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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound falls against euro after ECB meeting; Fathom warns of UK recession - as it happened

A live feed of the ECB press conference

That’s all for today. Thanks for reading and commenting, GW

This is also interesting. ECB insiders have told Bloomberg that the much-anticipated decision on the future of its bond-purchase programme might not come until October.

A cynic might suggest the ECB didn’t enjoy seeing the euro rally against the pound and the US dollar (as that weakens inflation), and wanted to recalibrate the markets’ views.....

Now this is interesting..... the ECB have just tweeted a video clip from today’s press conference.

And it’s the section where Mario Draghi spells out that the ECB needs to be “persistent and patient, as we’re not there yet”.

So that’s the dovish message which the eurozone’s central bank wants to get across :)

Over in Athens, government officials have welcomed Mario Draghi’s proclamation that Greece has made “serious [fiscal] progress”.

It comes as speculation grows that Greece is close to testing its fortunes in the bond markets.

Helena Smith reports from Athens:

The leftist-led government announced today that it was “closely monitoring developments in markets … [and] trends” in preparation of a market return, possibly as early as next week.

When it judged the “moment was appropriate” it would make the first move, it said.

Athens has hired six international banks to oversee the bond sale in what would be its first market foray in three years.

The government spokesman Dimitiris Tzanakopoulos has told the Guardian that the country wants to test the ground with “test exits in order to be able at the end of the programme to finance our debt without official sector support.”

Greece’s latest bailout programme, a third financial package of €86bn euro, expires in August 2018.

And in another key development, the IMF has indicated that it is ready to finally approve Greece’s bailout package.

A spokesman said the ultimate goal is to get Greece to return to markets, adding that “debt sustainability discussion only just starting.”

Here’s an alternative view...

Fathom: UK recession now >50% chance

City research group Fathom has some late gloomy news; they reckon the chances of a UK recession over the next year is greater than 50%.

They cite the slowdown in consumer spending in recent months, as inflation erodes wages.

In a new report, they say:

Defying widespread expectation of a recession, the UK economy weathered the Brexit storm better than the majority of forecasters, ourselves included, anticipated.

That was thanks, in large part, to the strength of consumer spending. But that tide has since turned: the brief period of real wage growth is over; household finances are stretched; and June’s inconclusive general election has reignited concerns about the nation’s economic prospects.

With the key driver of UK GDP growth, the consumer, under assault, we believe that there is now a greater-than-evens chance of a technical recession in the UK over the next year.

Updated

Sterling slides to eight-month low

The pound has hit an eight month low against the euro.

That’s bad news for British holidaymakers planning a trip to Europe this summer.

Sky News has more details:

Sterling slipped close to €1.11 as the euro strengthened in reaction to remarks by European Central Bank (ECB) president Mario Draghi while the UK currency was again buffeted by fears over Brexit.

The pound’s dip - of as much as two cents - took it to its lowest level since November 2016.

It will weaken the spending power of British families preparing to flock to Spanish beaches and French campsites when school holidays begin later this week.

Ouch! Consumer confidence in the eurozone has fallen unexpectedly.

The European Commissions gauge of consumer morale has dropped to minus 1.7, from minus 1.3 in June. Economists had expected it to rise to minus 1.1.

Summary: Autumn hint pushes euro higher

ECB President Draghi and Vice President Constancio address today’s news conference at the ECB headquarters in Frankfurt.
ECB President Draghi and Vice President Constancio address today’s news conference at the ECB headquarters in Frankfurt. Photograph: Ralph Orlowski/Reuters

I suspect Mario Draghi arrived at today’s press conference determined to say as little as possible.

And he almost succeeded. Reporters seeking detailed answers on how the ECB might unwind its stimulus programme were met with a firm “we didn’t discuss that”.

But one piece of news did slip out - Draghi’s pledge that the ECB will discuss the next stage in its QE programme ‘in the autumn’.

That promise came with a warning that policymakers must remain prudent, patient and persistent -- which is Draghi’s way of saying that it’s too early to tighten policy today.

He insisted that inflation pressures are still weak, and warned that a premature tightening would threaten the whole eurozone recovery. Hardly the words of a full-blown hawk.

