Banks, Financial

Banking app targets millennials who want help budgeting

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Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

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Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

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Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

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RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Categorized | Economy

Bleak ECB minutes point to further stimulus

Posted on November 17, 2016

The European Central Bank looks set to approve more bond purchases to boost the eurozone’s fragile recovery after its governing council delivered a bleak assessment of economic prospects.

Analysts expect the council to make a decision in early December on whether to extend its landmark quantitative easing programme past the deadline of March 2017. The minutes of the council’s 17 October meeting, published on Thursday, indicate an extension is likely, revealing the group of 25 officials is becoming increasingly concerned about the region’s recovery.

The single currency area’s recovery remains exposed to global risks, despite a large-scale quantitative easing package in which the region’s central bankers have spent €1.4tn on bonds and cut rates deep into negative territory.

The minutes said governing council members noted that “the outlook for a continued cyclical recovery was based on exceptionally supportive financing conditions, which benefited to a large extent from the ECB’s monetary policy measures”.

Fears over mounting protectionism, paltry wage growth and a lack of investment were among the risks flagged in the minutes. The concerns over trade and investment are likely to have increased since the election of Donald Trump as US president, who pledged to protect American jobs by imposing import tariffs.

Vítor Constâncio, the ECB’s vice-president, warned this week that Mr Trump’s win posed a threat to eurozone growth, adding to unusually high uncertainty. This tends to weigh on investment, as businesses delay decisions until they become more confident in the economic outlook.

Significantly, for an institution whose sole official policy goal is an inflation target of less than 2 per cent, officials believed risks to growth could slow down inflation — which at 0.5 per cent remained much too weak.

While officials believed they did not yet have enough information to justify unleashing a fresh round of bond purchases, most agreed that they would be in a better position to do so by the time of the next policy vote on December 8.

The council will decide then whether to extend quantitative easing at the current pace of €80bn worth of bond purchases a month. It could also announce changes to the design of the programme, to enable it to counter scarcity in assets eligible for the eurozone’s central bankers to buy.

The minutes will add to expectations that the ECB will continue to buy bonds at the same rate until at least the second half of 2017.