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This article was published on June 3, 2015 at 16:25.
The last change is the June 3, 2015 at 16:49.
The inflation improves, but eye to growth! Surprisingly, in a press conference dominated by questions about Greece, it has been the trend in economic activity, and not the price, to attract attention. The European Central Bank has indeed changed their expectations: no recovery “will be expanded and strengthened,” as explained to the official statement of April, but simply “will expand.” Something important is thus changed, and regards the performance of the investments. With an important conclusion: the quantitative easing will be neither reduced nor shortened.
Forecast marginally weaker
Even the economic projections in June are consistent with this scenario weaker . True, the end-year inflation will be 0.3% and not more than zero percent expected in March. It is, however, still it indicated 1.5% at the end of 2015 – thanks especially, said President Mario Draghi, to a base effect, purely mathematical – and 1.8% at the end of 2016. They were instead reduced marginally – really very little – the growth projections: 1.5% this year and 1.9% in 2016, just as in March, but the only 2% in 2017, against the previous 2.1 percent. It is mostly increased uncertainty: the gap forecasts, much broader than in March, it indicates the 1.1 to 1.9% for 2015, the 0.5 to 3.3% for 2016 and 0.3 to 3.7% for 2017.
Dragons: reduced foreign demand
A decline so marginal in the central tendency does not justify the cancellation of that “it will expand” the official statement. You Draghi, then, to explain what happened. The Governing Council was expected actually something more from growth than expected (which are processed by the staff and not endorsed by the board: a difference not only technical and formal). Instead came a little less’ momentum, mainly due to foreign demand while domestic demand, confirmed Draghi, remains strong.
Projections: investments too weak
The staff of the ECB, detailed forecasts, but tells a different story. Will the investments to fail: in March were expected acceleration from + 1.7% in 2015 to 4.1% in 2016 to 4.6% in 2017; Now it is indicated another path: + 1.9%, + 3.5%, + 3.9%. It is the only item to have a variation so strong: exports, but also include the euro area trade, could marginally accelerate.
Unchanged monetary policy
The less rosy prospects for growth, however, explain why Draghi has again referred to the possibility to expand or extend the quantitative easing, bond purchases, as he glossed over when he was asked if it was even possible a reduction of the operations. He also explicitly linked the possibility of a review of q, albeit as an example, to materialize those downside risks to growth that the ECB still considers prevailing. Euroland still needs the balance sheets of banks being “liberated” by the securities owned by banks, so they devote themselves to finance businesses: loans fall again, albeit at ever slower. Inflation, however, is not worried. Not even the ‘(apparent?) Acceleration in prices in May surprised the ECB considers appropriate at the time that its monetary policy.
The mystery of the returns in upward
Maintain’ stable monetary policy stance, in any case, it is important – said Draghi – also to control yields, rising on longer maturities, especially in some countries, including Germany. According to ECB President, the phenomenon is related to many factors: improved growth prospects of some economies, and price expectations. There has been a sharp correction after the first declines, but also an outflow of purchases in favor of shorter-term securities whose returns have returned positive and then returned for purchase by the ECB. It also increased the volatility in general, even for the limited liquidity of the markets “at this stage” and, Draghi said, “we must get used to periods of higher volatility.”
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