Eurozone: Recovery but not time for tightening – Danske Bank

Analysts at Danske Bank expect the euro area economy to expand by 1.7% in 2017 and 1.6% in 2018 although the external environment is giving less tailwind.

Key Quotes

“Investments should become a more important growth driver relative to consumption.”

“There is still no evidence of a rise in the underlying price pressure, and with the oil price having been a significant contributor to inflation at the beginning of the year, headline inflation will approach 1.0% in early 2018.”

“We expect the ECB to continue its QE purchases going into next year and keep policy rates unchanged at least until 2019, which is longer than what is currently priced in the market.”

“Political uncertainty has subsided with the eliminated ‘Frexit’ risk, and a subsequent pro-European Franco-German alliance could bring renewed vitality. That said, Italy is still faced with economic and political challenges.”