ECB will decide Central Europe’s turn from rate rises
Significance Pressure is mounting on the ECB to justify its withdrawal of monetary stimulus, following a sharp fall in German industrial activity in November that has increased the risk of Europe’s largest economy slipping into recession in the final quarter of 2018. The downturn across the euro-area, which is dragging down inflation rates and government bond yields, is starting to dampen growth in Central Europe. Impacts The euro-area economy’s outlook has dimmed, with Germany’s ten-year government bond yield plumbing its lowest level since April 2017. The open Hungarian and Czech economies are most at risk from a euro-area slowdown, since the weakness is concentrated in the car industry. However, sentiment towards emerging market bond and equity funds has improved despite a global growth scare centred around China’s economy.