Thursday, January 21, 2016

Governing Council meeting: The new caution of Mario Draghi – THE WORLD

There was a storm, like him Mario Draghi is not accustomed. The President of the European Central Bank (ECB) has been known as a virtuoso he understands it, with specific statements to guide the mood in the financial markets and to benefit from their expectations, in turn, to enforce its monetary policy. Ironically, he slipped in December but the communicative sovereignty over European capital markets: As the Governing Council at the last meeting of the year, monetary policy further eased only modestly, many investors reacted bitterly disappointed – they had relied upon the statements Draghi and other central bankers , hoped for more.

Mario Draghi gave Although unmoved outwardly according to the ECB’s doctrine, it was not the job of central bankers to make investors and analysts happy. Yet gnawed involuntarily triggered turmoil on nerves of money politicians. We wanted to produce not such a surprise to the markets, assured Vice-President Vítor Constâncio in an interview at the end. “Both sides need to learn the lessons,” he said and admitted indirectly error a: “. We also need to communicate better”

This one is probably seen as a sign that the central bankers once impose some restraint when it comes to speculating about further monetary measures.

markets are in turmoil

Only: The global economic situation makes it difficult just now. The stock exchanges in China are YTD in turmoil, and the concern about a marked slowdown in the local economy troubled financial market players worldwide. The China-weakness also helps that commodity prices continue to sag, especially for oil. The fuel has time just cheapened by a quarter since the last Council meeting of the ECB.

And so the central bank is only six weeks after their last easing decisions already under pressure. Finally, the cheap oil pushes further on the inflation rates that are significantly lower for more than a year ago when it really wants to tolerate the ECB. Normally one would expect Draghi keeps contrary, if not with the new measures, then at least in no uncertain terms. But can and will the ECB president to lean already out the window again, so soon after the unpleasant experience of the year?

Defensive Fed chief expects

In the vast majority of economists agree: New decisions are not expected for the rate-setting meeting on Thursday. Finally, the Governing Council has just extended its bond-buying program by six months, and reduced the deposit rates for banks to minus 0.3 percent. “It is too early to already return to activism mode”, believe the analysts at Bank of America Merrill Lynch.

There is also no compelling reason for it in the matter. It is true that the year, globally, started turbulent, but precisely the years in crisis euro zone shows so far quite unmoved. Carsten Brzeski, chief economist at ING-DiBa, provides the monetary union “in the quiet eye of the current storm.”

all over the world economic uncertainty, despite is the mood in Europe’s business well: “The published since the last Council meeting in early December economic indicators for the euro area have, on balance, exceeded expectations, “says Commerzbank economist Michael Schubert. It is problematic from the perspective of the central bank only a code number – but precisely those which is in accordance with its mandate, in the center of monetary policy: inflation.

Even the core inflation rate, at which the ultra-cheap oil is factored out, in December was only 0.9 percent, far from the ECB target value of just under two percent. Even more important than the current price increases are inflation expectations for central bankers, and these are currently “only slightly above the all-time low in January 2015,” said Schubert. At that time, the Governing Council decided to enter into large-scale government bond purchases.

Nevertheless, bank economists now do not believe in a similar reaction. Not even new rhetorical strength exercises Draghi are expected. He had repeatedly demonstrated on previous occasions, such as, for example, the exchange rate of the euro can press the mere fact that the ECB president is thinking aloud about further easing steps. Now, however, a more defensive central bank chief is expected: “At the press conference, ECB President Draghi is likely to keep open all options, but avoid clear signals,” said Commerzbank economist Schubert

disagreement. the Governing Council

This could also contribute to the mood in the Governing Council is anything but appears clearly. Already the extension of bond purchases in December and the renewed rate cut were controversial in the 25-member board. This could be seen in the minutes, which has now been published as scheduled. The conclusion of economists: Draghi will think twice when he urges even further decisions. Perhaps the situation it would have to be significantly worse.

Photo: Infographics World

Whether is a further easing only postponed or canceled, Furthermore, the experts are highly divided. The Deutsche Bank economists believe that the recent forecasts of the central bank should meet about and therefore, monetary policy does not need to be further eased.

start the contrary, in the course of the year could, in their view already discussion of the correct exit from the current glut of money. Nevertheless, the German bank economists leave a loophole in their prognosis: There was a “significant risk of a further easing”

The look in particular. Anglo-Saxon financial institutions quite different. They believe that the situation in Europe will become cloudy again – and the ECB therefore sooner or later must nachschießen more cheap money.

“The ECB will be forced to the end of spring to take further action,” it says at the Bank of America Merrill Lynch. With disappointing economic and inflation data could already be so far in March. Economists expect especially with another increase of bond purchases.

easing a matter of time

The US bank Citi holds a further easing for a matter of time. However, she expects more with recent interest rate cuts. A first step they expected in the first half of the year, and by the end of the deposit rates are likely to fall even up to minus 0.5 percent, according to a recent Citi analysis. Such penalty interest to encourage commercial banks to lend more, rather than to deposit excess funds with the central bank.

The British Barclays Bank expects that Draghi will shore up the economy further – but not before June. “The pressure is rising, but it is not big enough,” according to their judgment.

Actually, so my most economists expected the ECB again until act if the situation is even worse. If the economy darkened in the euro zone or crash, inflation rates still further, for example. If, yes, if Mario Draghi can resist the temptation to make headway with strong words directly against the turbulence of the past few weeks.

That he such pulses no stranger are the first four years of his tenure have proved. And so want to experienced observers as well as once again rule anything out. The financial markets saw Draghi still as their “monetary James Bond,” says ING-Diba chief economist Brzeski. Therefore hot the motto: never say never



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