Thursday, September 8, 2016

ECB: Draghi explained why it considers its monetary policy to be effective – SPIEGEL ONLINE


Externally Mario Draghi looks pale and exhausted when he at 14.30 before the international press occurs on Thursday – content but he gives himself emphasizes confident. His current monetary policy was “fully effective”, the head of the European Central Bank (ECB) says repeatedly. Other measures he considered currently not necessary.

There are words that disappoint in the stock markets investors who the German DAX benchmark index  chart show , the European benchmark index Euro Stoxx  chart show and press numerous other important indices within minutes into the red. With big news hardly anyone had in September although already expected; but at least with a better perspective.

The heart of Draghi’s monetary policy, a program for the purchase of government and corporate bonds, runs out in six months. Currently, banks push their government bonds to the ECB and to buy the fresh money they get through the sales, bonds or stocks of companies. This should then also the company obtain new capital and then invest more (How the program works exactly find out in the following photo gallery).

Every month buys the ECB bonds in volume of 80 billion euros. In March 2017 could now be an end to the great flood of money, for only as long as the program is planned. And on an extension of the Governing Council did not discuss, Draghi said.

The first surprise, because the ECB also expects the economy in the euro zone underperformed last expected. Their own economists expected in 2017 and 2018 with an increase in GDP of 1.6 per cent, respectively; in June they were still assumed each 1.7 percent.

“The economic recovery in the euro zone is likely to be dampened by weak foreign demand, which is partly linked to the uncertainties caused by the result of the referendum in the UK” , Draghi said. The British had voted in June for a withdrawal from the EU.

Also, inflation is expected to be somewhat lower according to the current Governing prognosis than last expected. For this year, the economists of the central bank continue to expect with an inflation rate of 0.2 percent. but for 2017 they assume an increase of 1.2 percent, previously it had been 1.3 per cent. Only in 2018, the inflation rate will stabilize at 1.6 percent, which again corresponds to the ECB’s target of just below two percent.

Experts expect Draghi soon reloading must

Draghi holds the developments according to own data for manageable. The latest data showed the resilience of the European economy confronted with uncertainty, said the ECB chief. If the outlook but continue to deteriorate, then you will take further measures. The ECB had to “the will, the capacity and capability”.

All in all, moves the ECB chief thus a dual strategy: he is confident that inflation soon gains momentum. At the same time he thinks he’s the future options open.

Experts believe that Draghi given the weak growth soon have to act again. “I expect that the ECB will announce an extension of the bond-buying program to March 2017. in December,” says, for example, Marcel Fratzscher by the German Institute for Economic Research.

Does the ECB their own criteria soften?

but then takes Draghi solve a new problem. Because the ECB has already bought with her gigantic program much of the bonds from the market. Experts therefore expect that the ECB would have to expand its program to other papers and would have to refer also buy bonds issued by banks.

It is also conceivable that the Fed soon softens their own criteria for buying bonds. So far, it has prohibited, for example, even, to buy securities whose interest rates are below the deposit rate of minus 0.4 percent currently. But as the ECB with their purchase program is fueling the demand for government bonds, profits are falling. Currently already have about 60 percent of government bonds a yield of less than minus 0.4 percent.

The British HSBC expects that the ECB will come forth which are considered particularly safe government bonds in the first half 2017, if they do not loose their own purchase conditions. Commerzbank analyst Michael Schubert expects “that the ECB in future also buys government bonds, whose yield is below the deposit rate”



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