12 September 2019

The global outlook remains "a tug-of-war between stimulus and trade tensions"

5 min read

Commenting on the ECB monetary policy announcement this afternoon, Melanie Baker, senior economist at Royal London Asset Management, said:

“The easing measures from the ECB today were welcome news for global growth prospects. By going for a package, rather than piecemeal measures, and a more open-ended form of QE, there is a better chance that there will ultimately be a visible positive impact on the euro area economy, both in terms of growth and inflation outcomes.

“The package, including a 10bp deposit rate cut, with tiering, forward guidance changes and a QE restart was broadly as expected by analysts.  The monthly pace of QE is a bit less than some anticipated. However, the action is effectively open-ended. The duration of asset purchases (QE) is tied to inflation outcomes rather than being for a particular time period. The pace of QE will be €20bn a month to end ‘shortly before’ the ECB raise rates again.   In turn, interest rates won’t rise until certain conditions – related to inflation – are met.

“It is worth noting that today’s action was taken in light of downward revisions to the ECB staff growth and inflation outlooks and in an environment where the ECB still see downside risks.

“In general, we still see the global outlook as something of a tug-of-war between stimulus and trade tensions. More fiscal stimulus would help, as will a likely Fed rate cut next week. But higher tariffs, persistent trade tensions and high levels of trade-related uncertainty for businesses remain key concerns.”

About Royal London Asset Management (RLAM):

Established in 1988, Royal London Asset Management (RLAM) is one of the UK's leading fund management companies, providing investment management solutions to both wholesale and institutional clients such as not-for-profit organisations, local authorities and the insurance sector.

RLAM manages £164 billion of assets and employs 129 investment professionals as at 31 December 2021. It invests in all major asset classes including UK and overseas equities, government bonds, investment grade and high yield corporate bonds, property and cash.

For professional clients only, not suitable for retail investors.

Issued by Royal London Asset Management Limited, registered in England and Wales number 2244297; authorised and regulated by the Financial Conduct Authority. Registered Office: 55 Gracechurch Street, London, EC3V 0RL.

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