Friday 10 February 2017

BNP Paribas Group Chief Economist William De Vijlder discusses the latest market drivers.


In recent weeks economic data have come in above expectations in the US, in the Eurozone and in the developing economies. They represent the reaction to ongoing low interest rates, a recovery in oil prices, a major and successful stimulus effort in China, country-specific developments (e.g. in Brazil) and the expectation of fiscal expansion in the US. The broad based nature of these developments should imply that better momentum in one region would have a positive impact on others and vice versa.
 
As always, there are a lot of uncertainties. One is a pick-up in inflation. Because of the rise in energy prices, the increase in headline inflation should be a global phenomenon; the key question will be to what extent it spills over into core inflation via higher wages and sales prices. That in turn will depend on the gap between the unemployment rate and the natural rate of unemployment. This gap has basically disappeared in the US, so all eyes are turned towards the Federal Reserve. Its decisions will also have to factor in the prospect of fiscal stimulus and the question of whether a proactive or reactive stance when tightening policy is appropriate.
 
Inflation is also becoming a hot topic in the UK, following the decline of sterling after the Brexit referendum, and in Germany because of its strong growth performance. This in turn focuses the attention to the divergent inflation performance amongst the Eurozone members and the challenge it creates for the ECB. Central bank communication will continue to grab headlines this year. Amongst the other uncertainties we have to mention mounting concern about policy measures weighing on international trade and the many elections in Europe.


William De Vijlder
Group Chief Economist, BNP Paribas Group
William De Vijlder began his career in the Economic Research Department at Belgium’s Generale Bank in 1987 and became Chief Investment Strategist in the Asset Management division in 1989. He was subsequently Managing Director and Global Chief Investment Officer at Fortis Investments. When Fortis Investments merged with BNP Paribas Investment Partners in 2010, he became member of the executive committee of BNP Paribas Investment Partners and CIO Partners and Alternative Investments, and subsequently CIO Strategy and Partners. In September 2013, he was appointed Vice Chairman of BNP Paribas Investment Partners. Since September 2014 he is Group Chief Economist of BNP Paribas.
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