Daily Management Review

ECB: eurozone still needs serious monetary stimulus


08/23/2018


ECB executives believe that the euro area still needs "substantial" monetary stimulus to ensure the growth of inflation.



MPD01605 via flickr
MPD01605 via flickr
This follows from the protocols of the July meeting of the central bank published on August 23.

In general, the uncertainties associated with inflation prospects point to the need for caution, and many believe that monetary policy should remain "patient, prudent and consistent," the protocols say.

In June, the ECB said that the regulator could curtail the asset purchase program (QE) before the end of this year, but signaled that interest rates, including the -0.4% deposit rate, would remain at current levels until the end of the summer of 2019. In July, the bank confirmed this statement.

The ECB's approach contrasts with the actions of the US Federal Reserve System (FRS), which is tightening its policy. This means that the discrepancy between the policies of the two largest central banks in the world will continue to increase.

This situation can support the US dollar against the euro and put upward pressure on the yield of US bonds compared to the yield of euro-zone bonds.

The Fed's August 22 reports was said that in August the key interest rate in the US could be increased from the current range of 1.75% -2%.

The Eurozone economy has been slowing down within three months to June, as export reserves and business confidence weakened amid fears about future relations with the largest trading partners of the currency zone.

The loss of momentum in 2018 contrasts with the US economy, where growth accelerated in the second quarter. The growth differential in the US was the broadest since the second half of 2014, and since then the two economies have been expanding at approximately the same pace.

source: reuters.com






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