But the prospect that the ECB might taper its €60bn/month bond-buying programme in September or October has tantalised investors, sending the euro close to a 16-month high.

But that move could be premature, given Draghi insisted that inflation pressures remain subdued and that a substantial stimulus is still needed.

What the experts say....

Kathleen Brooks of City Index says Draghi sounded dovish today:

The key takeaway from today’s meeting is that a September taper announcement looks increasingly unlikely as the ECB said that a “very substantial degree of accommodation is needed” to boost inflation, and that the ECB’s QE programme will run until the inflation rate picks up.

Since core inflation remains at 1.1%, well below the ECB’s 2% target rate, this suggests that QE has further to go. Indeed, the ECB stressed that it would increase its asset purchase scheme, which currently stands at €60bn a month, if the inflation picture deteriorated further.

Marchel Alexandrovich, Chief European Economist at Jefferies, insists that nothing has really changed....

In reality, there are no big changes from the June press conference or the keynote speech from a few weeks ago. And the overall message is that while the economy is recovering, inflation will only return to target as long as the ECB maintains its accommodative policy stance.

But Draghi is also making sure that the markets don’t get ahead of themselves and start pricing in QE adjustment before the ECB settles on the right policy path. In fact, Draghi seems to allow for the possibility that the decision on how to extend QE will not be announced in September, and the exact details may follow later – 26 October, or even 14 December.

Megan Greene of Manulife Asset Management thinks Draghi played a good game:

But Alex Lydall, Head of Dealing at Foenix Partners, says Draghi failed to keep the euro’s value down.

Draghi did his best this afternoon to cap the euro, failing quite spectacularly! During his press conference, the ECB President noted that officials were unanimous in not outlining a timeframe on tapering, stating the Central Bank ‘was not there yet’.

Many would have seen this in a dovish light and possibly bearish for the single currency, but much the opposite appears to be taking place.

Updated

And finally....

Q: are you worried that areas of the eurozone economy which have benefitted from your stimulus programme will struggle when it is taken away?

That goes beyond our remit, Draghi replies.

And that’s the end of the press conference, a good 10 minutes earlier than scheduled. School is out for the summer!

Q: Does September 7th count as the autumn? [ie, could a decision on tapering QE come at the ECB’s next meeting?]

Haha, says Draghi.

That’s exactly why we have kept our plans vague, and only agreed to discuss QE sometime in the autumn, he replies.

Updated

Q: Does the ECB’s inflation target need to be rethought, given the failure to hit it?

Draghi points out that most top central banks aim for an inflation rate of around 2%.

Six million jobs have been created since the stimulus programme was created - that shows how successful it’s been.

How credible would an institution be if it just changed an objective every time it struggled to reach it, he continues, before warning that it would be very destabilising to consider adjusting the inflation target now.

Q: Might the ECB change its ‘capital key’ rules (which dictate how many bonds it can buy from each eurozone country)?

We haven’t discussed that, says Draghi (this is his theme for the day)

Q: Will you have concrete options on the table for a possible QE exit in time for your next meeting, in September? Or would you only take the decision to task staff to do that work at September’s meeting?

And.... secondly, what are the chances that you have to change your QE programme again, to ensure there are enough bonds to buy?

The answer to the second question is that we didn’t discuss it, and for the first question too, says Draghi tetchily.

The euro has jumped while Draghi is speaking. It’s now up 0.5% today at $1.155, having been a cent lower earlier.

This may be triggered by Draghi’s comment that the ECB will discuss how to proceed with its QE programme in the autumn.....

Q: Have you asked staff to look at the technical details of QE after December (when the current programme expires)?

No, says Draghi. It’s not been discussed, and they’ve not been tasked.

Q: Several ECB appointments have been overturned in the last year, and your own advisor is being challenged - so what can you do to improve hiring practices?

We are grateful when mistakes are caught, says Draghi, before adding that it’s ‘sad’ when these issues are discussed in the media.

Q: Greece wants to return to the financial markets, so how confident are you that the ECB will include Greece in your QE programme, and buy its government bonds?

