What Will Cause the ECB to Act?

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April 24 (Bloomberg) –- Catalyst Economics Founder Julian Callow discusses how below-expectation inflation figures could still trigger more action by the ECB. He speaks to Anna Edwards and Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

German business confidence data.

The first fall in a month.

What will today's data tell us about the ultimate germany and the implications for policy in the eurozone?

The weakness was attributed to business implementations -- conditions.

It is important to bear in mind that russia is a huge market for germany.

-- on that basis, i would not be surprised if we see a little bit further weakness come through.

I think it will probably be more in the expectations component.

The last reading was around 106.4. the indexes -- we are at high levels.

It wouldn't surprise me if the overall index and expectations component drift a little big lower -- a little bit lower.

Which is reflecting geopolitical risk factors, an important source of future risk coming through to the euro zone economy.

What will be the trigger if you like that gets the ecb to do something?

Rather than talk about it.

Is it going to be changing their own inflation targets?

Or we could knows -- or weaker news out of the german economy?

The inflation thing is crucial here.

Euro zone inflation will average 0.7%. there's a chance it could be 0.6%. we see big falls coming.

Therefore, the ecb will have to lower inflation target significantly.

I think the inflation forecast will be cut from one percent to down to 0.8%. something similar for next year's forecast by the ecb staff . that will be published in early june in their meeting.

That puts the burden on the focus to do something.

The obvious thing is to lower interest rates.

There talking more about a negative deposit rate.

You have had comments by various officials -- i think they should do this.

The euro is still on the strong side.

It is the key factor that has been pushing inflation down.

Is the key restraining factor for the economy.

I think the indications at the recent imf meetings are they want to put a cap on the euro.

Will they succeed putting on that cap?

They can if they are heavy enough.

I'm not at all sure they are going to go that direction.

Certainly, they're going to have to follow it with some action.

Thank you, julian.

We are six: 26 -- 6:26 in

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