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Week Ahead (23 August)

Monday, 23 August - Flash Eurozone composite PMI to be released 

The next flash eurozone composite PMI will be released today. Last month’s PMI results showed the eurozone private sector economy expanding at its fastest rate since June 2006, with a composite reading of 60.2. This was slightly below the flash estimates of 60.6 but still beat June’s 15-year record of 59.5. The services sector again performed strongly, reaching 59.8. While manufacturing production still surpassed that seen in the services sector, manufacturing output was at its slowest for five months due to slowing supply lines. Inflation subsided slightly in July, with both output price and input cost inflation slowing since June. Despite this, inflation remains at historically high levels.

This month’s report will likely show continued strong, albeit slightly slower, economic growth as countries emerge from the Covid-19 pandemic, driven by pent-up demand in the services sector.

Thursday, 26 August – Minutes of July meeting of ECB governing council to be released; Jackson Hole Symposium to take place

The minutes of the European Central Bank governing council meeting of 22 July will be released this week. The minutes will provide insight into the prevailing attitudes of members of the governing council and may suggest a possible direction of travel for future monetary policy.

The ECB pledged to keep buying bonds and to persist with negative interest rates in July and said that an overshoot of its inflation target, recently adjusted to 2%, could be tolerated in the medium term. However, Jens Weidmann, head of the German Central Bank, reportedly said that the new conditions were too aggressive and would increase the risk of longer-term inflation. President Christine Lagarde, at the press conference following the July 22 meeting, said that there had been "minor divergence" on the new conditions but that an "overwhelming" majority of council members supported the actions.

Separately, the annual Jackson Hole symposium of central bankers from across the globe, which is organised by the Kansas City Fed, will take place from 26 to 28 August. This year, however, it has been confirmed that European Central Bank President, Christine Lagarde, and Bank of England Governor, Andrew Bailey, will not be attending.

Friday, 27 August - Fitch to release latest ratings review of Poland

The credit rating agency, Fitch Ratings, will release its latest review of Poland on Friday. The review will focus on Poland’s ability and willingness to fulfil its financial obligations. Fitch last reviewed Poland’s standing in March of this year, when it gave Poland an ‘A-’ rating. The report described Poland as having a diversified economy which has experienced stable growth in recent years, combined with a sound macroeconomic and monetary policy framework, against lower GDP per capita and high, albeit declining, net external debt compared with other ‘A’-rated countries.

Fitch’s report will be of interest due to ongoing uncertainty over the future of Poland’s €36 billion EU recovery fund allocation. Poland has requested €23.9 billion in grants and €12.1 billion in loans under the RRF, and the Commission has until 31 August to make a decision about whether to endorse the plan. However, the distribution of funds under the RRF is tied to country-specific recommendations on the rule of law – in Poland’s case, concerning the erosion of judicial independence in the country. Last week Poland told the Commission that it would dismantle the disciplinary body for its Supreme Court, which the Commission said was against EU law.

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