Thursday , March 4 2021

ECB ready to foreclose bazooka in September



According to the Wall Street Journal, the European Central Bank will announce a package of new measures. The goal: to stimulate a euro zone economy that shows signs of slowing down. Among the measures mentioned is the return of the ECB's monetary bazooka.

The comeback promises to be hectic on the ECB. A senior official of the European Central Bank told the Wall Street Journal that the monetary institution would put the package on its next meeting in September, the last of President Draghi. Also, rely on the comments fromOlli Rehn, the current governor of the Finnish central bank and a member of the ECB, elicits the American newspaper measures that will exceed investor expectations.

It has to be said that in light of the economic data presented by Germany and China this week, markets are waiting for a strong gesture from the Frankfurt Institute, "a set of important and effective measures", as Olli Rehn wants. For the former European Commissioner in the current climate, "It is better to have a package of very strong political measures than to think".

Still sound from the inversion of the yield curve emerged on Wednesday, though only temporarily, European stock markets resumed their colors on Friday, particularly underpinned by hopeful measures that BCE hoped for in September. But fears of recession, or at least a protracted slowdown in European economies, still scare investors.

Press ECB

© REUTERS

The United States, Australia, New Zealand or India have taken monetary easing in recent weeks, and the ECB could follow suit even as the German economy slows down in the second quarter and we start talking about a risk of contagious recession . By the end of July, Mario Draghi had already paved the way for a variety of emergency medicine. It is now a matter ofone or more interest rate reductionsbut also a possible one resumption of debt repayments.

Analysts expect the ECB to lower its key policy rate by 0.1 percentage points. It is currently set at -0.4% since March 2016. Analysts are also more likely to trust a return on the quantitative easing program ECB, a tool that was discontinued at the end of last year. This time, the ECB's "bazooka" could be responsible 50 billion a month to buy new bonds.

Olli Rehn's comments will certainly put pressure on the European Central Bank. Will the interest rate cut be more pronounced? Will the ECB repurchase other types of assets? Will the terms of a new batch of long-term bank loans be softened? Reply on 12 September after the Governing Council of the European Central Bank.


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