Europe remains the focus of the coming week. Growth numbers for the final quarter of last year for Germany, France and the eurozone as a whole are released on Friday.
Thursday’s summit of EU leaders in Brussels is the first such meeting to be attended by new Greek prime minister Alexis Tsipras, and rapidly moving developments there could dominate the agenda. Any renegotiation of bailout conditions would be expected to be a drawn-out affair.
Eurozone growth numbers are expected to show moderate strength for the final three months of 2014. Lower energy prices and rising real wages are expected to have boosted consumption and the weaker euro should have helped exporters. Market expectation is for 0.2 per cent growth from the third quarter, equating to 0.8 per cent growth from the same period last year.
Growth in Germany for the same period is expected to be slightly stronger as the bloc’s biggest exporter sees greater gains from a cheaper euro. Compared to the third quarter, GDP is expected to be 0.3 per cent bigger, 1.2 per cent compared to the same period last year. Contrasting this French GDP is likely to have expanded by just 0.1 per cent in the final three months of last year.
Further insight into the path of UK interest rates over the next 12 months becomes available on Thursday with the release of the Bank of England’s quarterly inflation report for February. The recent slowdown in consumer price inflation prompted the Monetary Policy Committee to unanimously vote to hold interest rates in January; previous meetings had seen two members favouring a rise.
The BoE’s view on prices during the coming year will be key to the timing of any rise in rates. A prolonged period of below target inflation is likely to keep rates where they are until early 2016 at least.
Chinese inflation data for January are released on Tuesday in which weak domestic demand and falling energy costs are expected to push the annual rate to 1 per cent, down from 1.5 per cent in December. Producer prices, down 3.3 per cent in December on a yearly basis are expected to fall further to -3.7 per cent as many commodity prices continue to fall.
Sweden’s Riksbank has been concerned with below target inflation levels for some time now. Further monetary easing from the European and Swiss national banks may prompt action to stimulate prices. Possible outcomes of Thursday’s meeting could be the announcement of its own asset purchase programme or a shift of policy rates into negative territory.