Spotted In Europe: Green Shoots

There was good news for the ECB on Friday. Inflation ticked higher in November, two months on from the Governing Council’s controversial decision to restart net asset purchases as part of a broad package of easing measures delivered just in time for Mario Draghi to ride off into the sunset.

The headline rate jumped to 1% from 0.7% in October. That latter figure marked a three-year low.

Core inflation moved up to 1.3%, a seven-month high.

Both are still a country mile away from the central bank’s target and gains could prove fleeting.

According to officials cited by Bloomberg this week, policymakers are considering a tweak to the target to make it just 2%, as opposed to “below, but close to, 2%”, an ambiguous goal that’s somewhat confusing at times. It will be the first serious rethink in more than a decade and a half. In addition to ensuring there will be no calls for policy normalization should inflation move sustainably above 1.5%, a new, more definitive commitment to 2% could bolster expectations which, of course, are generally seen as self-fulfilling.

Minutes from the October meeting show policymakers emphasizing the importance of unity following what was widely seen as the most contentious meeting of Draghi’s tenure in September, when multiple officials argued against the resumption of net asset purchases.

Read more: ‘Strong Call For Unity’ Made At Mario Draghi’s Final ECB Meeting After Contentious September Showdown

Meanwhile, unemployment fell to 7.5% across the euro-area last month, data out Friday showed.

Still, lackluster growth and subdued price pressures have led to calls for more fiscal stimulus, especially from core countries who can afford it. Christine Lagarde is widely expected to make a concerted effort at compelling recalcitrant fiscal hawks to loosen the proverbial purse strings, especially in Berlin.

Speaking of Germany and fiscal stimulus, jobless claims fell 16,000 in November, defying estimates of a 6,000 rise. The jobless rate remained at 5%, close to a record low.

Other data this month showed tentative signs of stabilization in the German economy, which narrowly averted falling into a technical recession in the third quarter.

Friday’s better than expected unemployment figures are likely to harden the resolve of those who insist that no debt-funded stimulus binge is necessary.

And yet, as Bloomberg points out, “manufacturers have announced more than 80,000 job cuts this year [and] the concern is that job losses will erode private spending, which has supported the economy in recent quarters and helped prevent it from falling into a recession this year”.

Read more: Germany Just Dodged A Recession. And That Means You Can Kiss Your Fiscal Stimulus Hopes Goodbye

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