It’s up to the Greek government to decide whether to tap the markets, says Draghi.

He points out that Bank of Greece has expressed some concern about the plan, but also acknowledges that there has been “serious progress” in Greece.

The governing council trusts the strength and the power of its monetary package in all its elements, says Draghi firmly. We still stay in the market for a long time, he adds.

Is he channelling Darth Vader?!

Q: You sound more dovish on inflation than in your speech in Sintra last month, so how do you see inflation rising to the ECB’s target?

Draghi insists that there’s little difference between today’s statement, and the Sintra speech (when he said that inflationary pressures had replaced deflationary ones).

It is going to take “some time” for the factors holding down inflation to weaken, but it will happen, he pledges.

Draghi: Early tightening would jeopardise the recovery

Q: Is the ECB worried about triggering a taper tantrum, like the US Federal Reserve experienced, when it slows its bond-buying programme?

Inflation is not where we want it to be, nor where it should be, Mario Draghi replies firmly.

That’s why a substantial degree of accommodative monetary policy is still needed.

He strikes an upbeat tone, saying that the eurozone is now enjoying a “robust” recovery.

We only have to wait for wages and prices to follow course.

The last thing the Governing Council wants is an untimely tightening that slows down this process, or even jeopardises it.

Draghi: We must be persistent, patient and prudent

Onto questions.

Q) Did the ECB discuss what changes it would make to its asset purchase scheme after December?

We reviewed the economic and financial developments in the euro area, says Draghi.

That included the improved economic recovery and the lack of any “convincing sign” of a pick-up in core inflation.

The broad message is that we must be “Persistent and patient, and prudent, as we’re not there yet.”, says Draghi, reiterating points he made last month at the ECB’s forum in Sintra.

Draghi also revealed that the governing council was “unanimous in setting no precise date on when to discuss changes in the future.”

In other words, our discussions should take place in the fall, or in the autumn as we are in Europe.

Q) Are you concerned that the euro has strengthened since your speech in Sintra last month, and are those gains excessive?

The repricing of the exchange rate has received “some attention”, Draghi replies smoothly.

As usual, Draghi ends his statement by urging eurozone politicians to implement structural reforms.

Draghi: Risks are broadly balanced, but inflation pressures still weak

The risks to the growth outlook in the eurozone are broadly balanced, Draghi continues.

But this growth has not yet translated into ‘stronger inflation dynamics’, he says -- pointing out that headline inflation is dampened by weak energy prices.

So, a ‘substantial degree of accommodation’ is still needed, he declared -- a sign that the ECB isn’t ready to turn off the stimulus taps yet.

On the big picture, Draghi says that the global recovery should support trade, and boost eurozone exports.

But underlying inflation will probably only rise gradually, meaning that headline inflation will probably remain at current levels in the coming months (it was just 1.3% in June.)

Draghi press conference begins

Mario Draghi has arrived in the ECB’s press room, accompanied by vice-president Vítor Constâncio.

He begins by confirming that the governing council decided to keep the key interest rates unchanged, and expects them to remain at their present levels for an extended period of time - and and well past the horizon of the net asset purchases.

He also confirms that the ECB expects to keep buying €60bn of new assets each month until December, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aims.

Draghi adds that the QE programme could be increased, in terms of size and/or duration, if needed. (he’s basically reading out the statement released earlier)

Updated

A quick newsflash from America - the number of people signing on for jobless benefits has fallen to a nine-week low of 233,000.

That’s down from 247,000 last week, and shows the US labor market is still robust.

The euro has also dropped 0.3% against the pound, to €1.127, meaning one euro is worth 88.7p.

Alexandra Russell-Oliver of currency trading firm Caxton says the euro could fall further once Mario Draghi speaks. But in the longer term, it is likely to gain value.

She says:

The press conference will be key as traders seek clues as to the timing of the winding down of stimulus. ECB President could strike a more cautious tone to avoid adding further fuel to the speculative fire, which may weaken the euro.

Ultimately, the expected winding down of stimulus will likely continue to be supportive of the euro.”

Watch the ECB press conference here

Mario Draghi will explain today’s decisions to the press pack in Frankfurt shortly.

