Credit Agricole Economic Research

As a result of downside risks to activity and a more balanced outlook for inflation, the ECB's Governing Council is likely to leave policy rates on hold in the near term. It should shift to a more neutral monetary stance at the 8 September policy meeting, as pre-announced by Trichet during his hearing at the European parliament this week.

As a result of downside risks to activity and a more balanced outlook for inflation, the ECB's Governing Council is likely to leave policy rates on hold in the near term. It should shift to a more neutral monetary stance at the 8 September policy meeting, as pre-announced by Trichet during his hearing at the European parliament this week.

In late September, the French government is to present its draft budget for 2012. The public deficit is to be cut from 5.7% of GDP in 2011 to 4.5% of GDP in 2012. The aim is to bring the public deficit down to 3% of GDP in 2013.

In late September, the French government is to present its draft budget for 2012. The public deficit is to be cut from 5.7% of GDP in 2011 to 4.5% of GDP in 2012. The aim is to bring the public deficit down to 3% of GDP in 2013.

In an unchartered economic environment, market expectations cannot be very stable. This is especially the case when a structurally weak recovery among the developed countries faces a series of temporary shocks, whose magnitude and length are not precisely known. Policymakers are not really able to send positive messages about managing this 'soft patch' properly. Indeed, room for manoeuvre in implementing new monetary and fiscal stimulus measures is limited. The focus could be more widely used on structural policies. Increasing market dynamism (whether of goods, services, labour or capital) often implies less regulation. In this case, the flip side is more instability. Is this acceptable just a few years after a crisis, one of whose origins is a default in regulation?

In an unchartered economic environment, market expectations cannot be very stable. This is especially the case when a structurally weak recovery among the developed countries faces a series of temporary shocks, whose magnitude and length are not precisely known. Policymakers are not really able to send positive messages about managing this 'soft patch' properly. Indeed, room for manoeuvre in implementing new monetary and fiscal stimulus measures is limited. The focus could be more widely used on structural policies. Increasing market dynamism (whether of goods, services, labour or capital) often implies less regulation. In this case, the flip side is more instability. Is this acceptable just a few years after a crisis, one of whose origins is a default in regulation?