The manna of low rates on Italy

The world economy is kept afloat by the development of emerging countries and by US consumers. The fall in interest rates gives Italy the opportunity to cut the public deficit and restart domestic demand. We need a stable and pro-EU policy. THE FUNDAMENTAL GRAPHICS

FORWARD SLOWLY

The international background within which the Italian economy moves is that of a 'slow forward', and not a recession, thanks to the positive fundamental factors for the emerging countries and the American consumer who does not scratch anything.

The Chinese slowdown is real, but it moves along growth rates - 5-6 percent and more - which are a multiple of those of advanced economies.

World trade is growing less than GDP, due to tariffs and retaliation on tariffs, but also due to previous underlying factors.

Germany suffers in particular from the slowdown in trade and the dieselgate, with repercussions on Europe.

FRAGILE ITALY, BUT IF CONFIDENCE RETURNS…

The indicators continue to signal weakness for the Italian economy, but some positive signs can be seen in consumption (costs of basic income) and construction (mortgage rates at historic lows). Added to this is the opening of credit to the new government which can strengthen confidence.

Economic policies are oriented towards expansion: with evidence monetary policy (long-term real rates close to zero help control Italy's public debt), potentially budgetary policy, given that Italy will be able to exploit the changed European attitude in comparisons of support to the economy from public budgets.

DEfunct INFLATION

The flat trend in commodity prices is directly related to the slowdown of the global economy.

The price of crude oil is stabilizing at around $60 a barrel. It could be lower if it weren't for geopolitical tensions to support it, starting with what is happening in the Strait of Hormuz.

In Italy, Europe and the USA, inflation continues – and will continue – to be low, for both cyclical and structural reasons.

DOWN RATES FOR THE LONG. EURO AND YUAN WEAK

Central Banks converge towards a policy of support for the economy. Despite some retracements, long-term rates remain at historic lows, both due to the slowdown in the world economy and due to the possible and probable recovery of quantitative monetary expansion policies.

In Italy, the decline in the spread owes much to the inglorious end of the yellow-green government – no more challenges to Europe – and to the benevolent European attitude towards the yellow-red government.

US-European growth differentials, as well as long T-Bond-Bund real rate differentials, support the dollar, while the yuan depreciates for understandable reasons.