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The ECB’s monetary pillar is still very weak

Last week’s euro-zone data revealed a further pick-up in some measures of real economic activity, with the composite PMI for July raising the prospect that the region’s two-year recession could come to an end in the third quarter. However, the continued weakness of the monetary data – the second of the ECB’s two pillar policy strategy – suggests that the central bank may yet need to provide more support, perhaps in the form of another cut in interest rates, if the nascent recovery is to be sustained.

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