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ECB unlikely to raise rates before summer 2019

June 2018

Although the eurozone’s rate of inflation has moved closer to target, the ECB does not expect to tighten interest rates until “at least through the summer of 2019”. Elsewhere, Europe reacted with indignation to President Donald Trump’s decision to impose tariffs on steel and aluminium imports and the EU announced a series of tariffs on €2.8 billion-worth of US products

  • Europe agreed a debt-relief deal for Greece
  • Germany’s economic growth may be weaker than expected
  • President Trump threatened a 20% levy on EU cards

To view the series of market updates through June, click here


Europe reacted with indignation to President Donald Trump’s decision to impose tariffs on steel and aluminium imports. EC President Jean-Claude Juncker pledged to “do what we have to do to rebalance and safeguard”, and the EU announced a series of tariffs on €2.8 billion-worth of US products. President Trump subsequently threatened to place a 20% levy on all EU cars, sending the share prices of European car manufacturers – including BMW, VW and Peugeot – lower. Mr Juncker commented: “The trade that we believe in is built on rules, trust and reliable partnership. The United States' decision to impose tariffs on Europe goes against that. In fact, it goes against all logic and history.” German car manufacturer Daimler issued a profit warning, downgrading its earnings forecast and citing the impact of increased import tariffs for US vehicles into China.

“The ECB confirmed that it would conclude its programme of asset purchases at the end of December"

The European Central Bank (ECB) confirmed that it would conclude its programme of asset purchases at the end of December, as long as the economic outlook remains positive. Its bond-buying programme will halve from €30 billion per month to €15 billion per month, finishing at the end of the year. ECB President Mario Draghi acknowledged that the euro area remains vulnerable to pressure – including the threat of increased protectionism – but maintained that the risks to growth remain “broadly balanced”. Although the eurozone’s rate of inflation has continued to move closer to the ECB’s target of below but close to 2%, the central bank does not expect to tighten interest rates until “at least through the summer of 2019”. 

Germany’s economic growth is set to be weaker than previously anticipated, according to the Ifo Institute, which cut its forecast for growth from 2.6% to 1.8% this year, and from 2.1% to 1.8% next year. Ifo cited the impact of the escalating trade war and political and financial instability in Italy. During June, the Dax Index fell by 2.4%, while France’s benchmark CAC 40 Index declined by 1.4%.

Europe agreed on debt relief for Greece during June. The move has extended loans and deferred interest and amortisation for a ten-year period. The International Monetary Fund (IMF), which has long urged debt relief for Greece, hailed the deal, but issued a cautionary note about the long-term outlook for the country. The Athens Composite Index rose by 0.2% over June as a whole.

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