You can watch the press conference live, here: (I’ve also embedded this at the top of the blog)

Click play to watch the ECB press conference

Kathleen Brooks of City Index says anticipation is building on the trading floors....

The key takeaway from the press conference for us will be how Draghi justifies his “hawkish” talk in Sintra late last month when he mentioned the word “reflation” and euro bulls ran with it.

Considering there are still no signs of reflation and the ECB’s statement is still as dovish and QE-supporting as ever, will Draghi backtrack?

Kerim Derhalli, CEO and founder of investment game app invstr, says Mario Draghi is keen not to roil the markets today:

“While the possibility of an unlikely interest rate hike is slowly growing, it’s no surprise that Mario Draghi has opted to keep European Central Bank rates unchanged for now.

“Despite some evidence that monetary stimulus has been working, the fact that inflation in the eurozone slipped back to 1.3% in June suggests that a change now would be unwise.

“Draghi will have also been mindful of the market overreaction to his speech in Sintra, which saw a surge in bond yields and the euro.”

Fred Ducrozet of Swiss bank Pictet says today’s statement is dovish, simply because the ECB hasn’t changed its position on QE.

ING’s Carsten Brzeski agrees:

Reuters’ Jamie McGeever points out that this month’s statement is virtually identical to June’s one (except this month’s meeting took place in Frankfurt, not Tallinn).

Danielle Haralambous of the Economist Intelligence Unit predicts that the ECB will change policy in September

The euro has dipped following the ECB announcement, down 0.3% at $1.148.

That’s because the governing council didn’t drop its pledge to boost its stimulus programme in the future, if needed.

ECB: We're still buying €60bn of assets per month

Importantly, the European Central Bank has not decided to ‘taper’ its stimulus scheme today.

Instead, the central bank has repeated its pledge to keep buying €60bn of new bonds each month until the end of this year.

It is also sticking to its promise to extend the programme if needed - a dovish signal.

The ECB says:

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

The ECB has repeated its pledge to keep borrowing costs at their record low “for an extended period of time”, and well past the horizon when it stops buying new assets through its QE programme.

ECB leaves rates on hold

Newsflash: The European Central Bank has left interest rates unchanged, at today’s meeting.

That means that:

  • The headline interest rates remains at its current record low of 0.0%.
  • Eurozone banks will still be charged 0.4% to leave money at the ECB, rather than lending it.
  • Eurozone banks will also be charged 0.25% to borrow from the ECB.

More to follow....

We may have a winner...

There are just 30 minutes to go until the European Central Bank announces this month’s monetary policy decision (followed by Mario Draghi’s press conference 45 minutes later)

Naeem Aslam of Think Markets predicts a cautious performance from the ECB president:

The panic could only be if the ECB drops some unexpected surprise in the market and the chances of that are very low.

We expect the ECB to be very subtle in their approach and the main agenda for them would be to reinforce their forward guidance. What we do want to hear from the ECB is that the policy members have discussed the topic of tapering.

In the meantime, Alberto Gallo of Algebris Investment is playing the traditional game trying to guess Mario Draghi’s tie colour (possibly a guide to the president’s mood...)

More alarming figures from Greece have been released this morning, showing that the net worth of Greek households fell by a staggering 40% between 2009, when the country’s debt drama erupted, and 2014.

Helena Smith reports from Athens

The figures released by the Bank of Greece are further proof of just how much the disposable income of Greek households has shrunk since the start of the country’s financial crisis.

Bank researchers, releasing the findings, said the net worth of average households contracted from €108,649 in 2009 to €65,030 in 2014. There drop in poorer households was even more dramatic with some suffering a loss of 70.8% in net wealth over the same period.

The leftist-led government has announced it will be taking measures to alleviate the hardships of those worse hit by the rigours of austerity - the price of three emergency bailout programmes for the debt stricken country since May 2010.

With the Brexit clock ticking, Deutsche Bank has told its staff that it is preparing for a ‘hard’ exit from the EU.

That will means that some operations are shifted out of London and transferred to Frankfurt.

