Eurozone
Milan , November 21, 2014 – 10:02
” The situation in the Eurozone inflation has become increasingly difficult. ” And “a stronger recovery is unlikely in the coming months.” For this, he said the president of the ECB, Mario Draghi, the central bank will do “whatever needs to be done to raise inflation and inflation expectations as quickly as possible,” and if the current monetary policy is not effective enough “will increase the pressure further expanding the channels through which to intervene.” Words that since morning they have boosted the markets, which are increasingly seeing the imminent launch of the so-called “quantitative easing,” that is, the introduction of new liquidity into the market through the purchase of government bonds, that is the Eurozone debt to counter ‘undue delay’ fears of deflation. At the same time to give boost to the markets came the surprise decision of the Central Bank of China to cut interest rates to make room for the economy to Beijing slowdown, with GDP in 2014 which is expected to be the worst in 24 year old. Result: Milan was the fastest growing financial center, plus 3.88%, London has gained a percentage point, Paris and Frankfurt more than 2%. Upward opening even on Wall Street, its fifth consecutive week of gains. The ten-year benchmark Italian has updated its all-time lows at 2.23% from the previous 2.26% reached in early September. Also down the dollar in its exchange rate against the euro, which fell to $ 1.2380, its lowest for 27 months.
Dragons and the inspiration of the moves of the Fed and Japan
Draghi, speaking at a conference in Frankfurt, has in fact recognized that the general framework of the Eurozone economy worsens. A change in stride, as the ECB president had so far softened the market concerns about the prospects deflation in the eurozone. The central banker’s speech was very clear: the ECB is “committed to re-calibrate the size, pace and composition of government bond purchases, if necessary, to meet its mandate,” he explained, citing explicitly the quantitative easing implemented by the Fed and the Bank of Japan. In the plans of the Dragons budget ECB should increase from two thousand to three thousand billion Euros, a process already begun with soft loans to banks (so-called Tltro) and market purchases of covered bonds and Abs (asset backed securities).
Beijing displaces all
The other big boost to markets was the surprise decision of the Central Bank of China (the People’s Bank of China, PBOC) to cut interest rates for the first time since July 2012, by 25 basis points the rate on one-year deposits to 2.75% and the rate on one-year lending by 40 basis points to 5.6% with effect from tomorrow . In the period July-September GDP growth of China was 7.3%, the lowest level since the first quarter of 2009, after the second quarter of this year was placed at 7.5%. Already by September, the Central Bank began liquidity in the financial system. To determine the choice of the Chinese monetary authorities, according to analysts, were the negative data on industrial production. The PMI has indicated that growth has stalled and the housing market remains weak, slowing down the entire economy. A few days ago, Chinese President Xi Jinping had assured that the risks that China’s economy is facing “are not as worrisome” and that the government was confident of being able to contain the danger. Xi also stressed that even with a GDP growth of only 7% of China would still have been the fastest growing of all the other countries of the world.
“Inflation is too low in the short term,”
The evaluation of Dragons inspired by the latest macro data released today. In the face of an inflation rate “continually weak,” said the president of the ECB, “we have reached in September ‘, with the latest decisions on monetary policy,” the minimum effective rate of interest “(0.05 %, and even negative for bank deposits at the European Central Bank (-0.20%), said Draghi, and “we turned to plans for asset purchases as a way to make it even more accommodating our monetary policy.” In time “record volatility in inflation expectations. The long-term indicators are, on the whole, within a range that can be considered consistent with a situation of price stability. On the horizon soon, however, the indicators have fallen to levels I consider too low. “
” Unlikely a stronger recovery in the coming months “
The positive trends recorded in the financial sphere “is not moved fully in the economic,” and the situation in the euro area “remains difficult,” said Draghi, speaking at the 24th European Banking Congress. The Eurozone PMI index just published – said Dragons – suggests that “a stronger recovery is unlikely in the coming months, with new orders falling for the first time since July 2013″. In this context, “the trend of inflation in the eurozone has become increasingly problematic.”
” Governments do their part “
Hence the exhortation to governments:” It is essential that the rates of inflation in the Eurozone return to the target “of a annual rate below but close to 2% – from 0.4% today – and for that to happen “without delay. Monetary policy can play its part but it is clear that while monetary policy is acting on the demand side, other types of policies need to accompany this process or, at least, should not fight it. ” In this context, therefore, “the approach should be to support the trust, always within the framework of fiscal governance, or the lack of confidence will undermine investment plans and cancel the positive effects of fiscal policy on demand.” Even “structural reforms are an essential part of the policy mix” necessary, Draghi said. “We need to create business conditions that are conducive to investment” to help monetary policy.
Goldman Sachs: Italian recovery only from 2017
The weak economic situation, particularly in Italy, is also represented by Goldman Sachs:” We expect that the Italian economy comes out of recession in 2015, but that production growth will remain weak until 2017. At that point , we expect growth to accelerate delayed due to the effect of the reforms that we expect the government Renzi implement over the next year, “wrote economists at Goldman Sachs in an update on the prospects for the euro zone released today. “However, if these reforms were not implemented or prove disappointing, growth is likely to remain sclerotic.” For the Italian GDP, Goldman Sachs predicts a -0.4% in 2014 and a modest 0.2% in 2015. For the following three years, the US bank expects growth of 0.5% in 2016, 1, 6% in 2017 and 1.5% in 2018.
Berlusconi: Dragons detract from the ‘€ 1 to 1 dollar
On inflation spoke yesterday Silvio Berlusconi, according to which the Dragons would devalue the euro against the dollar. “There are some things you need to do more, such as Europe adapts the value of the euro to the dollar as it was in the beginning, that is, one by one,” Berlusconi said. “Today there is an overvalued euro. From a crisis like the one we are going through you can go out only if the United placing large doses of liquidity in the economy. They did the United States, the United Kingdom, Japan and even China. It is necessary that Europe is convinced that this is necessary and then print money, “he added saying that some countries have printed money” to a value equal to 16% of their gross domestic product. “
November 21, 2014 | 10:02
© ALL RIGHTS RESERVED
No comments:
Post a Comment