and fiscal consolidation measures adopted by several countries put a significant strain on domestic demand. Rising commodity prices and a weaker euro are driving up inflation, but there is no inflationary threat on the horizon. Shaped mainly by domestic forces, core inflation is expected to continue easing in the quarters ahead. With low inflationary pressures and a fragile recovery, the ECB will be in no hurry to raise the refi rate before 2012."
BNPParibas_EcoWeek_20100702