Bloomberg has the details:

Deutsche Bank is preparing for a hard Brexit and will probably book the “vast majority” of its assets in Frankfurt, Chief Executive Officer John Cryan tells employees in a videotaped message.

“There’s an awful lot of detail to be ironed out and agreed; depending on what the rules and regulations turn out to be, we will try to minimize disruption for our clients and for our own people,” Cryan says in the video.

“But inevitably roles will need to be either moved or at least added in Frankfurt.”

The pound jumped back over $1.30 when the retail sales figures hit the wires, but the rally didn’t have legs.

Sterling is now back at $1.2960, down over half a cent today.

Pound vs the US dollar today
Pound vs the US dollar today Photograph: Thomson Reuters

Kathleen Brooks of City Index explains why:

Although the bounce in sales last month was a welcome development, it still means that for the first half of the year retail sales will be relatively flat, and may only contribute 0.1% to Q2 GDP.

This does not bode well for the UK growth outlook, which is one reason why the pound’s reaction has been muted.

Thus, unless we see retail sales rise consistently in the coming months, which could be a big ask as we get deeper into Brexit negotiations that may trigger consumer uncertainty, then second half growth could be hindered, limiting the pound’s chance of a meaningful rally.

It’s also worth remembering that Britain’s retail sales figures are partly based on credit.

The latest figures from the Bank of England showed that unsecured consumer credit , such as credit cards, jumped by 10.3% in the year to May, five times as fast as the growth rate of earnings.

Dr Rebecca Harding, the CEO of Equant Analytics, thinks this is an important factor:

Andrew Sentance, senior economic adviser at PwC, fears that UK consumer spending will remain subdued for many months:

“The volume of retail sales has been quite volatile from month to month over the first half of this year. There was a recovery in June from a disappointing May, perhaps supported by warmer weather. But, over the past three months, the level of retail spending adjusted for inflation is no higher than it was in the final quarter of last year.

“Consumer spending has stalled, after a period of strong growth - with retail sales volumes increasing by 4.4% a year in the three years 2014-16. Rising inflation, driven by a weak pound, has squeezed the purchasing power of consumers.

We should expect this subdued pattern of retail sales and consumer growth to continue in the second half of this year and into early 2018.

UK retail sales rise: What the experts say

Despite June’s revival, UK retail sales have actually been flattish since the start of 2017.

Kate Davies, Office for National Statistics Senior Statistician, explains:

“Today’s retail sales figures show overall growth. A particularly warm June seems to have prompted strong sales in clothing, which has compensated for a decline in food and fuel sales for the month.

“Looking at the quarterly data, the underlying trend as suggested by the three-month on three-month movement is one of growth, following a fall in quarter 1, suggesting a relatively flat first half of 2017.”

Economist Rupert Seggins has tweeted some useful charts too:

Ana Boata, European Economist at trade credit insurer Euler Hermes, fears that retailers face a challenging time:

“High levels of competition, increasing market share moving to discounters and an online shopping frequency more than twice the European average have already made the UK retail one of the most challenging in the world. This is before the loss in households’ purchasing power and the rise in import costs are added to the mix.

“Net gearing ratios in the sector increased by more than 10pp to 66 per cent last year, while average profits (EBIT) slipped by 1.4pp to 5.6 per cent. In addition, the rise in import costs adds pressures on the already deteriorating profitability. Such signals of deterioration in financial health suggest greater pressure on cash flow and payment terms throughout the retail supply chain.

“Pressure on consumers is impacting the sector as retail sales have slowed over the last several months. UK household savings are now at the lowest level in 50 years and are equivalent to a level registered in the US in 2008 at the height of the financial crisis. This, plus falling regular earnings when adjusted for inflation, allude to an extremely challenging environment for retailers.”

UK retail sales beat forecasts

Breaking! UK retail sales grew faster than expected in June, as warmer weather sent Brits racing to the shops.

That’s according to the Office for National Statistics, which has just reported that the amount of stuff bought in the shops last month rose by 0.6%. The City had expected a 0.4% gain, following a 1.2% decline in May.

It suggest that consumer spending is holding up, even though rising inflation is eating into household incomes.

