Daily Overview of Global Markets & the SEE Region (Thursday, 2 May, 2019)
WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: As expected, the Fed left the target range for the federal funds rate at 2.25-2.50% at this week’s two-day monetary policy meeting, which concluded yesterday. The Fed reiterated its data-dependent and patient approach towards future policy adjustments with Chairman Jerome Powell making clear that the Fed sees no compelling reason to consider a rate cut in response to weak inflation. Taking markets by surprise, the Fed cut the interest paid on excess reserves (known as the IOER) by 5bps to 2.35% but Chairman Jerome Powell clarified that this was a “small technical adjustment” and does not reflect any shift in the monetary policy stance. In a knee-jerk reaction to the IOER rate cut, US government bond yields moved lower late yesterday but reversed course soon after the Fed Chairman insisted that the Fed is firmly on hold and the current inflation weakness is probably transitory. With the FOMC monetary policy meeting out of the way, focus today is on the BoE, which will publish the decision of the MPC and the May Inflation Report.
GREECE: According to the latest EU business and consumer survey, the economic sentiment for Greece contracted in April by 1.0 unit standing at 100.3 after having stood at 101.3 units for the two previous months. Meanwhile, according to the IHS Markit data, the seasonally adjusted Manufacturing PMI for Greece increased for the third consecutive month, standing at 56.6 in April, up from 54.7 in March, which constituted the strongest improvement in the health of the Greek manufacturing sector since June 2000. Finally, according to the Economic Bulletin released by the Ministry of Finance on 26 April, data for Q1-2019 shows that the state budget primary surplus amounted to €1.44 billion, overshooting the target – a deficit of €960 million – by €2.4 billion.
SOUTH EASTERN EUROPE
BULGARIA: Based on preliminary data and estimates released earlier today, the Consolidated Fiscal Programme (CFP) balance on a cash basis as of April 2019 is expected to be positive, amounting to BGN 2.7bn or 2.3% of projected GDP for 2019. At the same time, according to the latest data released by the Ministry of Finance, central government debt remained flat on a monthly basis, standing at EUR 11.7bn or 19.6% of projected GDP for 2019 at the end of March.
SERBIA: According to the flash estimate released on Tuesday by the Serbian statistical office, GDP growth slowed down to 2.3% YoY in Q1 2019 from 3.4% YoY in Q4 2018. Detailed data on national accounts will be published on May 31.
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