Presentation: We believe that the ECB cut the main rate by 50 BP at the meeting on 15 January. Anything else would be a disappointment and nothing else the travel is essential. We are looking at rates below 1.5% until the end of Q1 2009. The euro zone is already in recession and recent indicators have been weak, the lowest in decades of recession. The economy and consumer confidence has collapsed, and industrial production is in free fall. In addition, the increased risks to price stability is completely gone, and the ECB has a lot of firepower left. This should be an excellent basis for the ECB to reduce the price aggressive on Thursday. However, the ECB may disappoint. You’ve already cut the leaders at an unprecedented rate, from a total of 175 basis points since October 8, and indicated that these reductions “for the time being, are far from being fully in the economy.” In addition, the next meeting is only three weeks time, they have much more information. If it Thursday, we expect a clear signal that (A) relaxation of the policy in February.

Political Polarization: The sound of the press conference, depends heavily on the speed of the decision on Thursday. Since our baseline scenario, we still hope that the mild and stresses that the economy is weak, and that risks to price stability in monetary policy are concerned the balance of the year in the past . However, they are careful not to sound too pessimistic, to avoid mentioning that the ECB has a pessimism of the market economy. If any alternative Pin preintroduce of their usual political expression.
Based on our assessment, monetary policy will contribute to our goal, it is a signal that it is on the sidelines of the meeting, on 5 February. If you disappoint, we expect that made clear that, for a margin of maneuver (to) reduction policies on the session of February (they are much more information on tax policy, for example, within and outside the euro area and polling officers as bank loans and Professional Forecasters).

Growth: The economy is already in recession, and at the last meeting of the ECB, for the first time a decline for a year on the horizon. Given that most indicators are very depressing. The index of business climate, the phase of economic cycle was -3.17 points the lowest since discs began in 1985 to -2.10 in November, on the slopes and deep recession. Manufacturing PMI fell to a new low of 33.9 and 36.2 services PMI fell to 42.1 from 42.5 in November. We have seen some stabilization of the German Ifo expectations index, down slightly from 77.6 to 76.8. Thus, the lowest since 1973, just before the deep recession of 1974-75. Prospects damning serious such as industrial production was 7% y / y in Germany, 9% y / y in France and 15% in Spain. French exports have suffered an entry in the Drop
November at 10.6% compared to October. French contracts Planted 6% m / m in November, about 25% y / y. The unemployment rate rose to 7.8% in November and budgetary expectations of unemployment rose by 55 points from 44 in November, comes from a nearby all-time-high of 60 in 1993.
That is why there is a revision of the December ECB staff projections for growth on the cards.
Jean-Claude Trichet is likely that the economic outlook still surrounded by a particularly high degree of uncertaintyand that risks to economic growth is on the side.

Inflation: Inflation is declining rapidly. In the wake of the December-flash estimate, inflation fell to 1.6% to 2.1% Y / Y in November and 3.2% Y / Y in October, especially on the back of the diving at prices of raw materials. If sustainable, low inflation in raw material prices lead to mid-2009. Then, the forecast for inflation down near 0% y / y, by the accuracy of results strongly on the way to the prices of raw materials. The composite PMI index of input and output dropped to a lower price. Producer prices for consumer products further declined by 1.9% Y / Y in November from 2.6% Y / Y in October. In general, inflation GAL production of about 9 months. Thus, even if underlying inflation in May to seek something in the coming months (as a manufacturer, when they left in May charging try to historical costs of the high prices of raw materials), it would probably soon to increase.

The left main concern is the increase of the workforce overall in 3rd Quarter 2008 to 4.0% y / y from 2.8% in 2nd Quarter and 3.5% in Q1. At the same time, an index of wage costs rose 3.4% from 2.8% y / y in Q2. This corresponds to a large extent the delayed effects of normal labor market relatively narrow. In addition, inflationary expectations of consumers are rapidly (up 7.4 index points from 10.5, also below the average since 2002 of 21.3) and employment prospects significantly. This should be the increase in wages and concerns related to the negotiated wage statistics.

Monetary developments: growth in M3 and credit growth has further to 7.8% y / y from 8.7% y / y, but the data does not look like a credit. Still, M3 growth well above 4 ½% of the benchmark interest rate. The growth of loans in the private sector continued to fall, to 7.1% y / y from 7.8% Y / Y. Loans to non-financial companies has slowed to 11.1% y / y from 11.9% Y / Y. Consumer credit for housing construction has slowed sharply from 3.5% y / y to 2.5% y / y, while consumer credit slowed from 3.4% y / y to 2.8 % y / y, and consumer credit for other purposes verblasst slightly to 1.9% y / y from 2.3% Y / Y.

The euro zone’s services economy fell more deeply into recession in November, as originally thought, pressure on the European Central Bank to lower interest rates Thursday to more than 50 basis points expected.

A major study of the euro zone has also shown that mitigate inflationary pressures in the euro area, the dominant services sector, making it easier for the ECB to lower prices, provided that he said.

The euro zone Purchasing Managers Index MarkIt services for businesses, banks, bars, collapsed in November to 42.5 in October at 45.8, the lowest in the survey 10 years of history .

This was well below the first reading of Flash and 43.3 economists forecast and below the 50.0 mark, it appears that the growth of contraction.

The review is to strengthen the market, forecasts the ECB to lower the prices of more than 50 basis points, which most economists foresee the establishment of its meeting on Thursday.

Similarly, Britain PMI for the services sector fell to its fastest pace in November since the series began in 1996, hopes of a promotion of 100 basis points rate cut by the Bank of England on Thursday.

December-Bund-Future of a new contract after the peak of 124.04 euros in the area of data, while yields on 10-year bonds Confederation fell to 3.0%. A movement of 2997 percent the lowest in the euro life. European share losses.

“It is quite exceptional. On record low in all countries, except Germany, and Germany was very serious,” said Jürgen Michels at Citi.

“There is enough room for the ECB to lower the price … We believe 75 basis points, the compromise, but we can not exclude a reduction of 100 basis points,” he added.

Companies in the United Kingdom and Germany, complained it was too cumbersome and expensive in the loan in November – despite lower interest rates and banking rescue official in the two countries.

“A number of (Germany) service … commented that the turbulence in financial markets has led to bottlenecks in working capital for customers, resulting in delays and the removal of new work, “said in a statement MarkIt.

Mark, said the euro zone PMI on GDP of around 0.4% in the last quarter of the year, a steep climb of the decline since the recession of the early 1990s.

Both the segment of the larger economies PMIS makes weaker than expected, with Germany, from 48.3 to 45.1, France and PMI to 46.2 from 47.5.

Courageous step of the ECB?

All seven sub-indices PMI for the euro area was lower than the flash estimate. This concerns the price paid and businesses after a month of steep oil prices.

But a sharp decline was not enough to convince them that most economists of the ECB, the prices of more than 50 basis points, without warning, as the bank is vulnerable to.

“If they consider a courageous step, it would have scored, considering that we heard in the background for all the talk (ECB), the members, they want to avoid the risk that the remaining short of ammunition, said Aurelio Maccario at UniCredit (Milan: UCG.MI – News).

The film in the services PMI, with a horrible reading on manufacturing released earlier this week, the composite index of both down on 38.9, a new record lowest, to 43.6 in October.

And there is no indication that things can improve at any time to the service sector. The services of the employment index fell to 47.9 in November from 48.4 the previous month, slightly lower than the flash and the fifth month of contraction.

Separate data eurozone decreased retail sales more than expected in October, where weak consumer demand in the bloc of 15 nations.