UK retail sales
UK retail sales Photograph: ONS

Her are the key points from the ONS:

  • In the 3 months to June 2017, the quantity bought (volume) in the retail industry is estimated to have increased by 1.5%, with increases seen across all store types.
  • The growth for Quarter 2 (Apr to June) 2017 follows a decline of 1.4% in Quarter 1 (Jan Mar) 2017, meaning we are broadly at the same level as at the start of 2017.
  • Compared with May 2017, the quantity bought increased by 0.6%, with non-food stores providing the main contribution.
  • Feedback from retailers suggests that warmer weather in addition to the introduction of summer clothing helped boost clothing sales.
  • Average store prices (including petrol stations) increased by 2.7% on the year following a rise of 3.2% in May 2017; the fall is a consequence of slowing fuel prices.
  • Online sales (excluding automotive fuel) increased year-on-year by 15.9% and by 1.8% on the month, accounting for approximately 16.2% of all retail spending.

The pound has lost ground in early trading, dropping 0.3% against the US dollar to $1.2985.

That’s helping to push shares higher in London, where the FTSE 100 is up 31 points.

Here’s a handy chart showing the Bank of Japan’s struggle to get inflation up to its 2% targetL

Still, perhaps a bit more stimulus will work....

In the City, shares in Sports Direct have jumped by 7% this morning, despite reporting a 60% slump in profits in the last year.

Sports Direct suffered after failing to hedge itself sufficiently against the slump in the pound.

But founder Mike “power drinker” Ashley insists that the business is improving. He told investors that:

“Sports Direct is on course to become the “Selfridges” of sport by migrating to a new generation of stores to showcase the very best products from our third party brand partners.

We have invested over £300m in property over the last year, and I am pleased to report that early indications show that trading in our new flagship stores is exceeding expectations.”

The City should also be reassured to see that Sports Direct has appointed a new full time chief finance officer, filling a four-year (!) vacancy.

ECB meeting: Expert predictions

Kit Juckes of Société Générale predicts that today’s European Central Bank press conference will be dominated by questions about how, and when, it will exit its stimulus programme.

While acknowledging the strength of the economy, Draghi is likely to counter any ideas of an imminent and rapid path towards ending QE, instead urging patience with the still-subdued inflation outlook.

We maintain our call for an announcement in September of a six-month extension of the APP into 2018 at €40bn/month, followed by data-dependent quarterly reductions.

FXTM Chief Market Strategist Hussein Sayed says Mario Draghi will be desperate to avoid driving the euro higher today.

The last thing the ECB wants is a strong Euro and tightened financial conditions for now.

It is a complicated process to start normalizing policy without disrupting markets, so while Draghi wants to prepare investors for a gradual wind-down of asset purchases, he is likely to hint that the pace will be gradual and easing options will remain open. The trickiest part is how to deliver a confident message without leading to further selloffs in bonds and stocks and additional appreciation in the Euro.

Marc Ostwald of ADM Investor Services suspects the ECB will resist pressure to trim its stimulus programme today, but may get the ball rolling....

What may be announced at the meeting is that various ECB departments and committees will be given the task of exploring the best methodology, with a decision deferred until September, when it will also have an updated set of staff forecasts.

Marc also expects president Draghi will return to the themes covered in that speech in Sintra last month, when he said the eurozone recovery was “strengthening and broadening”

Given the market furore around Draghi’s comments about “reflationary forces displacing deflationary forces”, he will surely want to clarify precisely what he meant, and most likely qualify those comments by suggesting that core CPI is far from displaying a sustainable uptrend that would see headline CPI heading towards the ECB target of close to 2.0%, even if the disinflationary threat has passed.

And Mike Bird of the WSJ reports that anticipation is building up nicely...

Please insert your own joke about surprise liquidity injections....

BoJ won't rule out further easing

Haruhiko Kuroda has just denied that the Bank of Japan’s has lost credibility by pushing its inflation target back again today.

The BoJ governor is giving a press conference now, and pointed out that other central banks have also pushed back their own inflation targets.

Kuroda reiterated that the risks to inflation and economic growth are to the downside, and put some blame on companies for being too cautious to raise prices.

