Week Ahead (27 October)

W/C Monday, 26 October - Negotiations between institutions on recovery fund/MFF to take place

Discussions on the recovery fund and the new multiannual financial framework, MFF, will continue next week between the European Parliament, the European Council and the Commission. On Monday chief negotiators from each institution will meet, with a full trilateral meeting scheduled to begin on Wednesday. Negotiations between the European Council and Parliament have been fraught thus far, with the European Parliament demanding increased funding from the proposed MFF for up to 15 budget programmes which would require some €39 billion in additional funding.

Charles Michel, the President of the European Council, spoke at the European Parliament this week, asking it to back down on its request for extra funding. He pointed to the fact that the recovery fund and MFF combined represents the largest amount of funding ever agreed upon at European level, and asked the Parliament to consider the bigger picture.

Committee of Permanent Representatives (COREPER) spokesperson, Sebastian Fischer, said that negotiations last week were conducted "in a business-like atmosphere", although no side moved substantially from its positions. It was noted, however, that the second wave of the pandemic has added increased urgency to the talks, and may make agreement more likely in the coming week.

Thursday, 29 October - ECB Governing Council to meet to discuss monetary policy

The Governing Council of the European Central Bank will meet next Thursday to discuss monetary policy, with most analysts expecting the policymakers to keep their powder dry ahead of an anticipated ramping up of the pandemic emergency purchase programme, PEPP, at its next meeting on 10 December. At that stage, further data, such as projections for growth and inflation, will be available, which would allow the ECB to justify additional measures.

The meeting takes place in the context of the beginning of a second wave of Covid-19 in Europe. ECB President, Christine Lagarde, noted earlier this week that the second wave has begun sooner than scientists had anticipated, and commented that its reappearance was "not a good omen". Varying views were expressed by board members last week on what the next steps should be; Robert Holzmann stated that the time is not right for further intervention, while Philip Lane said that the ECB should prepare for "worse scenarios" than those projected.

Friday, 30 October - Flash estimates for European inflation to be released

The latest flash estimates for European inflation in October are due to be released next Friday. The new data may reveal the impact of the second wave of the pandemic on aspects of the services sector in particular as member states impose greater restrictions on their citizens, with a likely fall in demand for services likely to lead to depressed pricing.

The Eurozone annual inflation rate was -0.3% in September 2020, down from -0.2% in August, matching the flash estimates released in early October. The inflation rate during the same period last year was 0.8%.