The European Central Bank has no intention of going backwards compared to the unconventional monetary policy (or perhaps by now conventional) it began almost two years ago. Rather. Yesterday, the reiterated doing take the field the four heavyweights of its Executive Committee: President Mario Draghi, Vice Vítor Constâncio, the chief economist Peter Praet and Benoît Coeuré. A powerful deployment to reiterate that the initiatives taken are working and that if need be other will be decided; and to mitigate the effect of the criticisms of the recent evolutions that are growing, particularly in Germany (and also revealed yesterday by minute of the last meeting of the Board of Governors). The arguments of the Dragons – in accompanying 2015 financial statements of the ECB and then in a speech in Portugal – are at 360 degrees.
No resignation on prices
on the one hand, argues that the market bond purchases (the QE ) by bank and negative interest rates were effective in preventing the eurozone entered a deflationary circuit, lowering the cost of credit to businesses and to add force to the economic recovery, just 1.5% of GDP between 2015 and 2018. on this path – he assured – the ECB will not step back, not “resign” at too low inflation: in fact, “will do whatever it takes” to achieve in the medium term ‘ objective of price increases close to 2% per annum. On the other hand, the ECB president did not hide the risks, economic and political, which are facing Europe and eurozone. Like the International Monetary Fund, also known Draghi that the world economy is weakening. And in front of an encouraging picture, the euro area shows the dangers of “fragility”. It would be ready to respond to any new shock receive from outside? The missing something (maybe a lot) seems to want to warn Dragons. A little ‘because governments are not doing enough in terms of reforms to improve national competitiveness and to put in place fiscal policies with a careful mix to the Stability Pact but growth-oriented. But also because the architecture of the eurozone is incomplete construction. It is – he said – to “put into practice the Five Presidents Report” presented last year, which outlines a road-map towards more organic integration and stronger governance in the euro area.
the request to governments of courageous choices
in the confusion that dominates in Europe in this passage – between terrorism, refugees, Brexit, possible new crisis in Greece , nationalism – the ECB knows he was and having to be an anchor of certainty, if not stability. Even so, yesterday its leading representatives have wanted to send a double message: the central bank there, will be there and will make independent policies; but governments need to make more courageous decisions. Before the European Parliament, Vice-President Constâncio said that falling prices are starting to have so-called second-round effects: the drop in energy costs that would also reverberating on the rest of the prices, making the decrease woven real economy. Serious danger to which the ECB will respond, if need be: among other things, from the minute the last meeting of the Board of Governors is that interest rates on bank deposits with the ECB, to 0.40% negative today, they are not considered the least reached the limit; They could fall further. Coeuré claimed similar things. But, speaking in Frankfurt, he said that the central bank will continue making choices independently. An indirect response to the criticisms advanced to the ECB by some German politicians (not directly from the Berlin government). “This is a country – said Coeuré referring to Germany – where the independence of the central bank should be supported.” Praet, on the same line of colleagues, he said that if there were to be new global shock the bank would be ready to “recalibrate” of its policies accordingly. But he also said that it would be “quite worrying” if negative interest rates remain so for two or three years, which would create confusion on the markets. It was a great communication effort by the ECB: tries to cover the silence of governments’ strategies.
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