And crucially, he won’t rule out increasing the BoJ’s stimulus programme, if needed.

BoJ cuts inflation forecasts and maintains stimulus

The entrance to the Bank of Japan in Tokyo.
The entrance to the Bank of Japan in Tokyo. Photograph: Shuji Kajiyama/AP

Overnight, the Bank of Japan has decided to maintain its huge stimulus programme - and admitted that it is struggling to get inflation up.

Following its policy meeting, Japan’s central bank on Thursday cut its inflation forecasts for the next few years. It now admits it won’t hit its 2% target until 2020, despite having thrown trillions of new yen into the money supply in recent years.

This is a blow to governor Haruhiko Kuroda’s radical attempts to stimulate inflation by buying a staggering 80 trillion yen of bonds each year (that’s around £550bn)

But the BoJ is pressing on with the stimulus programme, keeping overnight interest rates at minus 0.1%, and capping 10-year bond yields at about zero per cent.

In a statement, the BoJ admitted that it is struggling to drive earnings higher, saying:

“Recent price developments have been relatively weak, as companies remained cautious in raising wages and prices.

“Risks to the economy and price outlook are skewed to the downside.”

This is the SIXTH time that the BoJ has pushed back its inflation target, since Kuroda launched his huge asset-buying program in 2013.

The agenda: Can ECB avoid a taper tantrum?

The skyscraper headquarters of the European Central Bank beside the River Main in Frankfurt, Germany.
The skyscraper headquarters of the European Central Bank beside the River Main in Frankfurt, Germany. Photograph: Bloomberg/Bloomberg via Getty Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

To taper, or not to taper? That’s the question on the lips of European Central Bank policymakers today as they hold their final monetary policy meeting before the summer holidays.

With Europe’s economy strengthening, hawks on the ECB’s governing council will be pushing their colleagues to consider trimming (or ‘tapering’) their stimulus programme.

That programme is currently mopping up €60bn of bonds each month with newly minted money, and investors around the globe are desperate to know how, and when, the ECB might wind it down.

BUT.... the ECB needs to tread cautiously, for fear of a ‘taper tantrum’. Bond prices gyrated alarmingly last month when president Mario Draghi gave a confident speech which seemed to hint that policy would be tightened soon.

Most economists expect the governing council to postpone any decision on tapering until their September meeting. But you never know....

Assuming the ECB don’t make any policy changes today, the big moment will be Draghi’s press conference at 1.30pm BST.

Expect the euro to be volatile. Any hint of imminent tapering would send the currency soaring, while a dovish performance from Draghi could sink it. It’s currently trading at $1.152, close to an eight-month high.

Also coming up today:

We get a new healthcheck on Britain’s economy, when new retail sales figures for June are released. The City expects a small rise in spending, after sales fell unexpectedly in May.

Consumer good giant Unilever, UK retailers Sports Direct and Mothercare, banknote maker De La Rue, and energy provider SSE are all reporting results today.

The agenda:

  • 9.30am BST: UK retail sales for June
  • 10am BST: Eurozone deficit figures for Q1 2017
  • 12.45pm BST: ECB interest rate decision announced
  • 1.30pm: ECB holds press conference
  • 1.30pm: US weekly jobless figures
  • 3pm: Eurozone consumer confidence figures for July

Updated

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Woman has parallel parking anxiety when she notices what all the men around her are doing: ‘My worst fear’
Ugh, we'd be mortified.
We Got This Covered
We Got This Covered
Amazon Nearly Made Eric Kripke Pull An Episode Of The Boys Last Season. So, What Happened?
This story is wild.
Cinemablend
Cinemablend
Whale watchers delighted as never seen before orcas arrive in Seattle
The visiting orcas have something that local whales don’t: circular scars left by cookie-cutter sharks, which latch on to larger animals and slice a chunk off them
The Independent UK
The Independent UK
Kelly Osbourne fuels fresh romance speculation after sharing images of Kiinicki on social media
After her split from fiancé Sid Wilson, Kelly Osbourne has fuelled fresh romance speculation after sharing images of Kiinicki on social media.
BANG Premier
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