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Prepared by Intesa Sanpaolo SpA
After an impressive package of March, the ECB you can take a break at this stage of relative calm on the markets and the apparent stabilization of the eurozone cycle. New measures before the summer are to be excluded because in June will start the corporate bond purchases, which will include the insurance stocks, and the new TLTRO . The ECB has refrained from verbal interventions on the exchange rate, but Draghi reassured once again that the Council remains ready to intervene with all the means at its disposal when unwanted narrowing of the financial conditions.
The ECB He has maintained a broadly accommodating rhetoric at the April meeting, reaffirming that “rates will remain at current levels or lower even after the purchase of public and private securities” . As expected, Draghi has found himself having to defend the independence of the ECB: the attacks by the German political front in recent days have been refuted stressing that all Council is unanimous on the need to reaffirm and defend the monetary policy decisions and the adequacy current orientation.
READ ALSO: ECB: Draghi’s speech of April 21, 2016
Regarding the possible future moves, Draghi reiterated that they will be dependent on the evolution of domestic and international data as well as political risks, and among these was the referendum on Britain. For now, Draghi noted, the situation seems to have stabilized thanks to resilient domestic demand. The effect of the ECB’s actions, taken between June 2014 and last year, in March we will see with time (it could be in the order of one and a half is on growth than inflation in 2015-17) and would definitely be stronger if other economic policy levers were already active. The Council is therefore vigilantly break. Draghi, however, reassured that if the external environment were to trigger an unwanted narrowing of the financial conditions, the ECB will not hesitate to act using all the tools at its disposal. The narrowing of the financial condition include, presumably, the euro movements. Draghi, however, has reiterated that the exchange rate is not a target, as if to confirm the fact step back from the ECB on the use of negative rates to weaken the exchange rate. Negative rates remain, however, between the instruments which the ECB could be used. The remaining broad scope is now limited. Regarding more unorthodox measures such as the “launch of the helicopter money”, Draghi said that the intervention was not discussed and has not granted any further comment although it has not explicitly ruled that it can be discussed in the future.
In view of the ECOFIN meeting of the weekend, which will see the discussion of possible regulatory changes on treatment of risk of the portfolios of banks government bonds, Costancio said adjustments are desirable, but should be discussed as part of the working tables Basel and can not be conditioned to other decisions, or the introduction of the third pillar of Banking Union.
the ECB will seek to maximize the purchase of corporate bonds program. the operational details specify that the ECB will intervene on either the primary or secondary, and also include the insurance of securities but not investment funds. This broadens the pool of assets to draw on to 412 billion euro. The ECB will also purchase all maturities between 6 months and 30 years and up to 70% of a single issue, such as covered bonds. The by issuer group purchases will be made on the basis of a benchmark, and then calibrated based on the weight of the individual issuers in the benchmark.
The tone thus by the ECB were more than reassuring, and it only remains to wait for the evolution of data and geopolitical risks, hoping that calm hard.
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