Thursday, December 8, 2016

No relaxation after Italy vote: ECB demanded again – THE WORLD

last update: 12:36 PM | Reading time: 4 minutes

FFrankfurt/Main – the all-clear sounds different: The economic recovery of the Euro area is “still to a considerable extent by the loose monetary policy,” said Europe’s Supreme monetary authority, Mario Draghi, recently.

sets That the majority of his countrymen abschmetterten the reform plans of the government in Rome and at the same time the head of government Matteo Renzi abwählten, the European Central Bank (ECB) in addition to under pressure. Economists expect the Central Bank will add to this Thursday.

What to expect?

Many Economists now expect only right that the ECB will extend its multi – billion dollar purchasing program for state and corporate bonds (“Quantitative Easing”/QE)through March 2017, to appease alone to Worry about a resurgence of the Euro debt crisis. The Italian Referendum Draghi should have “the last Argument supplied” to deliver the Minimum, and to extend QE through March 2017, said ING-Diba chief economist Carsten Brzeski. It is expected that the Central Bank will continue bond purchases until at least the end of September 2017. You may also receive the sum of 80 billion euros will be increased, the flows on a monthly basis.

not pumped, the ECB is already a lot of cheap money in the market?

In fact. Since Draghi took office in November 2011, the base interest rate fell, to the commercial banks to get fresh Central Bank money on a continuous basis. Since this March, he is on the record low of zero percent, banks can get ECB money zero tariff. In addition, the Central Bank buys for March 2015, government bonds and other securities in a gigantic scope: Only this March, the programme was extended, increased, and on Corporate bonds is expanding. According to previous plans, the program has a volume of 1.74 trillion euros.


The flood of money to stimulate the economy and the recent low Inflation back up to the top. Because the Mini-inflation in the Euro area makes the currency guardians worry. The ECB targets an inflation rate of just under 2.0 per cent – far enough away from the zero mark. Because permanently low or even falling prices are considered a risk to the economy: businesses and consumers may defer purchases because they expect it will be even cheaper. In the worst case a downward spiral of declining prices and an economic downturn – a Deflation.

the ECB measures are successful?

The ECB is of benefit to have a Deflation prevented. In November Inflation reached in the Euro area was 0.6 per cent, the highest level since April 2014. Critics of the ECB-course, however, indicate that the development of inflation has to do rate a large part of the price of Oil. “Since the year of 2014, the Oil prices fell significantly … Due to falling commodity prices have fallen overall inflation by almost one percentage point,” said about Bundesbank President Jens Weidmann. The last of this dampening effect of falling energy let prices. Fill up the tank and Heat is, therefore, a tendency for consumers is still cheaper than a year ago, but the distance is not quite as large as in the past few months. Weidmann warns against too great expectations of the ECB: “The idea that Central banks could combat with cheap money, the causes of the financial and sovereign debt crisis, of Globalization and the rising populism, is dangerous.”

What are the side effects of the cheap money?

The low interest rates have made loans for consumer real estate loans historically cheap. But at the same time, savers interest rates are so low, if you invest your money in the Bank. In the case of individual money houses customer numbers, particularly high net worth private even on it, if you put money on the account. Many banks will also increase fees – for Bank Transfers, Bank cards or account management. Insurers and pension funds can create money with profit. This provides pressure on life insurance and pensions. And many a head of state could procrastinate in the face of the emergency packages of the Central banks of major reforms.

there Is an exit from the policy of cheap money in sight?

In the Euro area for the time being. “We must also be aware that we are still in an environment marked by considerable uncertainty,” Draghi said just three weeks ago. Not only the problems of the highly indebted Italy remain unresolved, the Europeans hard Brexit negotiations with the EU-outlet resolute British before. And in the USA the price of the future US President Donald Trump is not yet clear. The country’s Central Bank, the Fed, however, was the last hope, that you will raise at its meeting in mid-December for the second Time since the financial crisis of 2008/2009, the interest rates.


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