ecb scouts for forward guidance pitfalls on road to stimulus end
Last Updated : GMT 06:49:16
Arab Today, arab today
Arab Today, arab today
Last Updated : GMT 06:49:16
Arab Today, arab today

ECB scouts for forward guidance pitfalls on road to stimulus end

Arab Today, arab today

Arab Today, arab today ECB scouts for forward guidance pitfalls on road to stimulus end

European Central Bank
Warsaw - Arab Today

European Central Bank (ECB) officials are beginning to wonder how they’re going to tell the world when the end of the stimulus era is in sight.

A proposal by Executive Board member Yves Mersch to review the ECB’s guidance on future actions has focused policy makers’ minds on the challenge of mapping an exit from quantitative easing and negative interest rates. While the strengthening euro-area economy might justify a change in language, a bigger concern is that it would lead to tighter market conditions that undermine current measures, according to Eurosystem officials familiar with the matter. 

That means the moment probably hasn’t yet arrived for such a revision to the Governing Council’s official statement, the people said, asking not to be named because the deliberations are confidential. An ECB spokesman declined to comment.

The Frankfurt-based central bank is in a complex predicament, having to justify why the euro area still needs unprecedented stimulus even with headline inflation near its goal and the economy continuing to expand. That situation will be thrown into sharper relief by the summer if the recovery is still looking robust after elections in France and the Netherlands and as US economic policy under President Donald Trump — a key concern for officials — takes shape.

‘No delay’

The ECB’s current position, decided at the Governing Council’s six-weekly policy meetings and announced by President Mario Draghi at his subsequent press conference, is that interest rates will stay at present or lower levels for an extended period, and until well after its 2.28 trillion-euro ($2.4 trillion) bond-buying programme has ended.

Mersch suggested this month that by insisting rates can go lower, knowing that the effects could be unpredictable, the ECB may damage its credibility. Strengthening his tone after airing a similar idea in November, he said there should be "no delay in making the necessary, gradual adjustments to our communication.”

The risk for the ECB is that however justifiable that stance might be given incoming data, it would feed the idea that a turning point for stimulus is near. With euro-area inflation now at 1.8 per cent — near the goal of just under 2 per cent, although largely due to energy prices — voices calling for a discussion on a change in stance are growing louder.

Mersch’s colleague Sabine Lautenschlaeger said on Sunday that she’s "delighted” about the pickup in consumer-price growth and wants "to return to normalisation as soon as possible.”

Even so, she also said in her interview with Deutschlandfunk that it’s important to be certain inflation really has returned. The rest of the Governing Council doesn’t look ready to change tack just yet either.

Prior record

Bostjan Jazbec, the head of Slovenia’s central bank, said in a Bloomberg interview that the idea of scaling back stimulus is still "hypothetical” and any discussions are some way off. Austria’s Ewald Nowotny told Der Standard that there is "no reason to depart from the current stance” of monetary policy. Referring to Mersch’s proposal, Ireland’s Philip Lane told the Wall Street Journal that it’s unlikely rates will be cut again, but retaining the option to do so signals a readiness to act and "I don’t see why we would necessarily give that up.”

The ECB has previously walked back from commitments on rates. When the deposit rate was cut below zero for the first time in June 2014, Draghi said that "for all practical purposes” the lower bound had been reached. Cutting rates again just three months later, he said it was a "technical adjustment.” The deposit rate has since dropped twice more and stands at minus 0.4 per cent.

The Governing Council may eventually decide that it can find a way to change its language without spooking investors. A test of that came in December, when it agreed to reduce the pace of QE. By only starting in April and in conjunction with a 9-month extension of the program, it convinced most commentators that this wasn’t the start of tapering purchases to zero.

This month’s inflation reading will be published on Feb. 28, when it may accelerate again. The next monetary-policy meeting will be held on March 9, when fresh economic projections may show that the outlook for euro-area inflation has picked up. If so, Draghi may find it gets even harder to keep demands for a communication change at bay.

Source :Times Of Oman

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

ecb scouts for forward guidance pitfalls on road to stimulus end ecb scouts for forward guidance pitfalls on road to stimulus end

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

ecb scouts for forward guidance pitfalls on road to stimulus end ecb scouts for forward guidance pitfalls on road to stimulus end

 



GMT 16:16 2014 Wednesday ,10 September

Samirah Ibrahim receives Saudi cultural attaché

GMT 09:32 2017 Sunday ,24 September

China confirms will limit oil exports to North Korea

GMT 19:56 2016 Saturday ,17 September

Typhoon Meranti death toll rises to 28

GMT 09:40 2018 Monday ,01 January

OIC Summit opens in Kazakhstan

GMT 06:37 2015 Monday ,07 December

Iran film directors protest colleague's jail term

GMT 18:37 2017 Friday ,25 August

Mental health issues should be prioritized

GMT 04:39 2017 Thursday ,31 August

Trump vows to right 'self-destructive' tax code

GMT 05:29 2017 Tuesday ,22 August

Celebrations across India on 71st Independence Day

GMT 10:54 2017 Wednesday ,11 October

Child obesity grows tenfold since 1975

GMT 02:31 2016 Tuesday ,06 December

Dubai Women Establishment delegation participates

GMT 04:29 2018 Wednesday ,19 September

North and South Korea: Kim and Moon hail new future

GMT 14:18 2013 Monday ,19 August

Newlywed Lebanese couple pose at car bomb site

GMT 11:11 2011 Friday ,12 August

Palestinian university ranks seventh in Arab world

GMT 15:16 2015 Wednesday ,26 August

UAE ambassador attends charity ceremony in Qalubiya

GMT 16:59 2016 Tuesday ,26 July

Hedge funds in new cycle of oil short-selling
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©

Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©

arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday