BREAKING NEWS:
Home »Business & Finance » Banking & Finance » ECB to take fresh look at easy money policy in June

 

FRANKFURT AM MAIN: European Central Bank governors will take a fresh look at their easy-money policy in June, with new economic forecasts on hand, an account of their April meeting showed Thursday.

June will bring new projections from ECB staff, "putting the governing council in a better position to take stock and reassess the sustainability of the recovery and the outlook for inflation".

The ECB buys 60 billion euros of government and corporate bonds per month and has set interest rates at historic lows.

The programme aims to pump cash through the financial system into the real economy, powering growth and driving inflation towards the central bank's target of just below 2.0 percent.

As the 19-nation eurozone has returned to growth and inflation increased -- overshooting the target in February before falling back in March and April -- calls from politicians and economists in some countries have grown for an end to the easy-money policy.

Financial markets have closely watched the carefully-weighed language of ECB statements for any hint as to when it could begin "tapering" (winding down) its bond-buying, a step policymakers say must come before any rise in interest rates.

Attention has so far focused on the council's assessment of the "balance of risks" to growth in the euro area, which ECB President Mario Draghi has in recent months maintained remain "tilted to the downside" even as the outlook has brightened.

Other members of the governing council disagree, with the accounts noting that in April "some members considered that the risks to real GDP could now be characterised as broadly balanced".

If conditions continued to improve, "due consideration would need to be given to adjusting the present formulation of the Governing Council's forward guidance," its regular statements about the future course of monetary policy.

In his press conferences, Draghi has long maintained a formula promising interest rates "at present or lower levels" if needed to react to an economic shock.

The debate on the governing council is now whether to eliminate the reference to possible lower interest rates, which observers would see as a hint that an announcement on winding down bond-buying was around the corner.

While the ECB is "more upbeat" about growth, "critically this has not translated yet into a change of assessment for the inflation outlook," analyst Howard Archer of IHS Global Insight commented.

"It could be touch and go as to whether the ECB could move to a more balanced policy stance at its June meeting," he added.

When the bank does eventually change its policy, "communication should be adjusted in a very gradual and cautious manner," governing council members agreed.

"Premature and unwarranted" removal of its support to the economy could nip the recovery in the bud, along with the bank's chances of reaching its just-below-2.0-percent inflation target, they added.

 

Copyright AFP (Agence France-Press), 2017
 

 

 

 

the author

Leave a Reply

Your email address will not be published. Required fields are marked *

Close
Close
Top