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ECB Not Planning To Change Monetary Policy "Anytime Soon"
Topic Started: Apr 6 2017, 10:00 AM (12 Views)
Webster
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(The Guardian) Draghi: too soon to change policy despite signs of recovery
--The European Central Bank is not planning to reassess its current monetary policy of low interest rates and bond buying, says its president Mario Draghi.

In a speech in Frankfurt he said the current stance was still appropriate and before making any alterations, the bank needed to see more signs that inflation was approaching its target. So far there was not enough evidence to significantly change its forecasts although there were signs of recovery:

Though the risks to the growth outlook remain tilted to the downside – mainly on account of [geo-political factors] – the balance seems to be shifting upwards. This is reflected in recent sentiment indicators, which suggest that the recovery may be gaining momentum.

But he added: Despite.. signs of progress, it is clearly too soon to declare success.

And he defended the bank’s policy which has come under some criticism, notably from Germany, by saying it was a key factor in the recovery in the eurozone econony’s recovery in recent years. He concluded: We are confident that our policy is working and that the outlook for the economy is gradually improving. As a result, the forces that are currently weighing on domestic price pressures should continue to wane.

But even so, we have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.

Before making any alterations to the components of our stance – interest rates, asset purchases and forward guidance – we still need to build sufficient confidence that inflation will indeed converge to our aim over a medium-term horizon, and will remain there even in less supportive monetary policy conditions.

-Read more: https://www.ecb.europa.eu/press/key/date/2017/html/sp170406.en.html
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Webster
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(The Guardian) Rate hike only after QE ends - ECB's Praet
--Still with the European Central Bank and board member Peter Praet has echoed president Mario Draghi’s view that it is too soon to change tack on policy. In a speech at the same Frankfurt event on “Calibrating unconventional monetary policy” he said:

Our monetary policy is working, and we see that, supported by our mutually reinforcing monetary policy measures, the euro area economic recovery is steadily firming. The cyclical recovery is gaining momentum and the expansion is broadening across sectors and countries, showing the effectiveness of the transmission of our measures throughout the entire euro area economy. Yet, the risks to the growth outlook remain tilted to the downside, even though their balance is improving. And, importantly, inflation dynamics continue to be conditional on the present, very substantial degree of monetary accommodation.

And he concludes that low interest rates will remain well after the ECB ends its bond buying [quantitative easing] programme: In our expectation, the policy interest rate will remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases. This forward guidance implies a sequencing between the interest rate policy and the quantitative policy that can most efficiently internalise and exploit the intimate complementarities between these two key components of our current stance.
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Webster
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--Praet defends the #ECB guidance that rates will go up only after tapering ends.Shows governors arguing otherwise have much explaining to do. (Ferdinando Giuliano, Bloomberg News - 6 April 2017)
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Webster
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(The Guardian) ECB's Weidmann takes different tack to Draghi
--Back, again, with the European Central Bank and board member and head of Germany’s Bundesbank Jens Weidmann is taking a more hawkish task than the earlier comments from Mario Draghi and Peter Praet. In a speech in Berlin (in German here) he said: I could have imagined a less expansive monetary policy, especially as many economic indicators developed positively....Given the prospect of a protracted, robust economic recovery in the euro area and an increase in price pressure, it is legitimate to ask when the ECB Council should consider monetary policy normalization and how it could adapt its communication in advance.

The Bundesbank has wanted the ECB to wind down its stimulus programme for some while so the remarks are no surprise, although they have pulled the euro back from its decline in the immediate aftermath of the Draghi and Praet commments...
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Webster
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--Laurel & Hardy of the #ECB send Euro on a rollercoaster ride: Weidmann leans hawkish, after dovish Draghi (Holger Zschaepitz, Die Welt - 6 April 2017)
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