Monday , January 18 2021

European Central Bank end QE behind the scenes of "Palace": Some politicians hope to strengthen economic downside risk – Wall Street News



At its meeting on Thursday, 13 December, the European Central Bank confirmed that it will end QE of 2.5 billion euros at the end of this year. After the meeting, the statement was slightly revised. But apparently consistent decisions may have hidden some "blows".

Reuters quoted insiders saying that police officers in the European Central Bank supported the withdrawal of loose stimulus on Thursday, but a few hopes to introduce a more cautious tone for the euro area's economic outlook, such as To make it clear that the risks associated with economic prospects are "prone to inconvenience". And that is the wording that the European Central Bank has suggested earlier to prepare for another monetary easing.

Opponents believe that such adjustments will make the market expect the European Central Bank to not adapt its policy. Others believe that although the ECB is not prepared to revise the wording, it must acknowledge that growth is slowing down. If the release announcement remains unchanged, it will raise questions about the credibility of the ECB.

In the end, the ECB's post-meeting statement only refined, reflecting an increase in economic concerns, but believing that the risks were still balanced.

Earlier on Wall Street, the article mentioned that the statement strengthens the forward-looking guide to reinvestment, saying that if necessary, it will reinvest in mature bonds and change the previously stated "reinvested after QE" to "first time". Continue reinvesting after raising interest rates. "The analysis believes that the ECB meeting at this meeting stated that the pigeons were slightly adjusted.

However, Wall Street has noted that ECB President Mario Draghi mentioned downside risks at a press conference after the meeting. He said:

"The risk associated with growth in the euro area is still assessed as an overall equilibrium. However, due to geopolitical factors, threats to protectionism, fragile growth markets and continued volatility in the financial markets, the risk balance at the bottom."

Draghi said that the latest data and survey results were weaker than expected, partly due to weaker demand and country and sector-specific factors. He added that the local economy will continue to support economic expansion. Although the ECB's Executive Board is more careful, there is still confidence in the euro area.

Draghi pointed out that the European Central Bank has hit its growth in GDP and inflation expectations this year and next year, which is affected by weak demand for abroad. At the same time, he said that the European Central Bank has tools to solve any future economic downturn and downside problems. The meeting did not discuss the timing of the interest rate increase, nor discussed the long-term refinancing transaction (LTRO).

Ken Wattret, an economist at IHS Markit, commented that if the European Central Bank objectively assessed the economic changes since June this year, it would expand QE's acquisition of assets. Invisible inflation is not really restored. The real concern is that the lack of euro area munitions can become a problem in the future.

* This article is from Wall Street (WeChat ID: wallstreetcn). Opened Wall Street to see VIP members and immediately access financial market systems.*


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